Moving to a No-Income-Tax State: Is It Worth It?
The appeal is obvious: why give 5%, 8%, or even 13% of your income to a state government when you could pay nothing? Nine US states levy no income tax on wages, and they have become increasingly popular destinations, especially with the rise of remote work. But the full picture is more complicated than simply comparing income tax rates. States without income taxes often have higher property taxes, sales taxes, and costs of living. This guide helps you analyze whether a move truly saves you money.
Use our take-home pay calculator to compare your net pay across different states.
The Nine No-Income-Tax States
| State | Avg. Property Tax Rate | State + Local Sales Tax | Key Considerations |
|---|---|---|---|
| Alaska | 1.04% | 1.76%* | No state sales tax; some localities levy taxes. High cost of living. |
| Florida | 0.80% | 7.02% | Homestead exemption up to $50K. Hurricane insurance costs. |
| Nevada | 0.53% | 8.23% | Commerce tax on businesses. Affordable housing outside Las Vegas. |
| New Hampshire | 1.86% | 0.00% | No sales tax but very high property tax. No broad income tax. |
| South Dakota | 1.08% | 6.40% | No corporate income tax. Low cost of living. |
| Tennessee | 0.56% | 9.55% | Highest combined sales tax in the nation. No wage tax. |
| Texas | 1.60% | 8.20% | Very high property tax. No state income tax is constitutional. |
| Washington | 0.87% | 9.29% | Capital gains tax on high earners. High-cost metro areas. |
| Wyoming | 0.55% | 5.36% | Low property and sales tax. Small population and limited services. |
*Alaska has no statewide sales tax, but local jurisdictions can impose their own.
The Hidden Costs: Property Tax
Texas is the poster child for the income-tax-to-property-tax tradeoff. With an effective property tax rate averaging 1.60%, a homeowner with a $400,000 home pays approximately $6,400 per year in property tax. Compare that to California, where Proposition 13 caps the base rate at 1% of assessed value (typically the purchase price), meaning a $400,000 home might only incur $4,000 in annual property tax.
For a deeper look at how property taxes work and how to appeal your assessment, see our property tax guide, or use our property tax calculator.
New Hampshire has the second-highest property tax rate in the nation. Homeowners there may find that their property tax bill exceeds what they would have paid in income tax in a neighboring state like Massachusetts.
The Hidden Costs: Sales Tax
Tennessee has the highest combined state and local sales tax rate in the country at 9.55%. If you spend $40,000 per year on taxable purchases, that is $3,820 in sales tax. Washington state is similar at 9.29%. Meanwhile, Oregon has no sales tax at all (though it has income tax).
Sales tax hits lower-income households harder because they spend a greater percentage of their income on taxable goods. For higher earners who save and invest a large portion of their income, sales tax is a smaller factor. Read our sales tax guide for more details.
When Moving Saves the Most Money
A move to a no-income-tax state is most beneficial when:
- You have high income (above $200,000). Income tax scales with income, while property and sales taxes are more fixed. A person earning $500,000 in California pays over $50,000 in state income tax. Moving to Texas eliminates that entirely, even with higher property tax.
- You rent rather than own. If you do not own a home, you avoid the high property taxes that states like Texas use to replace income tax revenue.
- You work remotely. If your salary stays the same after moving, you capture the full income tax savings without any cost-of-living adjustment by your employer.
- You are retiring with significant income. Retirees with pension income, IRA distributions, or Social Security benefits that would be taxed in their current state can save substantially by relocating.
- You receive a large one-time payout. Stock options exercises, business sales, or large bonuses are taxed at your marginal state rate. Establishing residency in a no-tax state before the event can save tens of thousands.
When Moving Does Not Save Much (or Costs More)
- You earn moderate income ($50,000-$75,000). At this level, the income tax saved may be $2,000-$4,000 per year, which can easily be offset by higher property tax, sales tax, or cost of living.
- You are buying an expensive home in Texas. A $600,000 home with a 1.60% property tax rate costs $9,600/year in property tax alone. That may exceed the income tax you would have paid in a state like Colorado (4.4% flat rate on $100,000 = $4,400).
- Moving to a high-cost metro area. Seattle, Austin, Miami, and Nashville have experienced significant cost-of-living increases. Higher housing costs, even when renting, can eat into any tax savings.
- You lose your social and professional network. The financial cost of reduced career opportunities, childcare support from family, and rebuilding professional connections is real, though hard to quantify.
Case Study: California to Texas
The most common move: a $150,000 earner leaving California for Texas. Let us compare the numbers:
| Tax Category | California | Texas |
|---|---|---|
| State Income Tax | ~$9,200 | $0 |
| Property Tax ($400K home) | ~$4,000 | ~$6,400 |
| Sales Tax (est. $30K spending) | ~$2,625 (8.75%) | ~$2,460 (8.20%) |
| Vehicle Registration | ~$300 | ~$75 |
| Total Estimated Taxes | ~$16,125 | ~$8,935 |
Net annual savings: approximately $7,190. That is significant, but remember to factor in moving costs, any salary adjustment, insurance differences (homeowners insurance is notably higher in Texas due to weather), and lifestyle changes.
Case Study: Massachusetts to New Hampshire
A shorter move with different dynamics:
| Tax Category | Massachusetts | New Hampshire |
|---|---|---|
| State Income Tax ($100K) | ~$5,000 | $0 |
| Property Tax ($500K home) | ~$5,600 (1.12%) | ~$9,300 (1.86%) |
| Sales Tax (est. $25K spending) | ~$1,563 (6.25%) | $0 |
| Total Estimated Taxes | ~$12,163 | ~$9,300 |
Net annual savings: approximately $2,863. Much more modest because New Hampshire's very high property tax recaptures a large portion of the income tax savings. For a renter, the savings would be closer to $6,500.
Establishing Residency: The Rules
Simply moving is not enough to change your tax residence. Most states consider you a resident if you maintain a domicile there, meaning it is your permanent home where you intend to return. To successfully establish residency in a new state:
- Spend more than 183 days per year in the new state
- Update your driver's license and vehicle registration
- Register to vote in the new state
- Update your address with banks, the IRS, and the post office
- Sever ties with the old state (selling property, ending memberships)
- File a part-year resident return in your old state for the year of the move
Some high-tax states (notably New York and California) aggressively audit taxpayers who claim to have moved. They may examine cell phone records, social media, credit card statements, and even veterinary records to challenge your claimed residency.
The Bottom Line
Moving to a no-income-tax state can produce real savings, particularly for high earners. But it is essential to look at the complete tax picture, including property tax, sales tax, and cost of living. The decision should never be made solely on income tax rates.
Compare your take-home pay across all 50 states with our take-home pay calculator, or see a comprehensive state tax comparison to evaluate your options.