States with the Lowest Taxes in 2025: Best for Families, Retirees & Entrepreneurs

Choosing to live or do business in a state with low taxes can significantly boost your family budget, retirement income, or business profits. Taxes vary widely across the U.S., so it pays to compare how each state handles income, sales, and property taxes. In this guide – our low-tax state comparison guide – we’ll break down the top 10 states with the lowest overall tax burdens and highlight which states have no income tax, the lowest sales taxes, and affordable property taxes. We’ll also discuss what these differences mean for families, states-with-the-lowest-taxes-in-2025-best-for-families-retirees-entrepreneursretirees, and small business owners.

Quick insight: Some states levy no personal income tax, while others offer low sales or property taxes – but usually not all at once. Understanding these trade-offs will help you decide which low-tax state best fits your financial priorities.

Don't want to read ahead yet but just want to compare states? Use our state tax tool below! You can find the tool here as well and other useful calculators.

Key Factors That Determine State Tax Burden

State and local taxes come in several forms, and each plays a role in your overall tax burden (the share of your income that goes to taxes). The key components are income tax, sales tax, and property tax, and states balance these in different ways:

• Income Taxes: These can be progressive (higher rates for higher incomes) or flat. Some states – like Florida and Texas – have no state income tax at all, while others (e.g. California) charge over 10% on top earners. States may also offer special deductions or exemptions (for example, not taxing Social Security benefits) which affect how much income tax you actually pay.

• Sales and Use Taxes: Sales tax is added to purchases and ranges from 0% in some states to over 9% in others when local taxes are included. Four states (Delaware, Montana, New Hampshire, Oregon) have no general sales tax at all. Use tax is a related tax on out-of-state purchases brought home. What items are taxed (and what is exempt) also matters – many low-tax states don’t tax essentials like groceries, easing the burden on families.

• Property Taxes: These are annual taxes on real estate (and sometimes vehicles) based on value. Property tax rates vary hugely – Hawaii’s effective property tax is around 0.3%, while New Jersey’s is over 2%. States with high property taxes (often in the Northeast) can significantly increase a family’s housing costs, whereas states like Alabama or Colorado keep property taxes under 0.6%, easing homeownership costs. Some states offer homestead exemptions or tax caps for primary residences to help homeowners.

  
  

Understanding these three tax types helps explain why some states are “low-tax” overall. A state with no income tax might have higher sales or property taxes to compensate – and vice versa. Next, let’s look at which states truly lead the pack for lowest overall tax burdens in 2025.

Top 10 States with the Lowest Tax Burdens (2025)

A 2025 analysis comparing all 50 states by combined state and local taxes (as a percentage of income) reveals the following 10 states have the lowest overall tax burdens:

1. Alaska – 4.93% of income

2. New Hampshire – 5.63% of income

3. Wyoming – 5.7% of income

4. Florida – 6.05% of income

5. Tennessee – 6.07% of income

6. Delaware – 6.43% of income

7. South Dakota – 6.44% of income

8. North Dakota – 6.80% of income

9. Oklahoma – 7.04% of income

10. Nevada – 7.37% of income

(Source: WalletHub study of total state/local tax as % of income.)

These states keep taxes low through different strategies. Many on the list do not levy a personal income tax, and several also benefit from low sales or property taxes (or unique revenue sources like oil or tourism). Let’s briefly examine what makes each of these states tax-friendly:

Alaska

Alaska imposes no state income tax and no state sales tax, resulting in the nation’s lowest tax burden. This means no tax on wages, retirement income, or most purchases. Some localities in Alaska do charge a small sales tax (the average local rate is about 1.8%), but overall sales taxes are minimal. Property taxes in Alaska can vary by area; on average the effective property tax rate is around 1.0% of home value, which is middle-of-the-pack nationally. Uniquely, Alaska’s state budget is bolstered by oil revenues – the Alaska Permanent Fund even pays residents an annual dividend from oil earnings. In short, Alaska offers a high standard of living with very low tax costs, though residents do encounter higher costs in some goods and services due to its remote location.

