No-Tax State Math, Honestly

"Move to Texas and save $5,000 a year on taxes." It is the kind of headline that travels well and survives unexamined. The first part is sometimes true. The full picture, with property tax, sales tax, and cost of living modelled in, is more interesting and meaningfully less conclusive. This guide walks through the math state by state and identifies the household profiles where no-income-tax is a clear win, where it is roughly neutral, and where the headline saving evaporates.

Source data: state revenue department references for income tax rates, Tax Foundation published median property tax data, state and local sales tax tables, and BEA Regional Price Parities for cost-of-living overlay. Citations are inline and at the end of the guide.

The Nine States and What They Substitute For Income Tax

Each state replaces income tax revenue through a different mix. Reading these as "free money" misses the offset.

• Alaska. No state income tax, no state sales tax. Funded historically by oil revenue plus a Permanent Fund Dividend that pays residents annually (~$1,300-$1,800 in recent years). Property taxes vary by borough. Local sales tax in some areas. Cost of living above the US average due to logistics.
• Florida. No state income tax. State sales tax of 6%, plus local additions averaging 1-1.5%. Property tax statewide median around 0.86% of home value. Cost of living near US average statewide; significantly above in Miami, Naples, Sarasota.
• Nevada. No state income tax. State sales tax of 6.85%, local additions push effective rate to 8-8.4% in Las Vegas and Reno metros. Property tax effective rate around 0.55% — among the lowest nationally. Cost of living moderate statewide, higher in Lake Tahoe area.
• New Hampshire. No tax on wage income. NH repealed its Interest and Dividends tax effective Jan 1, 2025 (HB 2, 2023 session); before repeal it taxed unearned investment income but not wages. Highest property tax effective rate in the country at approximately 1.93% — the wage earner pays no state income tax but a homeowner pays substantially in property tax.
• South Dakota. No state income tax. State sales tax 4.2%, local additions bring it to 6-7% in cities. Property tax near US median. Cost of living below US average. One of the cleanest no-tax cases.
• Tennessee. No tax on wage income. The Hall income tax on interest and dividends was eliminated in 2021. State sales tax 7%, local additions average 2.55% bringing combined to 9.55% — among the highest in the country. Property tax near US median. Cost of living below US average.
• Texas. No state income tax. State sales tax 6.25%, local additions push combined to 8.20% on average. Property tax effective rate around 1.68% — fourth highest nationally. The property tax counter-balance is the most-discussed element of the Texas case.
• Washington. No state income tax on wages. Capital gains tax of 7% on gains over $262,000. State sales tax 6.5%, local additions push combined to 9.4%. Property tax around 0.93%. Cost of living near US average statewide, significantly above in Seattle metro.
• Wyoming. No state income tax, no corporate income tax. State sales tax 4%, local additions push to 5.5%. Property tax 0.61%. Cost of living near US average, below average in most regions outside Jackson and Cheyenne.

The Headline vs Net Savings, At $80,000 Income

The starting comparison: an $80,000 wage earner pays roughly $4,000 in California state income tax, the highest-tax baseline. Versus zero in any no-income-tax state. So the headline saving is approximately $4,000.

The full picture once property tax, sales tax differential, and cost of living go in. The table below shows annual net advantage versus California for a single filer earning $80,000, renting (no property tax exposure), spending 30% of income on taxable goods.

Reading: Tennessee, South Dakota, and Wyoming compound the income-tax saving with cost-of- living advantages, producing net advantages 3-4x the headline. Florida, Texas, and Nevada produce more modest net advantages — the income-tax saving dominates but is not amplified. Alaska and New Hampshire are roughly neutral once their above-average cost of living offsets. Washington is the case where the headline saving disappears entirely; for the renter at $80,000, choosing Washington over California produces a net disadvantage despite zero state income tax.

The Property Tax Wedge: Texas Specifically

Renting and owning produce sharply different no-tax-state outcomes, more than headlines acknowledge. A homeowner in Texas with a $300,000 home pays approximately $5,040 per year in property tax at the 1.68% effective rate. That is more than the entire $4,000 income tax saving versus California. Adjust for Texas's lower cost of living and the homeowner is slightly ahead, but the property tax has eaten most of the headline benefit.

A renter in the same state pays no property tax directly, though landlords pass some through via rent. The renter captures more of the income-tax saving as net advantage. The same no-tax-state status produces meaningfully different outcomes for renter vs owner.

The math gets sharper at higher home values. A homeowner in Texas with a $600,000 home pays approximately $10,080 in property tax — far above the income tax savings versus any reasonable comparison state. The structural answer for high-value homeowners considering Texas: the no-income-tax win evaporates, and depending on home value, the move may be a net tax-burden increase compared to a moderate-tax state with normal property taxes.

