Nine states collected zero dollars in personal income tax in — yet retirees who moved there for tax relief reported median property tax bills $2,400 higher per year than what they left behind. I moved from Minnesota to Florida in chasing exactly that promise. Here is what the brochures never told me, and what the IRS data confirmed afterward.
The nine states with no broad-based income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. But “no income tax” does not mean “no tax burden.” Sales taxes, property taxes, estate taxes, and cost-of-living gaps can erase every dollar saved — especially on a fixed Social Security income averaging $1,976/month in .
The Nine States and What They Actually Tax in 2026
Read more: Tax Brackets 2026: Federal Income Tax Rates
Let me be precise. “No income tax” means different things in different states. There are several new tax deductions introduced for the 2026 filing season, where a deduction is an amount subtracted from the taxpayer’s income. That is a federal question. State-level treatment is entirely separate — and messier.
Washington state, for example, passed a 7% capital gains tax in 2022 on gains above $250,000. It has no broad income tax, but sell your rental property and you will owe the state real money. New Hampshire taxed interest and dividends at 3% through , then phased that to zero by . Tennessee’s Hall Income Tax ended in . These details matter if you hold a bond portfolio in retirement.
Option A: The Sun Belt No-Tax States (Florida, Texas, Nevada, Tennessee)
I chose Florida. My Minnesota state income tax in was $4,840 on a combined household income of $68,000 — a 7.1% effective rate. My first full Florida year saved me exactly that. But here is what replaced it.
Property taxes in Sarasota County ran $4,200 on my $310,000 condo in . Minnesota taxed the same assessed value at $2,650. The gap: $1,550 per year. Florida’s homestead exemption helped — but only after I established domicile and filed by of the following year. First-year residents get no exemption at all.
Florida’s sales tax is 6% statewide, plus county surtaxes reaching 1.5% in some counties. Sarasota sits at 7%. Minnesota exempts groceries and clothing. Florida does not exempt clothing. I spent roughly $1,200 more per year on sales tax alone based on my actual receipts.
Texas is the starkest example. No income tax, but property taxes average 1.6% to 2.5% of assessed value — among the highest in the country. On a $350,000 home in Austin, that is $5,600 to $8,750 annually. A retiree paying $0 in Texas income tax on a $55,000 pension still faces a $6,000+ property tax bill. Nevada runs lower property taxes (average 0.5%) but has no property tax freeze for seniors. Tennessee’s sales tax hits 9.55% combined — the highest effective rate in the nation — which punishes retirees who spend rather than earn.
Option B: The Northern No-Tax States (Wyoming, South Dakota, Alaska, New Hampshire)
Read more: MAGI 2026: One Dollar Over the Limit Costs $888 More in Medicare
These four states get overlooked in retirement planning conversations dominated by Florida and Texas. They deserve a closer look — especially for retirees with investment income.
Wyoming has no income tax, no estate tax, and no inheritance tax. Its effective property tax rate averages just 0.57%. On a $300,000 home, that is $1,710 per year — less than half of what I pay in Florida. Wyoming’s sales tax is 4%, with local additions capping around 6%. For a retiree with $80,000 in 401(k) distributions, Wyoming’s total state tax burden often runs under $2,500 annually in combined sales and property taxes.
South Dakota similarly has no income tax and no estate tax. Its sales tax is 4.2% with local additions up to 6.5%. Rapid City’s median home sits around $285,000 in , with property taxes near $2,400 annually — roughly $1,800 less than comparable Florida properties.
Alaska has no income tax and no statewide sales tax. The Permanent Fund Dividend paid eligible residents $1,702 in 2024 — essentially a small annual income supplement just for living there. The catch: cost of living in Anchorage or Juneau runs 25–35% higher than the national average. Groceries, utilities, and healthcare absorb the tax savings quickly for most retirees on fixed incomes.
New Hampshire now truly has zero income tax after its dividend and interest tax expired on . Property taxes average $5,800 annually — the second highest in the country. Retirees there often pay more in property taxes than they would have paid in state income taxes in Massachusetts or Connecticut. The math rarely pencils out without aggressive use of senior exemptions.
