10 Best States for Taxpayers
The best states for taxpayers are usually the ones that combine reasonable overall taxes with a cost of living that does not erase the savings.
Contents
28 sections
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How to judge "tax-friendly" the right way
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Taxes that matter most for most households
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Costs that can cancel out low taxes
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Decision rule: focus on your "big 2"
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Best states for taxpayers: the top 10 to consider
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Why these states often rank well
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Real-number examples: what "tax-friendly" can look like
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Scenario A: High earner renting, $120,000 income
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Scenario B: Homeowner family, $90,000 income, buying a $350,000 home
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Scenario C: Retiree couple, $55,000 income (Social Security + withdrawals)
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Budget allocations with real dollar amounts (and how taxes fit in)
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Allocation 1: $4,000 monthly take-home pay
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Allocation 2: $7,500 monthly take-home pay
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Allocation 3: $3,200 monthly take-home pay
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Timeline decision rules: where to keep money for taxes and big moves
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Under 1 year
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1 to 3 years
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3 to 7 years
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7+ years
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Checklist: compare states without missing hidden costs
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Named tools and providers to help you run the numbers
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Common taxpayer mistakes when choosing a state
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1) Only looking at income tax
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2) Ignoring local taxes and fees
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3) Not planning for a partial-year return
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4) Missing identity and credit steps during a move
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How to narrow your list to 2 states in 30 minutes
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Where to verify tax rules and avoid surprises
But “best” depends on what you pay most: income tax, property tax, sales tax, or hidden costs like insurance and fees. A retiree living off Social Security may care more about how a state taxes retirement income. A homeowner may care most about property taxes. A high earner may focus on income tax brackets. And a frequent shopper may feel sales taxes more than anything else.
This guide gives you a practical way to compare states, plus a list of 10 states that often rank well for taxpayers. You will also see real number examples and decision rules you can use before you move, buy a home, or plan your next year’s budget.
How to judge “tax-friendly” the right way
Start with the taxes you actually pay, then layer in the costs that can offset tax savings.
Taxes that matter most for most households
- State income tax – wage income, business income, and sometimes retirement income.
- Property tax – based on home value and local rates. This can be the biggest annual tax for homeowners.
- Sales and excise taxes – general sales tax plus higher taxes on gas, alcohol, tobacco, and sometimes services.
- Other state and local taxes – vehicle registration, local income taxes, gross receipts taxes, and special assessments.
Costs that can cancel out low taxes
- Housing costs – rent and home prices can dwarf tax differences.
- Insurance – homeowners and auto insurance vary widely by state and region.
- Healthcare access and premiums – especially important for retirees and self-employed households.
- Wages and job market – a lower tax state is not always better if pay is much lower for your field.
Decision rule: focus on your “big 2”
Pick the two categories that will drive most of your spending and taxes, then compare states primarily on those. Examples:
- Homeowners: property tax + home prices
- High earners: income tax + housing costs
- Retirees: retirement income rules + property tax
- Families: income tax + childcare and housing
Best states for taxpayers: the top 10 to consider
The states below are commonly considered tax-friendly because they tend to keep one or more major taxes low (often income tax) and can offer a strong overall value depending on your situation. Always verify current rules and local rates because cities and counties can change the picture.
| State | Best fit | What to compare | Main drawback to watch |
|---|---|---|---|
| Florida | Wage earners and retirees who want no state income tax | Property taxes by county, homeowners insurance, HOA fees | Insurance and storm risk can raise total cost |
| Texas | High earners who want no state income tax | Property tax rates, home prices, local fees | Property taxes can be high in many areas |
| Tennessee | Households seeking no wage income tax and moderate costs | Sales tax rates, local add-ons, housing costs | Sales taxes can be high depending on location |
| Nevada | Wage earners and small business owners seeking no state income tax | Sales taxes, housing costs in metro areas, fees | Cost of living can be higher in certain markets |
| Washington | High earners who want no wage income tax | Sales tax, property tax, business taxes if self-employed | High housing costs in many areas |
| South Dakota | Retirees and remote workers seeking low overall tax burden | Property taxes by county, local sales taxes | Fewer large job markets and services in rural areas |
| Wyoming | Households seeking low taxes and lower population density | Housing availability, property taxes, energy costs | Job options can be limited depending on industry |
| New Hampshire | Wage earners who want no broad wage income tax | Property taxes, commuting costs, housing prices | Property taxes can be high |
| North Carolina | Families and professionals seeking a balanced tax structure | Income tax rate structure, property taxes, growth areas | Rapidly rising housing costs in some metros |
| Colorado | Wage earners who want moderate income taxes and strong amenities | Home prices, local taxes, vehicle fees | Housing costs can be the biggest expense |
Why these states often rank well
- No state income tax states (Florida, Texas, Tennessee, Nevada, Washington, South Dakota, Wyoming) can be attractive if income tax would be your largest bill.
