Key Takeaways
- Nine states charge no personal income tax in 2026 - Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming - but that doesn't mean they're cheap overall.
- New Jersey has the highest effective property tax rate in the country (2.11%), while Hawaii has the lowest (0.27%) - on a $400,000 home, that's roughly $8,440 a year in NJ versus $1,080 in Hawaii.
- Louisiana, Tennessee, Washington, Arkansas, and Alabama have the highest combined state and local sales tax rates (all above 9.4%); Delaware, Montana, New Hampshire, and Oregon charge none at all.
- Twelve states plus D.C. levy their own estate tax and five states levy an inheritance tax (Maryland has both) - separate from, and often with a much lower exemption than, the federal estate tax.
- Only eight states still tax Social Security benefits in 2026 (Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont), and most exempt lower- and middle-income retirees through income thresholds anyway.
- Washington voters decide in November 2026 whether to repeal the state's new 9.9% tax on income over $1 million before it even takes effect in 2028.
Where you live changes what you owe in ways that have nothing to do with your federal return. Nine states charge no personal income tax at all in 2026, but the same nine states often make up the difference through property tax, sales tax, or both.
There’s no single “best” state for taxes — there’s only the state that’s best for your specific situation. A high-income earner, a homeowner, a retiree living on Social Security, and someone with a taxable estate can each get a completely different answer from the same list of states.
Here’s how the five taxes that matter most — income, property, sales, estate, and capital gains — actually break down across the country in 2026, plus which ones are worth paying attention to based on your own situation.
State Income Tax: The Biggest Lever for High Earners
If most of your money comes from wages, a 401(k) withdrawal, or other ordinary income, state income tax is usually the single biggest state-tax line item you’ll see.
The nine states with no personal income tax in 2026 are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee (TN), Texas (TX), Washington (WA), and Wyoming. New Hampshire fully repealed its old tax on interest and dividend income starting in 2025, which is why it now joins this list alongside longtime no-income-tax states like Texas and Tennessee.
At the other end, the states with the highest individual income tax collections per person are Oregon, Massachusetts, New York, California, and Minnesota, according to Tax Foundation data. California’s top marginal rate reaches 13.3% on income over $1 million — the highest in the country — which is part of why our California vs. Florida refund comparison found Florida stretching a refund noticeably further for high earners.
Having no state income tax doesn’t automatically mean a state is cheap — it just means that particular lever isn’t pulling on your paycheck. Washington is the clearest example, and it’s also the state to watch heading into 2027: no wage income tax, but a 7% state capital gains tax on long-term gains above $270,000 for investors and business sellers, plus a brand-new millionaire’s income tax that’s currently on hold pending a November 2026 vote (more on that in the Looking Ahead section below).
Remote workers face a separate wrinkle. If you live in one state but work for an employer based in another, reciprocity agreements (or the lack of one) determine which state actually taxes your income — and some states without reciprocity can tax the same income twice before you claim a credit. I cover the mechanics in my remote work tax issues guide.
Subscribe or follow us — I’ll update this page as states adjust their brackets, exemptions, and rebate programs throughout the year.
Property Tax: What You’ll Actually Pay Every Year
Property tax is the one that shows up every single year, whether or not your income changes, and it tends to rise alongside home values rather than inflation alone.
To compare states fairly, look at the effective property tax rate — total property tax paid divided by the home’s value — rather than the raw dollar amount, since home prices vary so much by state. The figures below come from the Tax Foundation’s 2026 state tax data.
| State (Highest) | Effective Rate | State (Lowest) | Effective Rate |
|---|---|---|---|
| New Jersey | 2.11% | Hawaii | 0.27% |
| Illinois | 2.01% | Alabama | 0.38% |
| Connecticut | 1.81% | Nevada | 0.47% |
| New Hampshire | 1.66% | Arizona / Colorado / South Carolina | 0.48% |
On a $400,000 home, that gap works out to roughly $8,440 a year in New Jersey versus about $1,080 in Hawaii — a difference of more than $7,000 annually for an identical house. New Jersey’s high property tax rate is a major reason the state also runs one of the country’s largest property tax relief programs; if you’re checking on a New Jersey state tax refund, it’s worth knowing the state’s overall tax mix leans much more heavily on property tax than income tax.
Since property tax is set locally, not by the state government, your actual bill depends heavily on the specific city or county — a home in a low-tax state can still land in a high-tax county, and vice versa. Rising home values are part of why this number keeps climbing nationally; see my mortgage rates and home prices outlook for where prices are headed next.
Sales Tax: The One With No Withholding, and No Escape
Sales tax is the easiest of these five to understand — it’s right there on the receipt — but states with no income tax often lean harder on it to make up the difference.
Delaware, Montana, New Hampshire, and Oregon are the only states with no statewide sales tax at all. Alaska has no state sales tax, but it’s the exception among the no-income-tax states — it allows individual localities to charge their own.
The five states with the highest combined state-and-local sales tax rates are Louisiana (10.13%), Tennessee (9.61%), Washington (9.57%), Arkansas (9.48%), and Alabama (9.46%) — all comfortably above the roughly 7.5% national average. Notice that three of those five (Tennessee, Washington, and Alabama’s neighbor states) also show up on the no-income-tax list; that’s not a coincidence.
Sales tax is also more regressive than income tax by design — it takes the same percentage from a lower earner’s grocery run as a higher earner’s, without the credits and deductions that soften state income tax for lower-income households.
Estate and Inheritance Tax: The Tax Most People Never See
Even if your estate falls well within the federal estate tax exemption — $15 million per individual in 2026 — your state may have a much lower threshold of its own.
