Currently, there are nine states in the U.S. that do not impose taxes on workers’ wages. However, the absence of income tax does not necessarily equate to affordability in these regions.
States that forgo income tax often compensate by imposing higher rates in other tax categories. Additionally, some of these states have witnessed significant increases in the cost of living, driven by escalating home insurance expenses due to climate change and rising housing market prices.
Renowned financial analysts caution that relocating to a state without an income tax may not guarantee financial savings. Failing to consider other local living costs could lead to unfavorable financial outcomes. The states without a standard income tax in 2025 include Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Andrey Yushkov, a senior policy analyst at the Tax Foundation, emphasizes the limited correlation between living costs and the absence of income tax. He notes that multiple factors contribute to the overall cost of living, including property taxes, sales taxes, excise taxes, and home insurance. Thus, states without income tax may not be more affordable for all residents.
The rise in home and auto insurance premiums is a notable concern. Florida, a state known for its absence of income tax, has the highest average home insurance rates in the country, with annual premiums averaging $10,675 in 2025. Texas, another state recognized for the same advantage, sees average home insurance costs of $4,789, ranking it fourth nationwide.
These figures significantly exceed the national average of $2,584 for home insurance in 2025. Homeowners across various states are adjusting to soaring insurance rates, with Washington witnessing a year-on-year increase exceeding 20% in 2024, according to S&P Global data.
Moreover, securing insurance coverage is becoming increasingly difficult as many insurers exit states where climate change has driven up costs, including Florida, Louisiana, California, and Colorado. The U.S. Treasury Department recently highlighted the “alarming” rise in home insurance costs and the dwindling availability of coverage options.
The trend extends to auto insurance, where average prices have surged to $2,324, marking a nearly 30% increase over the past two years. Many states with no income tax rank among those with the highest car insurance costs, with Nevada averaging $3,207 for full coverage in 2025 and Florida averaging $2,967.
Understanding the disparities in insurance costs is crucial as they can significantly affect household budgets. Cassie Sheets, a data journalist at Insurify, advises individuals considering a move to a no-income-tax state to first evaluate the local auto and home insurance markets, as variances in rates can be substantial.
When assessing living expenses in no-income-tax states, it is essential to consider property taxes, sales tax, and various other expenses. Property tax rates vary widely across the nation, with some rural counties having annual bills under $300, while suburban areas in states like California and New Jersey see rates surpassing $10,000.
Property taxes are calculated as a percentage of a home’s assessed value, emphasizing the importance of understanding rates rather than just raw dollar amounts. For instance, Illinois has the highest property tax rate at 1.83%, followed closely by New Jersey at 1.77%. New Hampshire also ranks at 1.41%, despite having no general sales tax.
Sales tax rates in no-income-tax states can also contribute to overall living expenses. States like Tennessee and Nevada feature some of the highest sales tax rates in the country, charging 7% and 6.85%, respectively, while Texas and Washington are not far behind at 6.25% and 6.5%.
Some no-income-tax states may levy sales taxes on typically exempt items, such as groceries, as evidenced by South Dakota’s recent voter decision to retain its grocery tax to mitigate property tax increases.
The impact of sales taxes can add hundreds, if not thousands, of dollars to annual budgets based on individual consumption habits. Yushkov from the Tax Foundation indicates that for high-income individuals, the lack of income tax may be a critical factor in residency decisions, but those with lower incomes might find limited financial benefits.
Before relocating to a no-income-tax state, potential movers should consider personal factors including job availability, family dynamics, climate, infrastructure, educational systems, and the various local tax structures. Beyond property, sales, and income taxes, individuals should also evaluate taxes on capital gains, dividends, and Social Security benefits, in addition to monthly expenses like utilities, as states can exhibit significant cost disparities.
Using various data resources, including Insurify and Zillow, here are some key aspects to consider for living costs in states without income tax:
Alaska
State sales tax rate: 1.82%
Property tax rate: 0.91%
Average home insurance per year: $1,197
Average car insurance per year: N/A due to insufficient data
Other factors: Local cities can impose additional sales tax up to 10%; substantial revenue is generated from the oil sector.
Florida
State sales tax rate: 6.95%
Property tax rate: 0.74%
Average home insurance per year: $10,675
Average car insurance per year: $2,967
Other factors: Home values have surged, increasing by 50% within five years.
Nevada
State sales tax rate: 8.24%
Property tax rate: 0.49%
Average home insurance per year: $1,370
Average car insurance per year: $3,207
Other factors: State revenues are significantly influenced by gambling operations.
New Hampshire
State sales tax rate: 0%
Property tax rate: 1.41%
Average home insurance per year: $1,226
Average car insurance per year: $966
Other factors: Utility expenses rank among the highest nationwide.
South Dakota
State sales tax rate: 6.11%
Property tax rate: 0.99%
Average home insurance per year: $2,871
Average car insurance per year: $1,876
Other factors: Taxes items typically exempt, including groceries.
Tennessee
State sales tax rate: 9.56%
Property tax rate: 0.49%
Average home insurance per year: $2,584
Average car insurance per year: $1,652
Other factors: Sales taxes applied to items generally exempt, such as groceries.
Texas
State sales tax rate: 8.20%
Property tax rate: 1.36%
Average home insurance per year: $4,789
Average car insurance per year: $2,703
Other factors: The state relies heavily on revenues from the oil sector.
Washington
State sales tax rate: 9.43%
Property tax rate: 0.75%
Average home insurance per year: $1,470
Average car insurance per year: $2,038
Other factors: Imposes a 7% tax on capital gains exceeding $250,000.
Wyoming
State sales tax rate: 5.44%
Property tax rate: 0.55%
Average home insurance per year: $1,740
Average car insurance per year: $1,229
Other factors: Imposes sales tax on feminine hygiene products and diapers; residential energy expenses are also notably high.