You're probably thinking about moving. Or maybe you're just staring at your latest pay stub, wondering why the government needs such a big piece of your hard-earned cash. It’s a common frustration.
When people search for us states with lowest taxes, they usually go straight for the "No Income Tax" list. It’s the obvious move. States like Florida and Texas scream "savings" because that 0% line on your state return looks incredible. But honestly? It’s often a bit of a shell game. If a state doesn't get you on income, they’re probably getting you at the cash register or through your property tax bill.
The real winners for 2026 aren't just the ones with no income tax. They are the states that manage to keep the total burden low across the board.
The Heavy Hitters of 2026 Tax Savings
If we're looking at the big picture—what the Tax Foundation calls the State Tax Competitiveness Index—Wyoming is basically the undisputed heavyweight champion. They have no individual income tax and no corporate income tax. Plus, their property taxes are actually low, ranking in the top ten most affordable. They fund most of their government through mineral and energy production taxes. It's a sweet deal if you can handle the wind.
South Dakota is right there with them. Again, no income tax. They do have a sales tax (around 4.2% at the state level), but it's broad. They tax almost everything, but the rate is low enough that it doesn't sting as much as a 10% bite in a place like Louisiana.
The New Hampshire Paradox
New Hampshire is a weird one. It’s a "Live Free or Die" state, and they mean it. As of 2025, they finally finished phasing out their tax on interest and dividends. This makes them a true 0% income tax state. No sales tax either.
Sounds perfect, right?
Well, you’ve got to live somewhere. Because New Hampshire doesn't have those big revenue streams, they lean hard on property owners. Their property tax rates are some of the highest in the country. If you’re a renter or you own a very modest home, you win big. If you're looking at a $700,000 house, your annual tax bill might make you miss the income tax.
States with Lowest Taxes: The Income Tax Myth
Most people get tunnel vision on income tax. But look at Alaska. It’s the only state with no state-level sales tax and no individual income tax. It sounds like a libertarian paradise. And for your wallet, it mostly is. But the cost of a gallon of milk or a heating bill in Fairbanks can quickly eat up those tax savings.
Then you have states that do have an income tax but keep it so low it barely matters.
- Arizona has moved to a flat tax of 2.5%.
- Ohio is down to 2.75% for most people.
- Indiana is sitting at a cool 2.95% for 2026.
These states often have much lower property taxes than the "no-income-tax" states. For a middle-class family, a 3% income tax combined with a $2,000 property tax bill is often cheaper than a 0% income tax combined with a $9,000 property tax bill.
What’s Changing in 2026?
We're seeing a massive trend toward "Flat Tax" models. States are competing for you. They want the remote workers. They want the businesses.
Iowa just finished a huge overhaul, landing at a flat 3.8% for 2026. Kentucky is down to 3.5%. These used to be high-tax states, but they’ve realized that being "middle of the pack" is a death sentence for growth.
Even West Virginia is getting aggressive. They’ve fully exempted Social Security benefits from state income tax starting this year. If you’re a retiree, West Virginia is suddenly looking like a financial fortress, especially with some of the lowest housing costs in the Eastern US.
The Property Tax Trap
You can’t talk about us states with lowest taxes without mentioning the Southern strategy. Alabama and South Carolina have incredibly low property taxes. We're talking 0.3% to 0.5% effective rates.
In Alabama, the median property tax bill is roughly $600 to $700 a year. In New Jersey, it's over $9,000. That is a life-changing difference in monthly cash flow.
However, Alabama makes up for it with a high sales tax. In many cities like Birmingham or Montgomery, you’ll pay 10% or more at the register. And yes, they still tax groceries in some places, though that's finally starting to change with recent legislation.
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Where Retirees Should Actually Look
If you're retiring, the math changes. You don't care about corporate tax. You care about Social Security, 401(k) withdrawals, and property tax exemptions.
Mississippi is a sleeper hit here. They don't tax retirement income at all. Not your pension, not your IRA, not your Social Security. Combine that with the lowest cost of living in the country and very low property taxes, and your dollar goes further there than almost anywhere else.
Tennessee is the other big contender. No income tax and very low property taxes. The catch? The 9.55% average combined sales tax. If you're a big spender, Tennessee gets its cut. If you live frugally, you keep almost everything.
Surprising Losers
Washington state used to be the "no tax" darling of the West. Not anymore. While they still don't have a general income tax, they implemented a 7% capital gains tax on high-earners. They also have some of the highest sales taxes in the nation. For a wealthy retiree living off a stock portfolio, Washington is no longer the tax haven it once was.
Real World Math: $100,000 Salary Example
Let's say you're a single filer making $100k.
In California, you’re losing about $6,000+ to the state just in income tax.
In Florida, you lose $0.
But wait. If you buy a $500,000 home in Florida, your property tax might be $4,500. In certain parts of California, due to Prop 13, it might actually be similar or even lower if you've owned for a while. The real difference is usually the cost of insurance. In Florida, your "tax savings" might just go straight to your homeowner's insurance premium, which has skyrocketed in 2026.
Practical Steps for Choosing Your State
Moving for taxes is a big deal. Don't just look at a map and pick a 0% state.
- Calculate your "Big Three": Estimate your annual income tax, property tax (based on the home value you want), and sales tax (based on your spending).
- Check the "Hidden" Taxes: Look at gasoline taxes and utility taxes. In states like Illinois, these are sneakily high.
- Factor in Insurance: Especially in Florida, Texas, and Louisiana. High insurance premiums act exactly like a tax on your monthly budget.
- Look at the Trend: Is the state cutting taxes (like North Carolina and Iowa) or looking for new ways to tax (like Washington and Massachusetts)?
Choosing a state based on the us states with lowest taxes requires looking past the 0% headlines. Wyoming and South Dakota offer the purest low-tax experience. But if you're a retiree, Mississippi's exemptions might actually save you more. For the average family, a low-flat-tax state like Arizona or Indiana often provides the best balance of low taxes and decent public services.
Determine which "bucket" you fall into—high earner, retiree, or remote worker—and run the numbers on your specific spending habits before packing the U-Haul.