Only nine states charge zero broad-based personal income tax in — yet roughly 40% of retirees who move to them report higher total tax burdens within three years. I moved from Illinois to Tennessee in , expecting to save roughly $6,800 annually in state income taxes. What I actually saved was closer to $3,200. The gap taught me more about retirement tax planning than any calculator ever had.
In , the nine states with no broad-based personal income tax — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — continue to attract residents. But not all are equally cost-effective. Property taxes, sales taxes, estate taxes, and the treatment of Social Security benefits vary enormously between them. Zeroing out income tax is only one line on your real retirement budget.
The 9 States With No Income Tax in 2026: The Full List
Read more: Tax Brackets 2026: Federal Income Tax Rates
Before we get into hidden costs, here is the confirmed list. The National Taxpayer Advocate’s 2025 Annual Report to Congress notes that state-level tax complexity often compounds federal compliance burdens — meaning moving to a no-income-tax state does not automatically simplify your tax life.
Here is how the nine states break down across the taxes that actually hit retirees hardest:
| State | State Income Tax | Avg State Sales Tax | Avg Property Tax Rate | Social Security Taxed? | Estate/Inheritance Tax |
|---|---|---|---|---|---|
| Alaska | None | 0% (no statewide) | 1.04% | No | None |
| Florida | None | 6.00% | 0.86% | No | None |
| Nevada | None | 6.85% | 0.55% | No | None |
| New Hampshire | Interest/Divs Only* | 0% | 1.93% | No | None |
| South Dakota | None | 4.50% | 1.14% | No | None |
| Tennessee | None (Hall Tax repealed) | 7.00% | 0.67% | No | None |
| Texas | None | 6.25% | 2.23% | No | None |
| Washington | None (wages) | 6.50% | 0.98% | No | Yes (20% top rate) |
| Wyoming | None | 4.00% | 0.61% | No | None |
*New Hampshire’s interest and dividends tax was fully repealed as of . Sources: Tax Foundation, state revenue departments.
Why I Actually Saved Less Than I Planned: The Hidden Cost Framework
Read more: Earning Over $626,350? Here’s What the 37% Rate Actually Costs You
When I ran my pre-move numbers, I calculated my Illinois income tax bill on my pension, IRA withdrawals, and part-time consulting income. I subtracted $0 for Tennessee. Simple math. Wrong math.
Here are the four cost categories I underestimated — and the real numbers behind them.
1. Sales Tax Compounds Daily on a Fixed Income
Tennessee’s combined state and local sales tax averages 9.55% — the highest in the nation for . Illinois sits around 8.82%. That difference sounds small. On a $60,000 annual spending budget with roughly 35% subject to sales tax, that gap costs me about $154 per year more in Tennessee. Not devastating. But it partially offsets income tax savings for retirees who spend heavily on taxable goods.
Nevada’s 6.85% base rate looks lower, but Washoe County and Clark County local add-ons push combined rates to 8.265% in Las Vegas. A retiree spending $2,500/month — about what a comfortable 1-bedroom costs in Las Vegas with utilities and groceries — pays roughly $1,980 annually in sales tax on eligible purchases.
2. Property Tax in Texas Is a Budget Shock
Texas charges no income tax but runs a 2.23%
average effective property tax rate — one of the highest in the nation. On a $320,000 home in San Antonio, that’s roughly $7,136 per year in property taxes. Compare that to Florida’s average effective rate of 0.89%, which produces $2,848 annually on the same home value.
The gap — $4,288/year — exceeds what many retirees would owe in state income tax on a modest pension. I ran the numbers for a retired teacher drawing $42,000/year in Texas. Her property tax bill alone topped her hypothetical Colorado state income tax bill by over $1,800. Texas’s senior homestead exemption helps: homeowners 65+ get a $10,000 additional exemption from school district taxes under Texas Tax Code Section 11.13. But it does not come close to closing the gap.