- Balanced tax states (North Carolina, Colorado) can work well when you want predictability and a mix of taxes that does not lean too heavily on one category.
- No broad wage income tax plus regional advantages (New Hampshire) can be appealing if you can manage property taxes and housing costs.
Real-number examples: what “tax-friendly” can look like
Because tax rules and local rates vary, use examples to understand tradeoffs. These scenarios are simplified to show how the same household can feel different taxes depending on where they live. For exact estimates, run your numbers through state and local calculators and compare quotes for insurance.
Scenario A: High earner renting, $120,000 income
Profile: Single renter, $120,000 salary, spends $45,000 per year after rent on taxable goods and services.
- Decision rule: If you rent and earn most of your income from wages, state income tax often matters more than property tax.
- What to model: Estimated state income tax, sales tax on spending, and rent difference.
Quick comparison approach:
- Estimate annual state income tax in each state you are considering.
- Estimate sales tax impact: taxable spending x combined state and local rate.
- Compare rent for a similar neighborhood and commute.
Scenario B: Homeowner family, $90,000 income, buying a $350,000 home
Profile: Married couple with kids, $90,000 income, buying a $350,000 home, putting 10% down, budgeting $6,000 per year for property taxes and insurance combined (this can be higher or lower depending on state and county).
- Decision rule: If you own a home, property taxes plus insurance can outweigh income tax differences.
- What to model: Property tax rate in the specific county, homeowners insurance quotes, and any local school or special district assessments.
Tip: When comparing Texas vs Florida, for example, many households find the tradeoff is not “tax vs no tax” but “property tax and insurance mix.”
Scenario C: Retiree couple, $55,000 income (Social Security + withdrawals)
Profile: Retired couple, $30,000 Social Security, $25,000 IRA withdrawals, owns a $300,000 home outright.
- Decision rule: Focus on how the state treats retirement income plus property taxes and healthcare access.
- What to model: State taxation of Social Security and retirement distributions, property taxes, and medical costs.
Budget allocations with real dollar amounts (and how taxes fit in)
Taxes affect cash flow, so it helps to build a plan that includes a “tax buffer” and keeps high-interest debt from growing. Below are three sample monthly allocations. They are not one-size-fits-all, but they show what this can look like with real numbers.
Allocation 1: $4,000 monthly take-home pay
| Category | Monthly amount | Notes |
|---|---|---|
| Housing (rent or mortgage) | $1,400 | Keep stable if moving to a lower-tax but higher-rent area |
| Utilities and internet | $250 | Energy costs vary by climate |
| Food | $600 | Groceries may be taxed differently by state |
| Transportation | $450 | Gas taxes and insurance can vary |
| Debt payments | $350 | Prioritize highest APR first |
| Savings and investing | $650 | Emergency fund, retirement, and near-term goals |
| Tax and fee buffer | $150 | For vehicle registration, local fees, unexpected taxes |
| Other (health, kids, misc.) | $150 | Adjust based on needs |
Total: $4,000
Allocation 2: $7,500 monthly take-home pay
- Housing: $2,600
- Utilities: $350
- Food: $900
- Transportation: $700
- Debt payments: $500
- Savings and investing: $2,200
- Tax and fee buffer: $250
Total: $7,500
Allocation 3: $3,200 monthly take-home pay
- Housing: $1,200
- Utilities: $250
- Food: $500
- Transportation: $350
- Debt payments: $300
- Savings: $450
- Tax and fee buffer: $150
Total: $3,200
Timeline decision rules: where to keep money for taxes and big moves
If you are moving states, buying a home, or changing jobs, you may face one-time costs: deposits, moving trucks, closing costs, and timing issues with tax withholding. A simple timeline rule can help you decide how much to keep liquid.
Under 1 year
- Keep planned moving costs and tax payments in cash-like accounts.
