My neighbor Ruth stood in her Florida driveway last January, holding a property tax bill that made her hands shake. She had moved from Illinois specifically to escape state income tax — and somehow owed $9,800 in property taxes on a modest three-bedroom she thought would be her “tax-free retirement dream.”
I’m Priya Desmond, and I’ve spent the last year documenting stories like Ruth’s — retirees who chased the no-income-tax promise, landed in one of nine states, and discovered a full ecosystem of replacement taxes waiting for them. This piece is the guide I wish Ruth had read in before she signed the closing papers.
In , nine states levy zero state income tax. But the IRS still taxes up to 85% of Social Security benefits at the federal level — and several no-income-tax states carry some of the highest property and sales tax burdens in the country. The full picture is far more complicated than the headline.
The Nine States — And Why the List Is Smaller Than You Think
Read more: Retirement Planning Guide
In , these nine states impose no broad-based individual state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
New Hampshire’s elimination of its Interest and Dividends Tax took full effect on , making it a true zero-income-tax state by the time I started this research. Washington is the asterisk: it has no wage income tax, but its 7% capital gains tax — upheld by the state Supreme Court in — applies to gains above $262,000 per year. For retirees drawing down investment portfolios, that matters enormously.
The Hidden Costs Ruth Didn’t See Coming
Read more: 9 States With No Income Tax in 2026: Hidden Costs for Retirees
Ruth’s situation wasn’t unique. When I spoke with her in , she pulled out a spreadsheet she’d finally built — eighteen months too late. Her total Florida tax burden came to roughly $14,200 annually. Back in Evanston, Illinois, she had paid $11,800 in combined state income and property taxes on a smaller home. Moving to “no income tax” Florida had cost her an extra $2,400 per year.
Here is where the money actually went:
Property taxes. Florida’s effective property tax rate averages around 0.86%, but in the Tampa Bay metro, Ruth’s county ran closer to 1.1%. On a home assessed at $890,000 — values that exploded post-pandemic — that’s exactly the $9,800 bill she got. Texas, the most popular no-income-tax retirement destination, averages an effective property tax rate near 1.6%, among the highest in the nation.
Sales taxes. Nevada charges a state sales tax of 6.85%, with Clark County (Las Vegas) adding another 1.525% — hitting 8.375% total. Tennessee carries a combined average rate above 9.5%, ranking it among the highest nationally. On a fixed retirement income of $3,200/month — roughly the average Social Security benefit for a retired worker in early — elevated sales taxes erode purchasing power every single week.
The federal tax on Social Security nobody talks about enough. Moving to a no-income-tax state does not reduce your federal income tax on Social Security benefits. The SSA has published extensive video content explaining benefit taxation thresholds, but the message rarely reaches people before they relocate. If your combined income — adjusted gross income plus nontaxable interest plus half your Social Security — exceeds $34,000 as a single filer, up to 85% of your benefit is federally taxable. The average retired worker benefit was approximately $1,927/month in early 2026 — about what a one-bedroom apartment costs in Phoenix — and for many retirees, that benefit still carries a federal tax bill regardless of which state they live in.
“Social Security retirement benefits are no longer the bargain they once were,” as one federal policy analysis has noted — a reality compounded when retirees move for state tax relief without modeling the full federal picture.
Financial planners increasingly argue that no-income-tax states disproportionately benefit high earners with large wage or pension income — not retirees on modest Social Security plus a small IRA distribution. For someone drawing $28,000/year from retirement accounts, the state income tax savings in, say, moving from Colorado (4.4% flat rate) to Wyoming might be roughly $1,232/year. But if Wyoming’s property taxes are higher and the cost of living difference is significant, the savings evaporate. The math must be done individually, not assumed from the headline.
Side-by-Side: What Retirees Actually Pay Across Key No-Tax States
Read more: 85% of Social Security Can Be Taxed in 2026 — Cut Your Bill
I built this comparison after interviewing retirees who had relocated to six of the nine states between and . These are approximate effective rates based on publicly available state data as of .
| State | State Income Tax | Avg Effective Property Tax | Combined Sales Tax (avg) | Social Security Taxed at State Level? |
|---|---|---|---|---|
| Florida | None | ~0.86% | ~7.02% | No |
| Texas | None | ~1.60% | ~8.20% | No |
| Nevada | None | ~0.55% | ~8.23% | No |
| Washington | None | ~0.98% | ~9.38% | No |
| Wyoming | None | ~0.61% | ~5.39% | No |
| South Dakota | None | ~1.08% | ~6.40% | No |
| Tennessee | None | ~0.66% | ~9.55% | No |
| Alaska | None | ~1.04% | ~1.76% (local only) | No |
| New Hampshire | None (as of 2025) | ~2.09% | ~0% | No |
Sources: Tax Foundation,
ssa.gov.
Property tax rates are statewide averages. Local rates vary significantly. Data reflects figures.
The Hidden Costs Retirees Consistently Miss
I moved to Florida in . I felt smart avoiding California’s 13.3% top rate. Then my first full year of expenses arrived. Here is what caught me off guard — and what I hear from retirees across all nine states.
1. Property Taxes Can Wipe Out the Savings Fast
Texas averages 1.60% effective property tax. On a $400,000 home, that is $6,400 per year. New Hampshire’s rate hits 2.09% — the highest on this list. A retiree on a fixed income feels this every single year. Compare that to Tennessee at 0.66%, where the same home costs roughly $2,640 annually in property taxes.
2. Sales Tax Stacks Up on Every Grocery Run
Tennessee carries the highest combined sales tax average in the country: ~9.55%. Washington sits close at ~9.38%. Retirees spending $30,000 annually on taxable goods and services pay roughly $2,865 in sales tax in Tennessee. The same spending in Alaska costs closer to $528, because Alaska has no statewide sales tax — only local levies. That difference is $2,337 per year in tax on identical spending.
3. Medicare and Healthcare Costs Still Apply Everywhere
No state erases federal Medicare premiums. In , standard Medicare Part B costs $185.00 per month per person, according to medicare.gov. High-income retirees pay IRMAA surcharges on top. Moving to a no-income-tax state does nothing to reduce these costs. Additionally, healthcare provider availability varies widely. Rural Wyoming or South Dakota may have fewer specialists than urban Florida or Nevada.
4. Estate and Inheritance Taxes Can Surface
None of the nine no-income-tax states currently impose a state estate or inheritance tax. That is a genuine benefit. However, the federal estate tax exemption in is $13.61 million per individual, per irs.gov. Most retirees fall below that threshold. Do not let estate tax avoidance be your primary relocation driver if your estate is under that limit.
5. Cost of Living Beyond Taxes
Housing costs, insurance premiums, and utility rates are not captured in tax tables. Florida home insurance rates have surged dramatically. The Florida Office of Insurance Regulation reports average homeowner premiums now exceed $4,200 per year statewide — nearly triple the national average. Texas also faces elevated home and flood insurance costs. Wyoming and South Dakota offer lower housing costs overall, but harsh winters add heating expenses. Alaska’s remote location drives up everyday goods through higher shipping costs.
Leave a Reply