States With No Income Tax: How Do They Make Money

Take one household: $110,000 of state taxable income, a $400,000 house, one car. Move it from Illinois to Texas and the state tax bill falls by roughly $7,900 a year. Move the identical household from Alabama to Texas and the fall is closer to $1,700.

Same destination. Same house. Same income. The entire difference sits in the state that got left behind, and none of it appears anywhere in a list of the nine states with no income tax.

That is the problem with the list. It is accurate and nearly useless, because "no income tax" describes a hole in a state budget, and every one of those states filled the hole with something. What follows is the arithmetic for finding out what, for a place you are actually considering, out of data that costs nothing.

Nine states, and three of them come with a footnote

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.

Two of them joined recently. The Tennessee Department of Revenue says plainly on its Hall income tax page that the tax on interest and dividends "was repealed for tax periods that begin on January 1, 2021, or later." New Hampshire finished the same journey four years afterward. Its Interest and Dividends Tax fell from 5 percent to 4 percent for periods ending on or after 31 December 2023, to 3 percent a year later, and to nothing effective 1 January 2025, which the Department of Revenue Administration set out in Technical Information Release 2025-001. There is no 2025 return to file.

Washington is the footnote that matters if you sell anything. The Department of Revenue's capital gains page, read 6 September 2026, describes a 7 percent tax under RCW 82.87 on the sale or exchange of long-term capital assets, with a standard deduction of $278,000 for 2025 and $270,000 for 2024, indexed each year. Real estate is exempt. Assets in qualifying retirement accounts are exempt. Depreciable business assets are exempt. Then in 2025 the legislature added a second tier, an additional 2.9 percent on gains above $1 million, published by the department as new tiered rates and taking the top rate to 9.9 percent. Washington calls the whole thing an excise tax rather than an income tax. If you are sitting on founder shares, the label will not comfort you.

Alaska is the third asterisk, pointing the other way. It has neither a state income tax nor a state sales tax, and it pays residents rather than billing them: the Department of Revenue announced a 2025 Permanent Fund Dividend of $1,000 for more than 600,000 eligible Alaskans, and named where the figure came from: House Bill 53. A number the legislature sets in a bill each session is an assumption in your sheet, not a constant, and last year's amount tells you very little about next year's.

Nobody publishes an effective property tax rate, so build one

Every commercial ranking of state property tax burden is a division problem you could do yourself in about ten minutes, and doing it yourself is the only way to run it on your county instead of your state.

Two American Community Survey tables:

• B25103 — median real estate taxes paid, owner-occupied housing units
• B25077 — median value, owner-occupied housing units

Divide the first by the second.

Getting them out is the part that has changed. A keyless request to api.census.gov returned a page headed "Missing Key" when I sent one on 6 September 2026, the same wall other pulls on this site have run into. The workaround is that data.census.gov exposes its own access endpoint, and that one answered without a key on the same afternoon:

https://data.census.gov/api/access/data/table?g=010XX00US$0400000&y=2024&tid=ACSDT1Y2024.B25103

The g= parameter is the geography. 010XX00US$0400000 means every state, 010XX00US alone gives the national row, and a county or place code in the same slot returns the same two tables for that county or place. The y=2024 with tid=ACSDT1Y2024 asks for the 2024 one-year estimates, which were the newest available on 6 September 2026. The request for 2025 came back "There is no table with the ID." Free ACS estimates run about a year behind, always.

Know what you have built before you lean on it. It is a ratio of two medians and not the median of a ratio, so the household paying the median tax bill is not necessarily living in the median-valued house. It bakes in every homestead exemption, senior freeze and assessment cap that current owners are enjoying and that a buyer may not inherit, which is precisely the distance between a state average and the bill you would actually be sent for one parcel. And every figure carries a margin of error. Wyoming's 2024 median value comes with a MOE of plus or minus $8,452 on $339,500, enough on its own to move the computed rate by a couple of hundredths of a point.

The nine rates, and where the national line falls

ACS 2024 one-year estimates, pulled 6 September 2026. The last column applies each rate to a $400,000 purchase, close enough to the national median value of $360,600 to work as a yardstick.

The spread inside the group is $4,057 a year on the same house — wider than the $2,285 that separates the national line from the most expensive member of the group. Five of the nine sit below the national line and four sit above it, and Tennessee comes in at under a third of New Hampshire's rate. Whatever "no income tax state" predicts, it is not your housing cost.

Washington's row is the one that gets misread. Its median bill of $4,729 is the second highest in the group in dollars, while its rate lands below the national average, because the denominator is $602,200. Buy at $400,000 in Washington and you are buying well under the state median, so the rate is the number that travels with you and the median bill is not.

Sales tax is a real rate applied to a number you have to estimate

The rates are published and easy to find. What they get multiplied by is not.

