The 9 States With No State Income Tax (Ranked Best to Worst)
- September 23, 2024
- 1:04 am
- One Comment
If you’re considering a move to a state with no income tax, you’re probably wondering where you’ll get the most bang for your buck. Several factors beyond state income tax can influence your decision. Let’s dive into the rankings of the nine U.S. states without state income tax, based on total tax burden, cost of living, quality of life, median home value, average gas price, and weather.
1. Florida
- Total tax burden: 6.56%
- Cost of living index: 101.5
- Quality of life rank: 13th
- Median home value: $384,000
- Avg. gas price: $3.65/gal
- Weather: 237 clear days/year
Why it ranks best: Florida’s sunny weather, high quality of life, and lack of state income tax make it highly desirable. The cost of living is just slightly above the national average, but it’s balanced out by the state’s robust economy and booming job market. Florida also offers no tax on retirement income, making it an excellent choice for retirees.
2. Texas
- Total tax burden: 8.19%
- Cost of living index: 92.1
- Quality of life rank: 31st
- Median home value: $324,000
- Avg. gas price: $3.45/gal
- Weather: 135 clear days/year
Why it ranks second: Texas is known for its business-friendly climate and affordable cost of living. Although its quality of life ranking is middling, the low cost of living and booming housing market make Texas a great place for families and job seekers. Its diverse economy—from tech hubs in Austin to oil in Houston—keeps job opportunities abundant.
3. Tennessee
- Total tax burden: 6.22%
- Cost of living index: 89.9
- Quality of life rank: 28th
- Median home value: $299,000
- Avg. gas price: $3.45/gal
- Weather: 207 clear days/year
Why it ranks third: Tennessee offers one of the lowest tax burdens in the nation and a below-average cost of living, making it highly appealing for young professionals and retirees. The state’s music and cultural scenes, particularly in Nashville, add to its charm. Median home prices are affordable, and the weather is mild with plenty of sunny days.
4. Nevada
- Total tax burden: 8.39%
- Cost of living index: 110.5
- Quality of life rank: 36th
- Median home value: $461,000
- Avg. gas price: $4.20/gal
- Weather: 252 clear days/year
Why it ranks fourth: Nevada shines with its entertainment, outdoor activities, and tax-friendly environment. While the cost of living and gas prices are on the higher side, the state’s zero-income-tax policy makes up for it. Its sunny climate and relatively high number of clear days add to its appeal, especially for outdoor enthusiasts and retirees.
5. South Dakota
- Total tax burden: 7.37%
- Cost of living index: 99.8
- Quality of life rank: 15th
- Median home value: $275,000
- Avg. gas price: $3.60/gal
- Weather: 226 clear days/year
Why it ranks fifth: South Dakota offers a solid mix of low taxes and a good quality of life. The state is known for its stunning natural beauty, affordable home prices, and relatively low gas prices. While not as flashy as Florida or Texas, South Dakota provides a more tranquil and affordable lifestyle with clear days perfect for exploring the great outdoors.
6. Washington
- Total tax burden: 8.34%
- Cost of living index: 111.6
- Quality of life rank: 6th
- Median home value: $610,000
- Avg. gas price: $4.90/gal
- Weather: 165 clear days/year
Why it ranks sixth: Washington boasts one of the highest quality of life rankings thanks to its vibrant economy and beautiful natural surroundings. However, the cost of living and median home prices are steep, especially around Seattle. The state’s growing tech industry (think Amazon and Microsoft) offers plenty of job opportunities, making it a draw for young professionals despite its higher costs.
7. Wyoming
- Total tax burden: 6.14%
- Cost of living index: 91.8
- Quality of life rank: 16th
- Median home value: $320,000
- Avg. gas price: $3.80/gal
- Weather: 243 clear days/year
Why it ranks seventh: Wyoming has one of the lowest tax burdens and a very affordable cost of living. The state offers plenty of wide-open spaces, making it a haven for nature lovers. Though the population is small, its tax-friendly policies and breathtaking scenery (including Yellowstone) make Wyoming ideal for those seeking a slower pace of life.
