Margaret Holloway, 64, sat at her kitchen table in suburban Ohio last January, calculator in hand, convinced she’d found the answer. Move to Florida, skip the state income tax, save hundreds every month on her Social Security income. She had the U-Haul website open in another tab.
Then her daughter, a CPA, called. “Mom, did you look at property taxes down there?” Margaret hadn’t. What she found changed everything.
The 9 States With No Income Tax in 2026
Read more: Retirement Planning Guide
The nine states with no income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. I want to be precise here: New Hampshire taxes interest and dividend income at a reduced rate through a phase-out period, so read the fine print carefully.
The Tax Foundation’s 2026 state income tax rate data confirms these nine states levy no broad-based individual income tax. That matters enormously if your retirement income includes Social Security benefits, pension distributions, or IRA withdrawals.
| State | Income Tax Rate | Avg. State + Local Sales Tax | Avg. Effective Property Tax Rate |
|---|---|---|---|
| Alaska | 0% | ~1.76% | ~1.04% |
| Florida | 0% | ~7.02% | ~0.83% |
| Nevada | 0% | ~8.23% | ~0.55% |
| New Hampshire | 0% (wages) | ~0% | ~1.86% |
| South Dakota | 0% | ~6.40% | ~1.14% |
| Tennessee | 0% | ~9.55% | ~0.56% |
| Texas | 0% | ~8.20% | ~1.60% |
| Washington | 0% | ~9.38% | ~0.84% |
| Wyoming | 0% | ~5.36% | ~0.55% |
What Zero Income Tax Actually Saves — And What It Costs
Here’s where Margaret’s math went sideways. She was receiving $1,840 per month in Social Security benefits and expected a small pension of roughly $900 per month. In Ohio, her combined state income tax on that pension was around $312 per year — barely $26 per month.
In context: $26 per month is about one tank of gas. That’s what she stood to save on income tax alone.
Meanwhile, the median Florida home she was eyeing cost $389,000. At Florida’s average effective property tax rate, she’d owe roughly $3,229 per year in property taxes — $269 per month. That’s more than ten times her Ohio income tax bill.
(I ran similar numbers for myself when I was considering a move from Pennsylvania to Nevada. The sales tax alone on everyday purchases added up faster than I expected.)
The 3 Hidden Tax Traps That Catch Retirees in No-Income-Tax States
The income tax headline is the easy part. What catches retirees off guard are the taxes that don’t show up in the glossy retirement relocation brochures. Here are the three that matter most.
1. Property Tax Shock
Texas is a perfect example. The Lone Star State has zero income tax, but its average effective property tax rate of 1.60% is among the highest in the nation. On a $350,000 home — modest by many Texas metro standards — that’s $5,600 per year, or $467 per month, coming straight out of a fixed retirement income. Compare that to Alabama, which has a state income tax but an average property tax rate of just 0.41%. The math doesn’t always favor the no-income-tax state.
2. Sales Tax Accumulation
Tennessee’s combined state and local sales tax rate of approximately 9.55% is the highest in the nation. For a retiree spending $3,000 per month on taxable goods and services, that’s roughly $286 in sales taxes every single month — $3,432 per year. Washington state isn’t far behind at 9.38%. These aren’t trivial numbers on a fixed income.
3. Medicare and Healthcare Cost Differences
This one rarely makes the tax comparison lists, but it should. Healthcare costs vary dramatically by state and region. A retiree moving from a mid-sized Midwestern city to South Florida may find that Medicare Advantage plan premiums, supplemental coverage costs, and out-of-pocket expenses run $150 to $300 more per month — easily swamping any income tax savings.
How 4 Specific No-Income-Tax States Compare for Retirees in 2026
Not all nine states are created equal for retirees. Here’s a closer look at the four most popular retirement destinations among the no-income-tax group.
Florida: The most popular retirement destination in the country, with over 4.5 million residents aged 65 and older. The income tax savings are real, and Florida does not tax Social Security benefits. However, homeowner’s insurance costs have surged dramatically — some retirees in coastal counties are now paying $4,000 to $8,000 per year for coverage, up from $1,500 just five years ago. That’s a cost that has nothing to do with income tax and everything to do with hurricane risk.