New Hampshire

New Hampshire is one of two states (along with Tennessee) that tax no wage income. It has no state income tax on salaries and no sales tax whatsoever. This effectively eliminates two major tax categories for residents. The trade-off comes via property taxes – New Hampshire relies heavily on them to fund services. The state’s property tax is among the highest, with an effective rate around 1.9% of home value, one of the top three in the country. In addition, New Hampshire currently taxes interest and dividend income at 5%, though this tax is being phased out by 2027. For many families and retirees, New Hampshire’s lack of income and sales taxes can outweigh the property tax costs – especially for renters or those with higher incomes and lower-value homes. Overall, the Granite State’s tax structure favors those who earn and spend, rather than those who own expensive real estate.

Wyoming

Wyoming consistently ranks as one of the most tax-friendly states for both individuals and businesses. It levies no personal or corporate income tax at all. The statewide sales tax is a modest 4%, with local counties adding up to 2% in some areas (combined average around 5%–6%). Property taxes in Wyoming are among the lowest in the U.S. – effective rates average about 0.5–0.6% of property value. How can Wyoming afford such low taxes? The state benefits from revenue on mineral and energy extraction (coal, oil, gas), which helps fund public services. This allows Wyoming to keep resident tax bills light. For a family or entrepreneur, Wyoming’s no-income-tax, low-sales-tax environment means more take-home pay and lower operating costs. It’s an attractive combination, though the state’s sparse population and rural nature may not suit everyone’s lifestyle.

Florida

Florida is famous for having no state income tax, which has long drawn retirees and high earners to the Sunshine State. Workers keep more of their paychecks, and retirees pay no state tax on Social Security or pensions. Florida does have a state sales tax of 6%. With local option taxes, the average combined sales tax is around 7.0% (moderate compared to other states). Property taxes in Florida are close to the national average (roughly 0.9% of home value effective rate), although rising home values in some areas have pushed tax bills higher. Florida offsets the lack of income tax in part through its robust tourism industry – taxes on hotel stays, tourism-driven sales taxes, and fees help fund state needs. For families and retirees, Florida’s appeal is not just the warm weather – keeping your income tax-free is a major draw. Just be mindful that local sales and property taxes, as well as homeowners insurance, can affect the cost of living. Overall, however, Florida’s tax setup is very friendly to those living on investments or retirement distributions.

Tennessee

Tennessee is another state with no tax on earned income. As of 2021, it fully repealed its tax on interest and dividends, making all personal income tax-free. To compensate, Tennessee relies on a relatively high sales tax – the state rate is 7%, and combined state+local sales tax averages about 9.55%, one of the highest in the country. Daily goods (including groceries, which are taxed at a reduced rate) will cost a bit more due to this heavy reliance on sales tax. On the other hand, Tennessee’s property taxes are quite low – averaging around 0.6–0.7% of home value, thanks in part to low home assessments and conservative local spending. For residents, especially retirees, not having any income tax on pensions, 401(k) withdrawals, or wages can yield big savings. Small business owners also benefit since there’s no personal income tax on pass-through business profits (though note Tennessee does impose a franchise & excise tax on business entities). Overall, Tennessee is a prime example of a low-tax state where you “pay as you spend” rather than on what you earn. This favors high earners and those who can manage their spending to minimize sales tax hits.

Delaware

Delaware takes a unique approach that results in a very low overall tax burden for many residents. It does impose a state income tax (with a top rate of 6.6%), but offsets this with no state or local sales tax at all. This makes Delaware a shopper’s haven – big-ticket purchases carry zero sales tax, attracting visitors from neighboring states. Moreover, Delaware’s property taxes are extremely low – effective rates average only about 0.55% of home value, among the lowest in the nation. For retirees, Delaware is often cited as tax-friendly: it does not tax Social Security, and residents over 60 can exclude up to $12,500 of investment and pension income from state taxes. The state raises much of its revenue through business taxes and incorporation fees (Delaware is a popular legal home for companies). For a family, the lack of sales tax keeps everyday expenses down. For a small business, Delaware’s moderate income tax and pro-business legal environment can be advantageous (though if you operate in Delaware, note there is a gross receipts tax in lieu of sales tax). In short, Delaware’s mix of no sales tax and low property tax earns it a spot among the lowest-tax states, especially for consumers and homeowners.

