The 10 Best States for Taxes (2025)

Based on total tax burden (income + sales + property taxes), these states offer the lowest overall taxes:

Top 10 Lowest-Tax States

1. Alaska - No income tax, no sales tax (state level), low property tax
2. Wyoming - No income tax, low sales tax (5.36%), low property tax
3. Tennessee - No income tax, low property tax, but high sales tax (9.55%)
4. South Dakota - No income tax, moderate sales tax (6.40%), moderate property tax
5. Florida - No income tax, moderate sales tax (7.01%), moderate property tax
6. Nevada - No income tax, high sales tax (8.23%), low property tax
7. Texas - No income tax, moderate sales tax (8.20%), high property tax
8. Washington - No income tax (except capital gains), high sales tax (9.38%)
9. New Hampshire - No earned income tax, no sales tax, high property tax
10. Delaware - Low income tax, no sales tax, moderate property tax

Key insight: 7 of the top 10 have no state income tax. But they make it up elsewhere.

The 10 Worst States for Taxes (2025)

These states have the highest total tax burden:

Top 10 Highest-Tax States

1. New York - High income tax (10.9% top rate), high property tax, moderate sales tax
2. California - Highest income tax (13.3% top rate), high sales tax, moderate property tax
3. Hawaii - High income tax (11% top rate), low property tax, high sales tax
4. Vermont - High income tax (8.75% top rate), high property tax, high sales tax
5. Connecticut - High income tax (7% top rate), high property tax, high sales tax
6. New Jersey - High income tax (10.75% top rate), highest property tax, high sales tax
7. Illinois - Flat high income tax (4.95%), high property tax, high sales tax
8. Massachusetts - Flat income tax (5%), high property tax, high sales tax
9. Minnesota - High income tax (9.85% top rate), high property tax, high sales tax
10. Maryland - High income tax (5.75% top rate), moderate property tax, high sales tax

Key insight: High-tax states tend to have progressive income taxes PLUS high property taxes PLUS high sales taxes.

See your exact tax burden →

Complete State Rankings: Income Tax

States with NO Income Tax (9 states)

1. Alaska
2. Florida
3. Nevada
4. New Hampshire (but 3% on interest/dividends until 2027)
5. South Dakota
6. Tennessee
7. Texas
8. Washington (but 7% capital gains tax on $250K+)
9. Wyoming

States with LOWEST Income Tax Rates

Top 5 (excluding no-tax states):

1. North Dakota - 2.90% top rate (lowest progressive tax)
2. Pennsylvania - 3.07% flat rate
3. Indiana - 3.05% flat rate (lowering to 2.9% by 2027)
4. Arizona - 2.50% flat rate (recently reduced!)
5. Michigan - 4.25% flat rate

States with HIGHEST Income Tax Rates

Top 5 worst:

1. California - 13.3% top rate (highest in nation)
2. Hawaii - 11% top rate
3. New York - 10.9% top rate
4. New Jersey - 10.75% top rate
5. Oregon - 9.9% top rate

Example impact: On $200K salary:

• California state tax: ~$13,000-16,000
• Arizona state tax: ~$5,000
• Difference: $8,000-11,000/year

Complete State Rankings: Sales Tax

States with NO Sales Tax (5 states)

1. Alaska (but local sales taxes allowed)
2. Delaware
3. Montana
4. New Hampshire
5. Oregon

States with LOWEST Sales Tax

Top 5:

1. Alaska - 0% (state), but local taxes vary (0-7%)
2. Hawaii - 4.00% (but applies to more items)
3. Wyoming - 5.36%
4. Wisconsin - 5.43%
5. Maine - 5.50%

States with HIGHEST Sales Tax

Top 5 worst:

1. Tennessee - 9.55% combined (7% state + avg local)
2. Louisiana - 9.52% combined
3. Arkansas - 9.51% combined
4. Washington - 9.38% combined
5. Alabama - 9.24% combined

Impact:

• Spending $50,000/year on taxable goods
• Tennessee (9.55%): $4,775 sales tax/year
• Oregon (0%): $0 sales tax/year
• Difference: $4,775/year

Complete State Rankings: Property Tax

States with LOWEST Property Tax

Top 10:

1. Hawaii - 0.29% effective rate (lowest in nation)
2. Alabama - 0.42%
3. Louisiana - 0.56%
4. District of Columbia - 0.57%
5. Delaware - 0.59%
6. West Virginia - 0.61%
7. South Carolina - 0.64%
8. Arkansas - 0.66%
9. Mississippi - 0.67%
10. Wyoming - 0.61%

States with HIGHEST Property Tax

Top 10 worst:

1. New Jersey - 2.13% effective rate (highest in nation)
2. Illinois - 2.07%
3. New Hampshire - 2.05%
4. Connecticut - 1.79%
5. Vermont - 1.77%
6. Wisconsin - 1.73%
7. Nebraska - 1.65%
8. Texas - 1.60%
9. New York - 1.51%
10. Pennsylvania - 1.50%