Two of those rates take some digging. Wyoming's 4 percent is not a single line anywhere on the department's site; it is three percent under W.S. 39-15-104(a) plus the one percent added by subsection (b) in 1993, and the county option tax sits on top of it. Nevada's appears in a sentence on the department's sales and use tax page: "The base State Sales Tax rate in Nevada is 6.85%," with Clark County at 8.375% since 1 January 2020.

These are destination-based taxes, which means the rate that applies is the rate where the goods land rather than where the seller sits. Use the state's own address lookup rather than a county table. Tennessee, Texas, Washington and Florida each publish one, and the boundaries do not follow ZIP codes. Wyoming's address lookup was not working on 6 September 2026 — the page says so in place of the tool — so that one is the jurisdiction table until it comes back.

Then comes the honest part. Nobody knows what share of your spending is taxable, because groceries, rent, medicine, insurance and services are each treated differently across these nine states. So do not report one number. Take a low and a high figure for annual taxable spending and carry the range all the way through. The three rows below are inputs I picked to show the shape of the box, not estimates of anyone's spending; replace them with your own:

The width of that box, roughly $1,750 between the corners inside one state, is a large part of why two cost-of-living tools hand you answers that differ by 40 percent on the same move. They are not disagreeing about the rate. They are disagreeing about your shopping.

Two of the nine turn the car into an annual bill

Registration is where this stops being abstract, because it repeats every year and it is charged on a number nobody negotiates.

Nevada bases it on the vehicle's original MSRP, permanently. The DMV's fee page walks through the arithmetic: valuation is 35 percent of original MSRP, depreciated 5 percent after the first year and 10 percent each year after that, with Governmental Services Tax at 4 percent of the depreciated valuation under NRS 371.040, plus a Supplemental GST of one cent per dollar in Clark and Churchill counties. Their worked example is a two-year-old vehicle with a $20,000 MSRP: valuation $7,000, depreciated 15 percent to $5,950, giving $238 plus $60, so $298 in tax on top of the $33 passenger-car registration fee. Put a three-year-old $34,000 car through the same steps and the valuation is $11,900, depreciated 25 percent to $8,925, producing $357 in GST and $89 supplemental. Call it $479 a year with the registration fee. It declines slowly and then stops declining: the depreciation floor is 15 percent of the original valuation, so an old car in Clark County never falls below about $71 in GST and $18 supplemental on that MSRP.

New Hampshire, the state with no sales tax and now no income tax at all, gets there by a different route and lands in the same range. The municipal permit fee under RSA 261:153 is charged per $1,000 of the manufacturer's list price on a sliding scale by model year — $18 in the current year, then $15, $12, $9, $6, and $3 for the fifth preceding model year and older, with a $5 minimum. On a $34,000 list price the top of that scale is $612 for the year, paid to the town, before the state registration fee. It is a property tax on a car collected at the town clerk's window, and it is why a New Hampshire household with two recent vehicles can hand over more each year than a Texas household does in five.

That schedule is the one place in this article I could not read from the source on 6 September 2026: the state's statute server at gencourt.state.nh.us refused every request. The per-$1,000 figures above are the schedule as codified, and the town clerk's office in the town you are considering will confirm the current numbers in one phone call — worth making, because the difference between $18 and $3 per $1,000 is the difference between a rounding error and a car payment.

Texas sits at the other end. The Texas DMV puts the base registration fee for cars and light trucks at $50.75, with a county local fee of $0 to $31.50 on top. Under $85 a year, on any vehicle. Texas took its money at the courthouse instead, in the property tax row above.

South Dakota takes 4 percent as a one-time excise when the vehicle is titled, which belongs in your moving costs rather than your annual sheet. Keep those two categories apart or your first year will look like your tenth.

If you invoice instead of collecting a W-2, the income tax did not vanish

This is the line most comparisons skip, and for a remote worker who is a contractor rather than an employee it is sometimes the largest single item.

Washington's business and occupation tax is levied on gross receipts, with no deduction for what it cost you to earn them. The DOR classification table, read 6 September 2026, lists Service and Other Activities at .015 for businesses under $1 million in prior-year income, and Retailing at .00471. A sole proprietor consultant billing $180,000 is looking at $2,700 before any credit, calculated on revenue, in a state with no income tax. Credits exist, including a small business B&O credit, so check what you actually owe rather than the headline rate.

New Hampshire runs two business taxes that reach small operators, and the Department of Revenue Administration's business taxes page carries both. The Business Profits Tax is 7.5 percent of taxable business profits for periods ending on or after 31 December 2023; anyone with more than $109,000 of gross business income has to file one. The Business Enterprise Tax is .55 percent for periods ending on or after 31 December 2022, charged not on profit but on the enterprise value tax base — compensation paid, interest paid, dividends paid — with a filing threshold of $298,000 in gross receipts or value tax base. Read the thresholds as filing triggers rather than exemptions, and note that both are adjusted biennially, so the pair above belongs to periods beginning on or after 1 January 2025 and will move.