Twelve states plus Washington, D.C. levy their own estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. Some of these exemptions are dramatically lower than the federal number — Oregon’s kicks in at just $1 million, and Massachusetts’ at $2 million.
Five states levy a separate inheritance tax, which taxes what the heir receives rather than the estate itself: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is the only state that imposes both. If you’re settling an estate in New York, it’s worth checking the state’s own estate tax rules separately from your federal filing, since New York’s exemption threshold and “cliff” structure catch more estates than most people expect.
The remaining 33 states have neither tax, meaning only the federal exemption applies — which the vast majority of American households will never come close to.
Capital Gains Tax by State: Investors Pay Twice
Long-term capital gains face federal tax at 0%, 15%, or 20% depending on income, plus a 3.8% net investment income tax for higher earners. Most states then add their own layer on top, taxed as ordinary income in most cases.
California has the highest effective state capital gains rate in the country at 13.3%, followed by New York (10.9%), New Jersey (10.75%), and Oregon (9.9%). If you’re weighing where investment gains actually stretch further, my capital gains tax rates guide breaks down the full federal short-term versus long-term math before you even get to the state layer.
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming charge no additional state capital gains tax — with one asterisk. Washington’s 7% capital gains excise tax applies only above roughly $270,000 in long-term gains for 2026, so it mostly affects business owners and investors selling significant, concentrated positions rather than everyday retirement account withdrawals.
Does Your State Tax Social Security?
Whether your Social Security benefit is federally taxable depends on your combined income — your AGI or MAGI plus half your benefit and any tax-exempt interest.
At the state level, only eight states still tax Social Security benefits in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. West Virginia finished phasing out its tax on Social Security this year and now fully exempts it, following the national trend of states dropping this tax.
Most of these eight states use income thresholds that exempt lower- and middle-income retirees anyway — Connecticut exempts single filers under $75,000 AGI ($100,000 joint), and Minnesota’s threshold sits around $86,000 for individuals. The IRS’s Interactive Tax Assistant can help you check whether your Social Security is federally taxable in the first place, before you even get to the state layer. If you’re mapping out when to start benefits in the first place, my retirement ages guide covers the 401(k), IRA, and Social Security milestones that determine your options.
Two Examples: How This Actually Plays Out
Diane, a 68-year-old retiree in Vermont, draws $32,000 a year in Social Security plus $18,000 from a traditional IRA. Her combined income puts her above Vermont’s exemption threshold, so a portion of her Social Security is taxed at both the federal and state level — something that wouldn’t happen at all if she lived in a state like Florida or one of the other 41 states that leave Social Security alone. She’s also weighing Roth versus traditional IRA withdrawals for the rest of her retirement, since Roth distributions wouldn’t add to that combined-income calculation at all.
Priya, a remote software engineer earning $240,000, is deciding between staying in California and relocating to Washington. California’s income tax would cost her roughly $20,000+ a year at her bracket; Washington charges no wage income tax at all. But Priya also holds concentrated stock from an earlier startup, and if she sells more than $270,000 in long-term gains in a single year after moving, Washington’s 7% capital gains tax kicks in on the excess — meaning the “no income tax” state isn’t entirely tax-free for her specific situation.
Common Issues to Watch Out For
I get versions of “just tell me the best state” a lot, so a few things worth flagging before you draw conclusions from any state-tax list:
Don’t stop at income tax. A state with no income tax that also has high property and sales tax can cost a middle-income household more overall than a state with moderate income tax and cheap housing — Texas and New Hampshire are both real examples of this trade-off.
Property tax is set locally, not statewide. The effective rates above are state averages; your specific city or county can run well above or below that number.
Residency rules are stricter than people assume. Simply owning a vacation home in a no-tax state doesn’t make you a resident there — states like California and New York are aggressive about auditing high earners who claim they moved, and day-count rules (sometimes just one day of work) can trigger nonresident filing obligations elsewhere.
State tax law changes more often than federal law. New Hampshire’s dividend tax repeal and West Virginia’s Social Security phase-out both happened within the last two years — don’t assume a state’s tax profile from five years ago still applies.
A no-income-tax state doesn’t mean a tax-free retirement. Property tax, sales tax on everyday purchases, and (in select states) estate tax can all still apply even where wages and retirement withdrawals aren’t taxed.
Looking Ahead: 2027
The biggest state income tax story to watch is actually in a state with no income tax — for now. The Washington legislature passed a new 9.9% tax on household income above $1 million, currently scheduled to take effect January 1, 2028. A signature-qualified repeal effort, Initiative 645, will go before Washington voters on the November 3, 2026 ballot; if it passes, the millionaire’s tax is repealed before it ever collects a dollar, and the state’s existing 7% capital gains excise tax (a separate law) stays in place either way. If I-645 fails, Washington would join the list of states taxing at least some income starting in 2028, which would be worth revisiting in this post’s income tax section.
A few other state-tax stories are worth watching heading into 2027. Florida voters decide on a ballot measure in November 2026 to raise the state’s homestead exemption further, which would lower property tax bills for many homeowners starting in 2027 if it passes. Georgia has been cutting its flat income tax rate incrementally each year, and further reductions are plausible if state revenue holds up.
More states have been trending toward dropping Social Security taxation entirely — West Virginia just finished its phase-out, and it wouldn’t be surprising to see one or two of the remaining eight states propose similar legislation. I’ll update this page as specific state legislative sessions wrap up and any changes take effect.