8. Alaska
- Total tax burden: 5.84%
- Cost of living index: 125.5
- Quality of life rank: 45th
- Median home value: $343,000
- Avg. gas price: $4.50/gal
- Weather: 126 clear days/year
Why it ranks eighth: Alaska offers the lowest tax burden in the country but has a high cost of living due to its remote location. It also faces challenges with weather, boasting the fewest clear days on this list. However, the state does offer residents a yearly dividend through its Permanent Fund, which helps offset some of the higher living costs. It’s ideal for those who love adventure and isolation.
9. New Hampshire
- Total tax burden: 6.84%
- Cost of living index: 114.7
- Quality of life rank: 2nd
- Median home value: $470,000
- Avg. gas price: $3.70/gal
- Weather: 200 clear days/year
Why it ranks ninth: Despite being one of the highest quality of life states, New Hampshire ranks last here due to its high cost of living and expensive real estate market. While there’s no state income tax, the state does have higher property taxes, making it less attractive than other states on this list from a financial perspective. However, the scenic beauty of New England and proximity to major cities like Boston make it an attractive choice for those who can afford it.
Conclusion
Living in a state with no income tax comes with significant financial perks, but other factors like cost of living, quality of life, and housing prices are equally important when making your decision. Florida and Texas come out on top, offering a solid mix of affordability, opportunity, and lifestyle.
FAQs:
1. Why do some states not have a state income tax?
States without an income tax often rely on alternative sources of revenue, such as sales tax, property tax, or tourism-related revenue, to fund public services. This allows them to eliminate state income tax and attract residents and businesses.
2. Which state is the best to live in without income tax?
Florida ranks highest due to its sunny weather, moderate cost of living, high quality of life, and no tax on retirement income. It’s especially popular among retirees and those seeking a balanced lifestyle with tax savings.
3. How do states without income tax make up for the lost revenue?
These states typically generate revenue through higher sales taxes, property taxes, excise taxes, or tourism industries. For example, Nevada and Florida benefit significantly from tourism, while Texas relies more on property taxes and business taxes.
4. Is it cheaper to live in a no-income-tax state?
Not always. While you save on state income tax, the cost of living (housing, gas, and groceries) may be higher in some states like Washington and Nevada. It’s important to balance tax savings with overall expenses like housing costs and quality of life.
5. Does living in a state with no income tax benefit retirees?
Yes. States like Florida and Tennessee are especially attractive to retirees because they have no tax on income or retirement benefits. This can lead to significant savings over time.
6. Are property taxes higher in states without an income tax?
In some cases, yes. States like New Hampshire and Texas offset the lack of income tax by imposing higher property taxes. It’s essential to consider property taxes when evaluating the total tax burden of a state.
7. Do these states have other taxes that make up for no state income tax?
Yes, states without income tax often have higher sales tax (e.g., Tennessee) or excise taxes. For example, Nevada has a high sales tax due to its reliance on tourism. Other states might impose heavier taxes on specific industries or services.
8. Which no-income-tax state has the lowest cost of living?
Tennessee and Wyoming have the lowest cost of living among states with no income tax. Both states offer affordable housing and living expenses compared to others on this list.
9. How does the quality of life compare in states without income tax?
The quality of life varies. Washington ranks very high in quality of life due to its economy and scenic beauty, while Alaska ranks lower due to isolation and high living costs. States like Florida and South Dakota offer a good balance between quality of life and affordability.
10. Is it worth moving to a state with no income tax for financial reasons?
It depends on your individual financial situation. If you’re in a high-income bracket, living in a no-income-tax state can lead to significant savings. However, be sure to weigh other factors like housing costs, property taxes, and quality of life before making a decision.