Texas has a franchise tax with a no-tax-due threshold published by report year on the Comptroller's franchise tax page: $2,650,000 of total revenue for report years 2026 and 2027, against rates of 0.375 percent for retail and wholesale and 0.75 percent for everyone else. Most solo consultants land far under the threshold and file an informational report instead of paying. Under the threshold is not the same as exempt: the Comptroller's notice pages describe forfeiture of the right to transact business for entities that skipped a report they owed no tax on.

The same move, priced from two different starting states

Back to the household in the first paragraph: $110,000 of state taxable income, a $400,000 house, moving to Texas.

Illinois publishes its individual rate as 4.95 percent of net income, effective since July 2017. Alabama's is graduated at 2, 4 and 5 percent, with the top rate reached above $6,000 of taxable income on a joint return, so nearly all of a six-figure return is taxed at 5 percent. Both origin property tax figures come from the same two ACS tables as the earlier table. Illinois at 1.92 percent is the highest state rate in the country on this arithmetic; Alabama at 0.38 percent is the second lowest, behind Hawaii at 0.27 percent. The two origins were chosen because they sit at opposite ends of that range, not because either move is recommended.

Neither column includes sales tax, on purpose. Chicago and Birmingham both charge more than Houston does, and both of those differences are small next to the property tax line. Add your own from the ranges above and the ordering will not change.

The finding is not that Texas is cheap, or expensive. It is that one destination produced a $6,200 difference in outcome based only on where the household started, which is why the tax row in the seven-number comparison a move actually turns on has to be a delta between two named places rather than a fact about one of them.

Three things this sheet gets wrong on purpose

It uses state medians where the real numbers are local. Run the same two ACS tables across the 58 Texas counties the 2024 one-year file covers and the computed rate runs from 0.62 percent in Nacogdoches County to 1.74 percent in Kaufman County — a spread of 1.12 points inside one state, against the 0.56 points that separate Texas from Florida. School district, municipal and special district rates are set separately from the county's on top of that. The state figure screens a shortlist. It does not answer for an address.

It assumes you buy at the same price in both places, which almost nobody does. If the move takes you from a $700,000 house to a $400,000 one, that swamps every rate in this article, and if it runs the other way a lower rate on a bigger number can still cost more.

And it prices a household that only earns wages. Capital gains in Washington, business receipts in Washington and New Hampshire, retirement income treated differently by the origin state, a vehicle much newer or older than the example: any of those can move the total by more than the property tax difference does. What the sheet is good for is the screening question, which is whether the headline saving survives contact with the replacement taxes at all. In the two cases worked above it survived very differently: leaving Illinois, the property tax line added to the saving; leaving Alabama, it took back roughly two thirds of it. There is no general ratio to quote, which is the point.

Fill the origin column first

Most people build this backwards. They spend an evening on the destination and leave the origin as a remembered number, and the origin is the one column where an error is inexcusable, because the documents are already in your filing cabinet.

So: open last year's state return and write down the state tax actually paid, not the rate. Open your current property tax bill and write down the total, including every line that is not based on value. Then run the two ACS pulls above for both states and check whether your own bill sits near the state median or well off it. If it sits well off, the destination estimate you build from a state median will be off in the same direction, and knowing which direction is most of the value.

Four numbers, about twenty minutes. That is what turns the nine-state list from trivia into the top row of a comparison.

Sources, read 6 September 2026: Census Bureau ACS 2024 one-year estimates, tables B25103 and B25077, pulled through the data.census.gov access endpoint; Washington DOR capital gains tax and its tiered rates notice; Washington DOR B&O classifications and retail sales tax; NH DRA TIR 2025-001 and business taxes; Tennessee DOR Hall income tax, sales and use tax and local sales tax; Texas Comptroller sales tax and franchise tax rates and thresholds; Texas DMV registration fees; Nevada DMV registration fees; Florida DOR sales and use tax and discretionary sales surtax; Nevada Department of Taxation sales and use tax; South Dakota DOR sales and use tax; Wyoming Excise Tax Division rates and W.S. 39-15-104 in the Wyoming Legislature's Title 39; Illinois DOR income tax rates; Alabama DOR individual income tax; Alaska DOR 2025 Permanent Fund Dividend announcement.

Every figure above was read from the publishing agency on 6 September 2026 except the RSA 261:153 mill schedule, whose source server did not answer that day and which is flagged where it appears. Rates and thresholds here change by legislative session and, for the local pieces, by ordinance. None of this is tax advice and none of it is a recommendation about where to live. Check every figure against the agency that publishes it, on the day you need it, before it goes into a spreadsheet you intend to act on.