South Dakota

South Dakota matches Wyoming in having no personal or corporate income tax, which immediately puts it on any low-tax list. It maintains a 4.5% state sales tax rate (cities can add a small local tax, bringing the average to around 6.4%). This is a moderate sales tax level – lower than many states. Property taxes in South Dakota are reasonable, though not as low as some peers: the effective rate is roughly 1.1%–1.2% of value on owner-occupied homes. That’s higher than places like Wyoming or Alabama, but still below the national average in absolute dollars (home values in SD are generally lower than national average, keeping tax bills manageable). South Dakota’s economy leans on agriculture and tourism (think Mount Rushmore) to generate revenue. It also has a history of very controlled state spending. The result is a simple, low-tax system that appeals to retirees (no tax on retirement income) and entrepreneurs alike. If you don’t mind cold winters, South Dakota offers substantial tax savings – you keep what you earn, and you won’t get nickeled-and-dimed by the state.

North Dakota

North Dakota is a low-tax standout on the Great Plains, with a gentle mix of taxes. While it does levy a state income tax, the rates are very low – as of 2025 North Dakota’s top income tax rate is around 2.5%, and legislation is underway to move to a flat ~1.5% rate for most filers. This means income taxes in North Dakota take only a small bite out of earnings. The state sales tax is 5%, and typical combined state+local sales tax is about 7%, on par with national averages. Property taxes average about 0.95%–1.0% of home value, which is in the middle nationally. North Dakota benefits from energy production (oil fracking booms in the past decade) which has allowed tax cuts. In fact, the state has used oil revenue surpluses to trim income tax rates and even issue occasional taxpayer refunds. For residents, North Dakota’s low tax burden means the state takes a much smaller share of income than most states. A family earning and spending in North Dakota will generally pay less in combined taxes than if they lived in almost any other state. The trade-off may be fewer big-city amenities, but strictly on taxes, North Dakota is hard to beat outside the no-income-tax states.

Oklahoma

Oklahoma might come as a surprise on this list, as it doesn’t outright eliminate any major tax, but it keeps all taxes relatively low and balanced. The state income tax is progressive with a top rate of 4.75%, kicking in at fairly modest income levels. That’s about half the top rate of many states that have income taxes. The sales tax in Oklahoma is average to slightly high – 4.5% state rate, and combined rates around 8.9% when local taxes are included. The saving grace is property taxes: Oklahoma’s effective property tax rate is only about 0.85%, thanks to low home assessments and constitutional caps on increases. Additionally, Oklahoma’s overall cost of living is low, which means even at a given tax rate, residents pay less in absolute dollars. For example, a 5% sales tax on groceries costs less when groceries are cheaper to begin with. Oklahoma also grants generous exemptions (for instance, retirement income exclusions) that reduce taxable income for many households. While not a zero-tax state, Oklahoma’s moderate income tax + moderate sales tax + low property tax formula yields an impressively low tax burden as a share of income. It’s a reminder that a state doesn’t need flashy “no tax” policies to be easy on your wallet – steady low rates across the board can achieve the same result.

Nevada

Nevada is well-known for having no state income tax – wages, salaries, and retirement income are not taxed at all. This is a huge draw for individuals and business owners (especially Californians moving across the border to escape high taxes on income). To fund state services, Nevada leans on sales tax and tourism-related taxes. The state sales tax is 6.85%, and with local additions, sales tax averages about 8.2% – on the higher side nationally. If you’re a big spender, Nevada will collect its share when you buy things (and note that groceries and medicine are generally exempt from sales tax in NV). Property taxes, however, are relatively low – roughly 0.55% of home value, which is among the lowest property tax rates in the U.S.. Nevada’s casinos and entertainment industry contribute a significant chunk of revenue via gaming taxes, hotel taxes, and sales taxes from tourism. This helps relieve the tax load on residents. For a Nevada resident, particularly a retiree or remote worker with significant income, the lack of income tax is a powerful benefit. Even with somewhat high sales tax, many find that Nevada’s overall tax bite is very small compared to high-tax states, making it a top choice for low-tax living (with the bonus of abundant sunshine and entertainment).

