As tax season winds down and spring prompts thoughts of moving, people across the U.S. consider the financial benefits of relocating to a state with no income tax.
While that’s understandable, since avoiding state income tax can save money, overall affordability depends on more than just tax policy. Housing, everyday expenses, and even other types of taxes often offset income tax savings.
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And…Washington state is now a special case because it taxes some high-income capital gains and, starting soon, income over $1 million. (More on that below.)
Here’s more to know about how these states rank when you weigh both tax savings and the cost of living.
Cost of living in no income tax states
To compare affordability across no‑income‑tax states, we used BEA regional price parities (RPPs) as a rough measure of how expensive each state is relative to the rest of the country. However, lower prices don’t automatically mean more affordable if wages are also lower.
- RPPs are indexed to the national average, where 100 equals the U.S. average price level.
- Values below 100 mean prices are lower than average, and values above 100 mean prices are higher.
We also considered:
- Housing costs: Median home prices and rents (Zillow, U.S. Census Bureau).
- Everyday expenses: Food, utilities, transportation, and healthcare.
- Taxes beyond income tax: Property taxes, sales taxes, and total state‑ and local‑tax burdens (Tax Foundation, 2026).
Which state is the most tax-friendly?
(Image credit: Getty Images)
This ranking is a simplified comparison based on average price levels and tax burdens.
Your actual costs will depend on your income, housing choices, spending habits, tax deductions, credits, and exemptions, and local prices.
1. Tennessee: Best overall value
- Income tax: 0%
- Cost of living: Approx. 90 (Roughly 10% below U.S. average, BEA RPP)
- Tax burden: Below average (Tax Foundation)
Tennessee offers a compelling combination of affordability and financial simplicity.
Housing and everyday expenses remain well below the national average, and the state’s relatively low total tax burden (despite higher sales taxes) adds to its appeal. BEA RPP data places the overall cost index at roughly 90, meaning households spend about 10% less than the national average.
Why the Volunteer State ranks first: Low housing and living costs allow residents to retain more of their income, making Tennessee a top choice for those looking for affordability.
For more information, see our guide: 10 Cheapest Places to Live in Tennessee.
2. Texas: Balanced overall, higher property tax
- Income tax: 0%
- Cost of living: Approx. 100 (About average for U.S., BEA RPP)
- Tax burden: Slightly below average, but property taxes are high (Tax Foundation)
For more information, see: 10 Cheapest Places to Live in Texas.
BEA RPP data show overall costs near the national average, and the Tax Foundation describes the total state-local tax burden as moderate, partially offset by property taxes.
Why the Lone Star State ranks here: Texas can be a balanced option for those who can manage property taxes while benefiting from no income tax.
3. South Dakota: Broad affordability
- Income tax: 0%
- Cost of living: Approx. 88–92 (About 8–12% below average, BEA RPP)
- Tax burden: Among the lowest (Tax Foundation)
BEA RPP data show the state is 8–12% below the national average. For households seeking straightforward savings without tradeoffs, South Dakota is consistently cost-effective.
Why the Mount Rushmore State ranks high: South Dakota’s broad affordability paired with minimal taxation.
4. Wyoming: Low taxes, moderate costs
- Income tax: 0%
- Cost of living: Approx. 95–100 (slightly below to near average, BEA RPP)
- Tax burden: Low (Tax Foundation)
Wyoming’s overall costs hover near the national average, with moderate housing prices and below-average total tax burdens. Its rural economy can offer relatively fewer job opportunities, and services could be limited in smaller towns.
Why the Equality State ranks here: Moderate costs make Wyoming affordable, but economic and service limitations are tradeoffs to consider.
5. Florida: Popular but rising costs
- Income tax: 0%
- Cost of living: Approx. 103 (Roughly 3% above U.S. average, BEA RPP)
- Tax burden: Below average (Tax Foundation)
Homeowners’ insurance premiums are among the highest in the U.S., further increasing costs. The Tax Foundation reports that the total tax burden is below the national average, but rising living costs reduce net savings.
Why the Sunshine State ranks mid-pack: Tax advantage in Florida is partially offset by housing and insurance costs.
For more information, see our report: Florida Tax Tradeoffs: Why 0% Income Tax Doesn’t Always Mean Cheap.
6. Nevada: No income tax, Higher everyday costs
- Income tax: 0%
- Cost of living: Approx. 102–108 (About 2–8% above average, BEA RPP)
- Tax burden: Near average (Tax Foundation)
The Tax Foundation indicates the total tax burden sits near the U.S. median. Rising housing and everyday expenses erode some of the savings from zero income tax.
Why the Silver State ranks here: Nevada is still relatively tax-friendly, but everyday costs can reduce the net benefit.
7. Washington: High costs, new taxes for high earners
- Income tax: No wage income tax; 7% capital gains tax on high earners (9.9%)
- Cost of living: Approx. 115–120 (Roughly 15–20% above U.S. average, BEA RPP)
- Tax burden: Around average (Tax Foundation)
Sales and property taxes contribute to a total tax burden near the national median, according to the Tax Foundation.
Why the Evergreen State ranks low: High housing and everyday costs in Washington, combined with a new capital gains tax and millionaire tax, can reduce the advantages of a no-wage-tax state for some higher earners.
8. New Hampshire: No wage tax, high property costs
- Income tax: No tax on earned wages (investment income tax phased out as of 2025)
- Cost of living: About 112–115 (Roughly 12–15% above average, BEA RPP)
- Tax burden: Relatively high property tax rate (Tax Foundation)
New Hampshire has no tax on earned wages, but property taxes are among the highest in the nation.
BEA RPP data show overall costs above the national average, and the Tax Foundation confirms that property taxes significantly offset the benefit of no income tax for many households.
Why the Granite State ranks here: High property costs reduce the net financial advantage for homeowners.
9. Alaska: Highest costs despite tax perks
- Income tax: 0%
- Cost of living: Approx. 124–126 (About 24–26% above average, BEA RPP)
- Tax burden: Low overall (Tax Foundation)
Alaska offers no income tax and distributes an annual Permanent Fund Dividend, but elevated prices for goods, groceries, utilities, and transportation make it one of the most expensive states. BEA RPP data confirms a cost index 24–26% above the national average.
The Tax Foundation reports a low overall tax burden, but everyday expenses largely outweigh tax savings for most households.
Why the Last Frontier State ranks last: The high cost of living in Alaska eclipses the benefits of no income tax.
Are states with no income tax better? Bottom line
Avoiding state income tax can save money, but your overall cost of living matters more. States like Tennessee and South Dakota offer broad affordability, while others, like Florida, Washington, and Alaska, offset tax advantages with high housing, insurance, and everyday costs.
If you’re thinking about moving to a low-tax state, look beyond income tax and evaluate total expenses, including property taxes, insurance, and cost-of-living differences.
Particularly with prices rising on everything from food to gas taxes, a state with no income tax is only beneficial if your overall expenses remain manageable.