Impact: On $400,000 home:

• New Jersey (2.13%): $8,520/year
• Hawaii (0.29%): $1,160/year
• Difference: $7,360/year

Total Tax Burden: The Real Rankings

Looking at combined federal, state, local, sales, and property taxes for a median household:

Lowest Total Tax Burden

Top 10 (combined effective rate):

1. Alaska - 5.84% of income
2. Wyoming - 7.02%
3. Tennessee - 7.67%
4. South Dakota - 7.93%
5. Texas - 8.22%
6. Florida - 8.35%
7. North Dakota - 8.78%
8. Nevada - 9.11%
9. Louisiana - 9.24%
10. Washington - 9.30%

Highest Total Tax Burden

Top 10 (combined effective rate):

1. New York - 12.79% of income
2. Connecticut - 12.75%
3. Hawaii - 12.70%
4. Vermont - 12.61%
5. California - 12.52%
6. New Jersey - 12.39%
7. Illinois - 11.98%
8. Wisconsin - 11.56%
9. Minnesota - 11.36%
10. Rhode Island - 11.31%

The difference: New York residents pay double the tax rate of Alaska residents.

Tax Rankings by Income Level

Here's where it gets interesting - best/worst states change based on income:

For Low-Income Earners ($30K-50K)

Best states:

1. Alaska (no income tax, low property tax if renting)
2. Wyoming
3. Florida
4. Nevada
5. Tennessee

Worst states:

1. Vermont (high income tax even at low incomes)
2. Hawaii (high sales tax affects necessities)
3. California
4. New York
5. Oregon

Why: Sales and property taxes hit low earners harder proportionally. Progressive income tax states can still be bad if sales tax is high.

For Middle-Income Earners ($75K-150K)

Best states:

1. Texas (no income tax, property tax only if owning)
2. Florida
3. Tennessee
4. Wyoming
5. Washington

Worst states:

1. California (progressive rate climbing)
2. New York
3. New Jersey
4. Minnesota
5. Oregon

Why: This is the sweet spot where income tax savings matter most. Property tax is moderate burden.

For High-Income Earners ($200K+)

Best states:

1. Wyoming (no income tax, low everything)
2. Florida (no income tax, can afford property tax)
3. Nevada
4. Texas
5. Washington (unless capital gains income)

Worst states:

1. California - 13.3% top rate (BRUTAL on $500K+ income)
2. New York - 10.9% state + 3.876% NYC
3. New Jersey - 10.75% rate
4. Hawaii - 11% rate
5. Oregon - 9.9% rate plus local taxes

Example: $500K earner

• California state tax: ~$45,000/year
• Florida state tax: $0
• Savings by moving: $45,000/year ($450K over 10 years!)

Calculate your savings →

Hidden Tax Traps

Some states look good on paper but have surprises:

Trap 1: Local Taxes

States with city/county income taxes:

• Ohio - Cincinnati (2.1%), Cleveland (2.5%), Columbus (2.5%)
• Pennsylvania - Philadelphia (3.75%), Pittsburgh (3%)
• Maryland - Baltimore (3.2%)
• New York - NYC (3.876%)
• Indiana - Marion County/Indianapolis (2.02%)

Impact: Can add 2-4% to your tax bill unexpectedly.

Trap 2: No Income Tax But Sky-High Property Tax

Texas problem:

• No income tax ✓
• But 1.60% property tax ✗
• $500K home = $8,000/year property tax
• Equivalent to ~5% income tax on $160K salary

New Hampshire problem:

• No income tax ✓
• But 2.05% property tax (2nd highest) ✗
• $400K home = $8,200/year

Trap 3: "Flat Tax" Doesn't Mean Low Tax

Illinois:

• "Flat" 4.95% sounds moderate
• BUT: High property tax (2.07%)
• AND: High sales tax (8.83% Chicago)
• AND: No standard deduction
• Result: 11th highest tax burden overall

Trap 4: Capital Gains Taxes

Washington State:

• No income tax... for now ✓
• BUT: 7% tax on capital gains over $250K ✗
• Affects stock sales, business exits
• Not an issue for W-2 employees

California:

• Capital gains taxed as ordinary income
• Top rate: 13.3%
• Sell $1M in stock: Pay $133K to CA
• Same sale in Texas: $0 state tax

Best States by Life Situation

Best for Retirees

Top 5:

1. Florida - No tax on Social Security, pensions, 401k
2. Nevada - No income tax on retirement income
3. Wyoming - Low everything, peaceful
4. Tennessee - No income tax, low COL
5. South Dakota - No income tax, low taxes overall

Why: Fixed income + no income tax = maximum purchasing power

Best for High-Income W-2 Employees

Top 5:

1. Texas - No income tax, strong job market
2. Washington - No income tax (unless capital gains)
3. Florida - No income tax, growing economy
4. Tennessee - No income tax, Nashville boom
5. Nevada - No income tax, no corporate tax

Best for Business Owners/Entrepreneurs

Top 5:

1. Wyoming - No income tax, no corporate tax, LLC-friendly
2. Nevada - No income tax, no corporate tax
3. Texas - No income tax, business-friendly (but has franchise tax)
4. South Dakota - No income tax, no corporate tax
5. Alaska - No income tax, no sales tax

Best for Investors

Top 5:

1. Wyoming - No capital gains tax
2. Texas - No capital gains tax
3. Florida - No capital gains tax
4. Nevada - No capital gains tax
5. Tennessee - No capital gains tax

Worst:

• California (13.3% on all capital gains)
• New York (10.9%)
• Hawaii (11%)

Example: Sell business for $5M

• California tax: $665,000
• Florida tax: $0
• Difference: $665,000 (13.3%)

Tax-Friendly Strategies

Strategy 1: Establish Residency in Low-Tax State

Requirements (varies by state):

• Physical presence 183+ days/year
• Driver's license
• Voter registration
• Property/rental lease
• Bank accounts
• Intend to stay permanently

Beware: High-tax states like CA and NY audit aggressive "move-aways". Document everything.

Strategy 2: Work Remote from Low-Tax State

Best case: Work for SF company, live in Texas

• Get SF salary: $150K
• Pay TX tax: $0
• Save vs living in CA: ~$7,000-9,000/year

BUT: Some companies adjust salary for location. Negotiate!

Strategy 3: Time Income for Tax Optimization

Example:

• Leaving California for Texas in July
• Bonus paid in August
• Defer bonus until after move
• Save 13.3% CA tax = $13,300 on $100K bonus

Strategy 4: Maximize Deductions in High-Tax States

If stuck in high-tax state:

• Max 401(k): $23,000 (2025)
• Max HSA: $4,150 individual
• Deduct state/local taxes (up to $10K cap)
• Every $1 deducted saves $0.10-0.13 in state tax

Surprising Tax Facts

Fact 1: Some "High-Tax" States Aren't That Bad

Massachusetts appears high-tax:

• 5% income tax
• High property tax
• High sales tax

BUT:

• Flat tax means middle-class pays less than progressive states
• No tax on clothing under $175
• No tax on groceries
• Result: Moderate actual burden for many residents

Fact 2: Some "Low-Tax" States Cost More Overall

Tennessee:

• No income tax ✓
• Sounds great!

BUT:

• 9.55% sales tax (highest in nation)
• Food IS taxed at 4-7%
• Hurts low/middle income more
• Result: Regressive tax system

Fact 3: Property Tax Increases Are Unlimited in Some States

Texas:

• Homestead exemption exists
• But rates can increase annually
• Many areas seeing 3-5% increases/year
• $6,000 tax → $10,000 tax in 10 years

California (Prop 13):

• Rate capped at 1%
• Increases limited to 2%/year
• Protects long-term homeowners

Your Action Plan

Step 1: Calculate YOUR Tax Burden

Use our calculator for your specific situation:

• Your income level
• Your state
• Your filing status
• Your homeownership

Step 2: Identify Savings Opportunities

If you can relocate:

• Compare take-home in top 5 target states
• Factor in cost of living too (separate from taxes)
• Consider career impact

If you can't relocate:

• Maximize pre-tax deductions
• Review W-4 withholdings
• Consider tax-loss harvesting (investments)
• Use tax-advantaged accounts

Step 3: Plan Major Financial Events

Before selling property/business:

• Consider establishing residency in no-tax state FIRST
• Timing can save 6-13.3% on proceeds

Before retiring:

• Move to tax-friendly state BEFORE distributions start
• Save thousands annually on pension/401k withdrawals

Conclusion

The best state for taxes isn't one-size-fits-all. It depends on:

• Your income level
• Your income sources (W-2, investment, business)
• Whether you own or rent
• Your life stage (working, retiring)

Key takeaways:

✅ Top 5 overall: Wyoming, Alaska, Tennessee, Florida, Texas ✅ High earners: No-income-tax states save MASSIVE amounts ✅ Middle class: Total burden (all taxes) matters more than income tax alone ✅ Retirees: Florida, Nevada, Tennessee offer best retirement tax breaks ✅ Business owners: Wyoming, Nevada, South Dakota most friendly

The biggest mistake: Focusing on one tax type (income tax) while ignoring others (property, sales).

The smart move: Look at TOTAL tax burden for YOUR situation.

Next step: Use our free calculator to see your exact take-home pay in different states. Compare your current state to potential new states and see how much you could save.

Remember: Over a career, choosing the right state for taxes can mean $100,000-500,000+ in extra wealth. Worth spending an hour to research!

Calculate your savings now →