Which States Have No Income Tax?

One of the biggest factors in a state’s tax friendliness is whether it taxes individual income. As of 2025, nine states do not levy any state income tax on wages or ordinary income. Those states are:

• Alaska

• Florida

• Nevada

• South Dakota

• Texas

• Washington

• Wyoming

• Tennessee (no tax on wages; investment income tax repealed in 2021)

• New Hampshire (no tax on wages; 5% tax on interest/dividends, phasing out by 2027)

  
  

If you live in one of these states, your paycheck and retirement distributions are safe from state income tax. This can mean thousands of dollars in annual savings, especially for high earners or retirees drawing from IRAs and 401(k)s. However, “no income tax” doesn’t mean “no taxes at all.” States with no income tax still need revenue, so they often rely on higher sales or property taxes to fund schools, roads, and services. For example, Texas and Washington have no income tax but have relatively high sales taxes and, in Texas’s case, high property taxes. Florida has no income tax but does tax sales and has above-average property tax bills in some areas.

Bottom line: Moving to a no-income-tax state can be very beneficial for your wallet – particularly if your income is high or you’re living on investments/pensions. Just be prepared for the possibility of paying a bit more at the store or in property levies. Overall, these nine states tend to attract retirees and entrepreneurs precisely because keeping income tax at $0 gives you much more disposable income or profit to work with.

(Note: Two states – Tennessee and New Hampshire – tax no earned income but do (as noted) tax certain investment earnings. In Tennessee, that tax is now fully repealed. In New Hampshire, it’s dwindling each year. For most people, these states function like no-income-tax states for regular wages.)

Which States Have the Lowest Sales Taxes?

Sales tax affects you every time you buy things, and it particularly impacts families (groceries, clothing, etc.) and consumers making big purchases (cars, appliances). A few states stand out for minimal sales tax:

• Delaware – No state or local sales tax at all (0%).

• Montana – No general sales tax (0%).

• New Hampshire – No sales tax (0%).

• Oregon – No sales tax (0%).

• Alaska – No state sales tax (0% state; local sales taxes up to ~7.5%).

  
  

If you shop in Delaware, Oregon, Montana, or New Hampshire, the price tag is what you pay – there’s no added tax at the register. (Alaska likewise has no state sales tax; some towns there levy a small local sales tax, but many essentials are tax-free.) These low sales-tax states are great for consumers. For example, furnishing a home or buying a new car in Portland, Oregon or Manchester, NH can save you 5–10% compared to doing so in a high-sales-tax state. Even everyday purchases are cheaper over time.

Beyond the zero-tax states above, others keep sales taxes modest. Many states in the Midwest and West have combined sales tax rates under 6%. For instance, Colorado’s average combined rate is around 7.7% (state 2.9% + local), and Idaho’s is about 6% – comparatively gentle. States also often exempt necessities: many of the low-tax states don’t tax groceries or medicine, reducing the impact on families.

It’s important to consider local sales taxes too. Some states have low state rates but allow high local add-ons. A prime example is Tennessee – the state rate is 7%, but localities can add up to 2.75%, creating some areas with a 9.75% total sales tax (one of the nation’s highest). In contrast, California has a high base rate (7.25% state) and cities that push the total to over 10%. (If you’re curious about California’s complex sales taxes, see our California sales tax guide for a detailed breakdown.)

Takeaway: The states with no sales tax (DE, MT, OR, NH, AK) offer the best relief for shoppers. This is especially beneficial for large purchases and for businesses selling goods (since a lack of sales tax can attract cross-border shoppers or online customers). Just remember, states that skip sales tax might make it up elsewhere – for example, Oregon and Montana have income taxes, and New Hampshire has higher property taxes to compensate. It’s all about the balance that works for you.