- Common targets: 1 to 3 months of expenses for a move, plus any known tax bill.
- Where: FDIC-insured bank accounts or NCUA-insured credit union accounts. Confirm coverage limits at FDIC.gov.
1 to 3 years
- Keep money for a down payment or relocation mostly stable.
- Consider a mix of high-yield savings and short-term instruments offered by banks and brokerages, comparing fees and access.
3 to 7 years
- You may be able to take modest market risk for long-term goals, but keep near-term tax and housing costs separate.
- Rule of thumb: keep 3 to 12 months of expenses liquid depending on job stability and household needs.
7+ years
- Long-term goals can usually handle more volatility, but still plan for annual taxes and insurance increases.
- Re-check your state tax situation when income changes, you start a business, or you retire.
Checklist: compare states without missing hidden costs
| Category | Questions to ask | Documents or data to gather |
|---|---|---|
| Income tax | Is there a state income tax? How are retirement income and capital gains treated? | Last year’s tax return, expected income sources |
| Property tax | What is the county rate? Are there exemptions? How often are assessments updated? | County assessor info, sample property tax bills |
| Sales tax | What is the combined state and local rate? Are groceries taxed? | State revenue site, city/county rates |
| Insurance | What do homeowners and auto quotes look like for your profile? | Insurance quotes for the same coverage |
| Fees | How much are vehicle registration, inspections, tolls, and local fees? | DMV fee schedules, toll estimates |
| Housing market | How do rent and home prices compare for similar neighborhoods? | Comparable listings, commute costs |
Named tools and providers to help you run the numbers
You do not need a perfect model, but you should use consistent tools so you can compare states apples-to-apples. Here are widely used, recognizable options to gather data and estimate impacts. Verify results with official sources when you are close to making a decision.
| Option | Best fit | What to compare | Main drawback |
|---|---|---|---|
| IRS Tax Withholding Estimator | Adjusting paycheck withholding after a move or job change | Inputs needed, how it handles multiple jobs | Federal-focused, does not replace state estimates |
| TurboTax (Intuit) | Estimating multi-state filing scenarios | State support, pricing, import features | Costs can add up depending on complexity |
| H&R Block | DIY or assisted prep with state returns | Support options, state add-ons, audit support terms | Upsells may not be necessary for simple returns |
| TaxAct | Lower-cost filing for some households | State pricing, forms included, ease of use | Interface and guidance may vary by situation |
| SmartAsset Tax Calculator | Quick comparisons of take-home pay by location | Locality coverage, assumptions, update frequency | Estimates only, not a substitute for actual tax rules |
| Zillow | Comparing home prices and property tax estimates by area | Comparable homes, tax estimate vs actual bill | Property tax estimates may differ from actual assessments |
Common taxpayer mistakes when choosing a state
1) Only looking at income tax
No income tax can be helpful, but property taxes, sales taxes, and insurance can be the bigger line items. Always run a full-year budget.
2) Ignoring local taxes and fees
City and county taxes can change the math. Vehicle registration, tolls, and special assessments can also be meaningful.
3) Not planning for a partial-year return
If you move mid-year, you may need to file part-year resident returns. Keep records of move dates, pay stubs, and addresses.
4) Missing identity and credit steps during a move
Moves are a common time for mail and account mix-ups. Consider checking your credit reports and monitoring for errors. You can get free weekly credit reports from AnnualCreditReport.com. For identity theft recovery steps, the FTC has guidance at consumer.ftc.gov.
How to narrow your list to 2 states in 30 minutes
- Write your profile: renter or homeowner, income sources, expected home price or rent.
- Pick your big 2: income tax, property tax, sales tax, housing cost, or insurance.
- Pull 3 local data points: a real rental listing or home listing, a county property tax example, and an insurance quote range.
- Estimate annual totals: taxes + housing + insurance. Use the same assumptions for each state.
- Stress test: add 10% to housing and insurance to see if the “tax-friendly” state still wins.
Where to verify tax rules and avoid surprises
- For federal tax topics and tools, start at IRS.gov.
- For consumer financial products and complaint resources, see consumerfinance.gov.
Choosing among the best states for taxpayers is less about chasing a single low tax and more about matching a state’s tax mix to your income, housing plans, and lifestyle. If you run the numbers with your real budget and compare local costs, you can make a decision that holds up after the moving boxes are gone.