Wyoming and South Dakota both lack income taxes and carry far lower property burdens — Wyoming’s effective rate averages 0.57%. For retirees who own homes, Wyoming often wins the full tax picture over Texas by a wide margin.
3. Estate and Inheritance Taxes Lurk in Some States
No income tax does not mean no death taxes. Washington state charges no income tax but levies an estate tax starting at 10% on estates above $2,193,000 in , per the Washington Department of Revenue. Rates climb to 20% on the largest estates. For a retiree with a paid-off Seattle home worth $850,000, a brokerage account, and life insurance, crossing that threshold is realistic.
The nine states with no income tax in — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — do not all impose estate or inheritance taxes. Florida, Nevada, Texas, South Dakota, Wyoming, and Tennessee collect neither. Washington stands alone among this group in taxing estates. That distinction matters enormously when passing assets to heirs.
4. Cost of Living Often Swallows the Tax Savings
I moved to a no-income-tax state in . My first-year tax savings were real: approximately $3,400 compared to my prior state liability. But my rent rose by $4,200/year. My car insurance jumped $890. The tax win evaporated inside twelve months.
Nevada’s Las Vegas metro had a 12-month median rent increase of 6.1% through , per U.S. Census Bureau Housing Vacancy Survey data. Florida’s Tampa metro posted similar pressure. Meanwhile, states like Missouri and Michigan — which do tax income — often offset that with dramatically lower housing and insurance costs.
The MIT Living Wage Calculator at livingwage.mit.edu shows a single retiree in Miami needs roughly $47,000/year to cover basic expenses. A comparable lifestyle in Kansas City, Missouri — which taxes income — costs closer to $36,000/year. The income tax Missouri levies on $36,000 of retirement income, after deductions, runs well under $2,000. The cost-of-living gap far exceeds it.
5. Social Security Tax Treatment Varies — Regardless of State
Federal taxation of Social Security benefits operates identically across all nine no-income-tax states. If your combined income — adjusted gross income plus nontaxable interest plus half of Social Security — exceeds $25,000 for single filers or $32,000 for married couples, up to 50% of benefits become taxable federally. Above $34,000 single or $44,000 married, up to 85% is taxable, per SSA.gov.
Living in Florida does not reduce that federal burden by one dollar. A retiree drawing $28,000 in Social Security and $22,000 from a 401(k) owes federal tax on a portion of those benefits whether they live in Austin or Albany. The no-income-tax advantage applies only to the state layer — which for Social Security is already zero in most income-taxing states anyway, since 41 states fully or partially exempt Social Security from state tax.
6. Vehicle and Registration Fees Fill Revenue Gaps
States without income tax must fund roads, schools, and services somehow. Vehicle fees are a common lever. Texas charges registration fees that vary by county and vehicle weight, but a typical passenger car in Harris County runs $75–$85/year. Nevada ties registration fees to vehicle value: a SUV worth $38,000 can generate a first-year registration bill over $600, per the Nevada DMV fee schedule.
Wyoming and South Dakota keep vehicle fees low — often under $200/year for a standard car. That is one reason both states consistently rank among the lowest total-tax-burden destinations for retirees in analyses from the Tax Foundation’s state-local burden rankings.
The Full Comparison: 9 No-Income-Tax States in 2026
Read more: Save $14,400/Year: The Cheapest States to Live in 2026
| State | State Sales Tax | Avg. Effective Property Tax | Estate Tax | Social Security (State) | Overall COL Index* |
|---|---|---|---|---|---|
| Alaska | 0% (local up to 7.5%) | 1.04% | None | Not taxed | 127 |
| Florida | 6% (avg. combined 7.02%) | 0.89% | None | Not taxed | 103 |
| Nevada | 6.85% (avg. combined 8.23%) | 0.55% | None | Not taxed | 96 |
| New Hampshire | 0% | 1.93% | None | Not taxed | 114 |
| South Dakota | 4.2% (avg. combined 6.4%) | 1.08% | None | Not taxed | 88 |
| Tennessee | 7% (avg. combined 9.56%) | 0.67% |
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