“Lowest income tax” sounds like a simple ranking, but it’s really two different questions: which states charge nothing at all, and which states charge the least among those that do tax income. States with no income tax still have to fund roads, schools, and public services somehow, usually through higher sales, property, or excise taxes. A state with 0% income tax isn’t automatically the cheapest place to live; it depends on your income level, whether you own property, and how much you spend.
Here’s the full 2026 picture, plus what actually determines whether a low-tax state saves you money.
States With No Income Tax in 2026
Nine states currently levy no broad-based tax on wage income:
| State | Notes |
| Alaska | No income or statewide sales tax; funds government partly through oil and gas revenue and pays residents an annual Permanent Fund Dividend |
| Florida | No income tax; relies heavily on sales tax and tourism-related revenue |
| Nevada | No income tax; funds government significantly through gaming and tourism taxes |
| New Hampshire | Completed its phaseout of the tax on interest and dividend income on January 1, 2025, now a true zero-income-tax state on all income types; no state sales tax, but among the highest property taxes in the country |
| South Dakota | No income tax; moderate sales tax |
| Tennessee | No income tax on wages (its old tax on interest and dividends, the “Hall Tax,” was fully repealed years ago); relies on one of the highest combined sales tax rates in the country |
| Texas | No income tax; relies on sales tax and notably high property taxes |
| Washington | No tax on wages, but taxes long-term capital gains above $270,000 at 7% (rising to 9.9% above $1 million as of 2025), a meaningful exception for high earners with significant investment income |
| Wyoming | No income tax; funds government substantially through mineral and energy severance taxes |
A tenth state worth a mention: South Carolina briefly shows a 0% bracket at the bottom of its income scale, but that’s a bracket structure, not a repeal, income above roughly $3,600 for single filers is taxed at rates up to 6%.
States With the Lowest Non-Zero Income Tax Rates
Among the states that do levy an income tax, several keep rates well below the national norm:
| State | 2026 Rate | Structure |
| Arizona | 2.50% flat | Single-rate tax on all taxable income |
| North Dakota | 1.95% – 2.50% | Two-bracket system; the 2.5% top rate is the lowest top marginal rate of any state that still uses graduated brackets |
| Ohio | 2.75% flat | Applies to nonbusiness income above $26,050; income below that is untaxed |
| Indiana | 2.95% flat | Down from 3.00% as of January 1, 2026, with a further cut to 2.90% scheduled for 2027 |
| Louisiana | 3.00% flat | Single-rate tax |
| Pennsylvania | 3.07% flat | One of the longest-standing flat-rate states |
| North Carolina | 3.99% flat | Final step of a multi-year phasedown from 4.25% |
Several other states, Georgia, Mississippi, Kentucky, Nebraska, and Oklahoma among them, cut rates again for 2026 as part of multi-year phasedown plans, so this list shifts most years. Check your state’s department of revenue for the current-year figure before relying on last year’s rate.
Why “No Income Tax” Doesn’t Automatically Mean “Lowest Tax Burden”
States without an income tax still need revenue, and it typically shows up in one or more of these places:
- Sales tax. Tennessee has one of the highest combined state-and-local sales tax rates in the country. If you spend a large share of income on taxable purchases, a high sales tax can offset a chunk of the income tax savings.
- Property tax. Texas and New Hampshire both have no income tax but rank among the states with the highest property tax burdens. Homeowners, especially in high-value areas, may not come out ahead on the net.
- Business and franchise taxes. Washington’s B&O tax, Texas’s franchise tax, and Tennessee’s franchise and excise tax function similarly to income tax for many business owners, even though the state doesn’t call it that.
- Cost of living. Housing and everyday costs in Florida, Nevada, or Washington can outweigh what you save on income tax, depending on where specifically you live within the state.
The practical takeaway: run the numbers on your actual income, spending, and property situation rather than assuming a zero-income-tax state is automatically cheaper.
Who Benefits Most From Moving to a Low-Tax State
- High earners and retirees with large distributions. Someone drawing a large pension, RMD, or investment income sees the biggest dollar benefit from eliminating a state income tax, since that tax would otherwise apply to the full amount.
- Business owners with significant pass-through income. S-corp and partnership owners whose profits flow through to their personal return benefit directly from a lower or eliminated state rate on that income.
- People with flexible work. Remote workers and retirees have the most freedom to relocate purely for tax reasons, without needing to change jobs.
For a household with modest income and no major asset sales, the difference between paying 0% and paying 3% state income tax may be smaller in practice than the property or sales tax differences between two states.
If You’re Considering a Move for Tax Reasons
Changing your state of residency for tax purposes is more than a change of mailing address. States like California and New York have become aggressive about auditing high earners who claim to have relocated but kept meaningful ties, a home, family, business activity, or significant time spent, in the old state. To establish residency that will hold up:
- Spend the majority of the year (typically more than half) in the new state
- Update your driver’s license, voter registration, and vehicle registration
- Move financial accounts, healthcare providers, and important documents
- Sever or clearly reduce ties to the former state, property, club memberships, business involvement
Leaving California or another aggressive-audit state? A residency audit can unwind a move years after the fact and result in back taxes, penalties, and interest on income you believed was already out of that state’s reach. Talk to a Tax Law Advocates attorney before you file your first return as a new-state resident, or if you’re already facing a residency audit.
If you’re moving primarily for tax savings and your former state has an established pattern of residency audits, it’s worth having a tax professional review your specific situation before you file your first return as a new-state resident.
FAQ
How many states have no income tax in 2026? Nine: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Washington is a partial exception since it taxes capital gains above a set threshold.
Which state has the lowest income tax rate among states that do tax income? Arizona and North Dakota are tied for the lowest top marginal rate at 2.5%, though North Dakota’s is a graduated structure with a lower starting rate of 1.95%.
Does moving to a no-income-tax state automatically lower my taxes? Not necessarily. States without an income tax generally rely more heavily on sales and property taxes, so your total tax burden depends on your income level, spending habits, and whether you own property.
Is New Hampshire really a zero-income-tax state now? Yes, as of January 1, 2025. New Hampshire fully phased out its tax on interest and dividend income, which was previously the only income the state taxed.