Texas: Growing fast as a retirement destination, particularly the Austin and San Antonio corridors. The high property taxes sting, but Texas does offer a homestead exemption that reduces the taxable value of a primary residence, and residents 65 and older receive an additional $10,000 exemption on school district taxes. Still, even with exemptions, property tax bills in suburban Dallas or Houston frequently exceed $5,000 annually.
Wyoming: Often overlooked, Wyoming is arguably the most tax-friendly state in the country for retirees with investment income. No income tax, low property taxes at 0.55%, and a modest sales tax of 5.36%. The tradeoff is harsh winters, limited healthcare infrastructure in rural areas, and a small population that means fewer amenities. Cheyenne and Jackson are the most livable cities, but Jackson’s cost of living rivals Manhattan.
Nevada: Las Vegas and Henderson attract retirees with warm weather and no income tax, but Nevada’s sales tax of 8.23% is a constant drain. On the positive side, Nevada has no estate or inheritance tax, which matters for retirees focused on wealth transfer to heirs.
Social Security Taxation: What Your State Does — and Doesn’t — Control
Here’s something many retirees don’t realize until it’s too late: even if you live in a no-income-tax state, the federal government may still tax up to 85% of your Social Security benefits depending on your combined income. Moving to Florida or Texas doesn’t change your federal tax obligation one bit.
What state income tax elimination does help with is pension income, traditional IRA withdrawals, and 401(k) distributions. If you’re pulling $40,000 per year from a traditional IRA in retirement and your former state taxed that at 5%, moving to a no-income-tax state saves you $2,000 per year — real money, but not the windfall that some relocation pitches imply.
The retirees who benefit most from no-income-tax states are those with substantial investment income, large IRA distributions, or significant pension payments. A retiree drawing $80,000 per year from a pension in a state with a 6% income tax rate saves $4,800 annually by moving to a no-income-tax state — assuming all other costs remain equal. They rarely do, but that’s a meaningful number worth calculating carefully.
The Wyoming and Alaska Advantage That Most Retirement Guides Skip
Two states on the list deserve special attention for retirees who can handle the lifestyle tradeoffs.
Wyoming has no income tax, no estate tax, no inheritance tax, and some of the lowest property taxes in the country at 0.55%. Its sales tax of 5.36% is moderate. For a retiree with significant assets who is concerned about estate planning, Wyoming’s trust laws are also among the most favorable in the nation — a detail that matters if you’re leaving wealth to children or grandchildren.
Alaska goes even further. It has no state income tax and no statewide sales tax. Some municipalities levy local sales taxes, but the statewide average is just 1.76%. More unusually, Alaska pays its residents a dividend from the Alaska Permanent Fund — in 2023, that dividend was $1,312 per person. A retired couple in Alaska received $2,624 just for living there. The obvious downsides are geographic isolation, extreme winters, and healthcare access challenges in rural areas. But for the right retiree, Alaska’s tax profile is genuinely exceptional.
How to Run Your Own No-Income-Tax State Comparison in 5 Steps
Margaret’s mistake was comparing a single tax line item — income tax — without running the full picture. Here’s a simple framework any retiree can use before making a relocation decision.
Step 1: Calculate your current total state tax burden. Add up what you pay in state income tax, property tax, and estimated sales tax in your current state. Use your actual spending habits, not averages.
Step 2: Estimate the same three numbers in the target state. Use the Tax Foundation’s state-by-state data and your anticipated home purchase price or rent.
Step 3: Add housing cost differences. A $200,000 home in Ohio and a $389,000 home in Florida are not equivalent comparisons even if the property tax rates were identical.
Step 4: Factor in healthcare and insurance costs. Get actual quotes for Medicare supplemental plans and homeowner’s or renter’s insurance in the target state before you move.
Step 5: Account for cost-of-living differences in groceries, utilities, and transportation. The Bureau of Labor Statistics regional price parities show that some no-income-tax states — particularly Washington and parts of Florida — have significantly higher overall costs of living than the Midwest or South.
Margaret ultimately decided to stay in Ohio. Her daughter’s phone call saved her from a move that would have cost her roughly $4,800 more per year in combined taxes and insurance — all to save $312 in state income tax. She did, however, open a Roth IRA to reduce her future taxable income, which her CPA daughter called “the smarter version of the same instinct.”
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