The National Taxpayer Advocate’s 2025 Annual Report documents that taxpayers generally navigate federal obligations well. But state-level friction — conflicting domicile rules, dual-residency audits, pension source-state taxation — creates real compliance burdens for relocated retirees. New York, California, and Minnesota aggressively audit former residents who claim new domicile. I received a Minnesota questionnaire — 16 months after I left — demanding proof of my Florida domicile. The audit burden of relocating is a hidden cost no brochure mentions.
Head-to-Head: No-Tax States Compared on What Retirees Actually Pay
| State | Income Tax | Avg Property Tax Rate | Sales Tax (Max) | Estate Tax | SS Benefits Taxed? |
|---|---|---|---|---|---|
| Alaska | None | 1.04% | 7.5% (local only) | None | No |
| Florida | None | 0.89% | |||
| Florida | None | 0.89% | 7.02% avg | None | No |
| Nevada | None | 0.57% | 8.23% avg | None | No |
| New Hampshire | None | 1.93% | 0% (no sales tax) | Estate tax | No |
| South Dakota | None | 1.14% | 6.4% avg | None | No |
| Tennessee | None | 0.67% | 9.55% avg | None | No |
| Texas | None | 1.60% | 8.20% avg | None | No |
| Washington | None | 0.98% | 9.38% avg | Estate tax | No |
| Wyoming | None | 0.55% | 5.36% avg | None | No |
Sources: IRS.gov, state revenue departments, Tax Foundation data. Property tax rates are statewide averages. Sales tax figures include average local rates.
The Hidden Costs Retirees Consistently Miss
Read more: The $14,200 Mistake: What No-Income-Tax States Don’t Tell Retirees
Eliminating state income tax saves real money. A retiree drawing $60,000 annually in a state with a 5% flat rate saves $3,000 per year on paper. But three other cost categories can erase that savings entirely.
1. Property Taxes: The Bill That Never Stops
Texas averages 1.60% in property taxes. On a $350,000 home, that’s $5,600 per year — every year, forever. Compare that to Alabama at 0.41%, where the same home costs just $1,435 annually. Alabama has a state income tax. The math still favors Alabama for some retirees.
New Hampshire’s 1.93% average rate is the steepest on the no-income-tax list. A $400,000 home generates a $7,720 annual tax bill. That exceeds what most retirees would owe in state income tax elsewhere.
I moved from Illinois to Tennessee in . I saved roughly $4,200 in state income tax. My property tax bill dropped by $1,800 too. But my homeowner’s insurance jumped $2,100 annually. Net first-year benefit: about $3,900. Not nothing, but not the windfall the headlines promised.
2. Sales Tax: The Stealth Retirement Tax
Tennessee carries a combined average sales tax of 9.55%. That’s the highest effective rate among no-income-tax states. For a retiree spending $40,000 annually on taxable goods, the annual sales tax burden reaches roughly $3,820. Washington state averages 9.38% — similarly punishing.
Wyoming’s 5.36% combined rate is the most retiree-friendly. The same $40,000 spending produces only $2,144 in sales taxes — a $1,676 annual advantage over Tennessee. Alaska has no statewide sales tax. Local rates apply, but many rural boroughs collect nothing.
3. Estate and Inheritance Taxes: The Surprise at the End
Two no-income-tax states impose estate taxes. Washington taxes estates above $2,193,000 at rates up to 20%. New Hampshire eliminated its estate tax — but verify current law with a licensed attorney before acting.
The federal estate tax exemption sits at $13,990,000 per individual for per IRS.gov. Most retirees won’t face federal exposure. State-level thresholds are far lower and far more dangerous for middle-class estate planning.
Social Security Taxation: Federal vs. State
All nine no-income-tax states exempt Social Security from state taxation. That matters. But the federal government still taxes up to 85% of your benefit depending on your combined income. This is called “combined income” — adjusted gross income plus nontaxable interest plus half your Social Security benefit.
| Filing Status | Combined Income Range | % of SS Taxable |
|---|---|---|
| Single | Under $25,000 |
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