As of , nine states collect zero state income tax — and I’ve spent the last three months tracking what that actually costs retirees who move there. The answer surprised me. I’m Harper Grant, and I cover retirement relocation for a living. What I found is that the headline “no income tax” often hides four or five other tax burdens that quietly eat your Social Security check. Here’s the full picture before you pack a moving truck.
Nine states levy no broad-based state income tax in . New Hampshire completed its dividend and interest tax phase-out effective , joining the list permanently. However, your federal tax liability is unaffected by your state of residence — Social Security may still be federally taxable depending on your combined income. “No state income tax” is not the same as “no tax.”
The Nine States: Full List, What Changed, and Who Qualifies
Read more: Social Security Payment Dates 2026
I pulled each state’s department of revenue page in to verify current status. The nine no-income-tax states are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Tennessee phased out its Hall income tax — which once taxed dividends and interest — completely by . New Hampshire mirrored that process, finishing in .
Washington state is worth flagging separately. It charges no income tax but does impose a 7% capital gains excise tax on gains above $262,000 per year as of . If you’re selling a rental property or a large stock portfolio after relocating, that’s a line item you need on a spreadsheet before signing a lease in Seattle.
The Dollar Impact: What “Tax-Free” Really Costs Retirees in 2026
I ran numbers on a hypothetical retired couple — $72,000 combined annual income, including $36,000 in Social Security, a $24,000 pension, and $12,000 in IRA withdrawals. Moving from Illinois (4.95% flat income tax) to Florida (0%) saves them roughly $3,564 per year in state taxes. But Florida’s average property tax on a $300,000 home runs about $2,400 annually. Its average sales tax — state plus county — is 7.07%. The real net savings shrinks to closer to $1,100 per year once you factor in those costs.
Your 2025 federal tax liability is determined by your total tax before credits and deductions — state of residence changes nothing about that federal calculation. Our couple above still owes federal tax on up to 85% of their Social Security if their combined income exceeds $44,000. Relocating to Wyoming doesn’t change that threshold by one dollar.
Several new tax deductions introduced for the 2026 filing season apply regardless of which state you live in. The enhanced standard deduction for taxpayers age 65 and older is worth tracking — it partially offsets federal tax regardless of your relocation decision.
| State | Income Tax | Avg. Sales Tax (2026) | Median Property Tax Rate | Social Security Taxed? | Notable Catch |
|---|---|---|---|---|---|
| Alaska | None | 1.76% (no state; local only) | 1.04% | No | High cost of living; remote healthcare |
| Florida | None | 7.07% | 0.80% | No | Hurricane insurance costs; rising |
| Nevada | None | 8.24% | 0.55% | No | High sales tax; Medicaid limits |
| New Hampshire | None (as of 2025) | 0% (no sales tax) | 1.86% — among the highest in the U.S. | No | Property tax can exceed $6,000/yr on median home |
| South Dakota | None | 6.40% | 1.14% | No | Limited public transit; rural healthcare gaps |
| Tennessee | None | 9.55% — highest in the U.S. | 0.66% | No | Sales tax heavily offsets income tax savings |
| Texas | None | 8.19% | 1.60% | No | Property tax: $4,000–$8,000/yr on median home |
| Washington | None (but see capital gains) | 9.38% | 0.87% | No | 7% capital gains tax over $262,000/yr |
| Wyoming | None | 5.36% | 0.61% | No | Low overall tax burden; limited services in rural areas |
Sources: IRS.gov,
Urban Institute,
state revenue department websites. Sales tax rates include average local rates as of
.
The Hidden Costs That Catch Retirees Off Guard
Read more: 8 States With No Income Tax in 2026: Retirees Save $8,400
Zeroing out your state income tax bill does not mean zeroing out your tax burden. Every no-income-tax state recovers revenue somewhere else. I’ve tracked four categories that consistently surprise retirees who relocate without doing full homework first.
1. Property Taxes
Texas and New Hampshire carry two of the highest effective property tax rates in the country — both above 1.60%. On a $350,000 home, that’s $5,600 per year before any exemptions. New Hampshire’s rate averages 1.93%, among the top five nationally according to Lincoln Institute of Land Policy.
Florida and Wyoming offer relief. Florida’s homestead exemption removes the first $50,000 of assessed value for primary residents. Wyoming’s effective rate sits at just 0.61%. Always apply for senior homestead exemptions the first year you’re eligible — missing the filing window costs real money.
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