Two Worked Examples

Example 1: $100,000 California vs $100,000 Texas, single filer, renter

The renter at $100,000 in Texas captures roughly $16,200 more in real purchasing power than the equivalent in California. Income tax saving alone was $5,335. The cost-of-living gap contributes the larger share — roughly $10,900 — and the sales tax counter-balance is small at this income level.

Example 2: $80,000 Florida vs $80,000 Tennessee, single filer, renter

Florida and Tennessee both have zero state income tax. The 4-percentage-point sales tax difference (FL ~7%, TN ~9.55%) costs the Tennessee resident roughly $400 per year on $24,000 of taxable spending. But Tennessee's cost-of-living advantage (RPP 91 vs FL 100.3) produces roughly $6,000 of additional real purchasing power. Tennessee wins clearly despite the higher sales tax burden, because cost of living dominates at this income level.

When No-Income-Tax IS a Clear Win

The pattern across the math: no-income-tax states are clear wins under specific conditions, not universally.

• High income with low housing exposure. A high-income renter, or a high-income owner of a small property in a no-tax state, captures the full income-tax saving without giving most of it back through property tax.
• High savers. Workers who save 30%+ of after-tax income are exposed less to sales tax, so the high-sales-tax counter-balance in Tennessee or Texas is muted. The income-tax saving compounds into investment growth rather than getting spent at the register.
• Below-COLA-average residence within state. A renter or modest owner in Wichita Falls, Texas, or Memphis, Tennessee, captures the cost-of-living advantage that a Houston or Nashville resident does not get. The state-level number averages across both; actual experience depends on metro choice.
• Retirees with primarily investment income. Investment income is taxed differently across states. New Hampshire and Washington tax investment categories that wage states tax through ordinary income brackets. This guide focuses on wage earners; the retirement case requires a separate analysis.

When It Is NOT a Clear Win

• Modest income in high-property-tax metro. A $60,000 worker buying a $300,000 home in suburban Texas pays roughly the same property tax as the income tax saving on that income level. Net effect close to zero, before adjusting for any cost-of-living difference.
• High consumption-to-income ratio. A worker spending 50% of income on taxable goods in Tennessee absorbs the high sales tax meaningfully. The income-tax saving and the sales-tax cost net to a smaller advantage than headlines imply.
• Seattle or Las Vegas housing. Cost of living in these specific metros can more than offset the no-income-tax saving. Workers comparing offers should not rely on state-level math when the actual housing decision is in a high-COLA metro.
• Family-of-four with school-age children. School quality, childcare, and local services are funded differently across states. Property tax in Texas and New Hampshire correlates with strong public school quality in suburban districts; lower property tax in some no-tax states correlates with weaker public services. The trade-off is real even when the dollar math is favorable.

Limitations

• Homestead exemptions and rebates. Texas homestead exemption, Florida's Save Our Homes assessment cap, and similar programs reduce effective property tax meaningfully for primary residences. The $5,040 Texas property tax estimate above is the unprotected case; the protected long-term resident may pay materially less.
• Local income taxes. Some no-state-income-tax states permit municipal or county wage taxes (rare in this group, but Alaska boroughs and a few others). The guide uses state-level baseline and notes these as outliers.
• Estate and inheritance tax. Several no-income-tax states (Washington notably) impose estate tax that affects inheritance planning. Outside the wage-earner scope of this guide.
• Healthcare premium variation. ACA marketplace premiums vary by state regardless of income tax status. A move that captures income tax saving but increases healthcare premiums can be net negative for self-employed or non-employer-sponsored coverage cases.
• Tax volatility. No-income-tax status is not constitutional in most states. New Hampshire is phasing out its interest-and-dividends tax; Alaska's PFD has varied dramatically by year. Building a long-term plan on a current rule structure carries some forward risk.

Related Tools and Guides

• Take-Home Pay Calculator — model the federal + FICA + state tax stack for any specific salary and state
• US Salary Heatmap — interactive cost-adjusted purchasing power by state
• Tax Estimator — federal and state tax breakdown with state-by-state comparison
• Real Take-Home Pay by State 2026 — the full 50-state ranking that includes the no-tax states in context
• Take-Home Pay Calculation Guide — the line-by-line formula explanation

Sources

• State income tax rate references: state revenue and tax department publications, 2026 references
• State and local sales tax tables: Tax Foundation State Sales Tax Rates
• Property tax effective rates: Tax Foundation Property Tax and Census Bureau ACS data
• Regional Price Parities by state: Bureau of Economic Analysis
• Federal income tax: IRS 2026 reference
• FICA: SSA 2026 wage base

Published 2026-05-21. Tax Foundation publishes annual updates to property tax and sales tax data; this guide will be revised when new tables drop. Updates logged in Methodology.