Which States Have the Lowest Property Taxes?

Property taxes are a big factor for homeowners (and even renters indirectly, since landlords factor them into rent). Here are a few states with extremely low property tax rates on owner-occupied homes:

• Hawaii – ~0.3% effective property tax rate (lowest in the nation).

• Alabama – ~0.4% effective property tax rate.

• Louisiana – ~0.5% effective property tax rate (among the lowest).

• Colorado – ~0.5% effective property tax rate.

  
  

In these states, annual property tax bills are very low relative to home values. For example, a $200,000 house in Birmingham, Alabama might incur around $800 in property tax per year (at 0.4%) – whereas the same $200,000 house in New Jersey would face about $4,000+ in taxes annually at New Jersey’s ~2% rate. That’s a huge difference for family budgets. Hawaii benefits from high property values (so they can charge a tiny rate and still fund services) and significant tourism taxes, allowing a 0.3% rate. Alabama and Louisiana have constitutional limits that keep property valuations and millage low, plus other revenue sources like sales taxes and federal aid.

By contrast, some states hit homeowners hard: New Jersey and Illinois have effective property tax rates over 2% of home value. New Jersey’s is about 2.23%, and Illinois around 2.08%, meaning a home in those states can carry four times the tax bill of an equivalent home in a low-property-tax state. Other high-property-tax states include Connecticut, New Hampshire (as noted ~1.9%), and Texas (around 1.6–1.8%, due to its no-income-tax model).

For families and retirees on fixed incomes, low property tax states can be very appealing – housing costs remain predictable and relatively low year to year. Low property taxes often correspond with lower population density and perhaps leaner public services. If you’re considering relocating, it’s wise to compare not just home prices but also the property tax rates. In a state like Colorado or Wyoming, you might afford a more expensive home knowing the annual taxes will be lower to sustain it.

(Tip: Many states offer property tax relief programs for seniors, veterans, or owner-occupants, which can further reduce the burden. Always check what exemptions or rebates you might qualify for in a given state.)

Economic and Lifestyle Benefits of Living in Low-Tax States

Moving to a low-tax state isn’t just about saving money on a tax bill – it can also influence your cost of living, job opportunities, and overall lifestyle. Here are some ways low-tax states benefit families, retirees, and businesses:

Cost of Living Implications

Keeping state taxes low often goes hand-in-hand with a lower overall cost of living, though not always. In many low-tax states (especially in the South and interior West), housing tends to be more affordable. For example, Florida and Texas not only have no income tax, but also historically had median home prices below the national average, making it easier for families to buy homes. A state like Wyoming pairs no income tax with low property taxes, dramatically reducing monthly expenses for homeowners compared to high-tax states.

More take-home pay (from not paying state income tax) means more money available for other needs – whether that’s private schooling, retirement savings, or leisure activities. For instance, a family in Nevada or Tennessee might save thousands per year in taxes versus a similar family in California or New York, boosting their disposable income. This extra money can be used to offset other costs like healthcare or simply improve quality of life.

However, it’s important to note that some low-tax states have higher costs in other areas. For example, states with minimal taxes might charge higher fees for services (like car registration or tolls), or the demand in popular low-tax states (like Florida or Texas) can drive up housing costs over time due to inbound migration. Always consider the full picture: low taxes generally help, but look at housing, utilities, and insurance costs in the state as well to gauge affordability.

Job Opportunities and Economic Growth

Low-tax states often actively court businesses, which can lead to more job opportunities and economic growth for residents. States such as Texas, Tennessee, and South Dakota have seen strong job growth in sectors like tech, manufacturing, and finance – in part due to their favorable tax climates for businesses. When businesses (especially small businesses and startups) face lower taxes and less regulation, they are more likely to invest and expand, creating jobs.

Additionally, entrepreneurs often flock to states like Florida or Wyoming to take advantage of the tax savings. A freelancer or business owner who relocates from a high-tax state can immediately improve their bottom line by paying no state income tax on business profits. Over time, this can lead to clusters of industries growing in low-tax states. For example, Miami and Austin have become tech and finance hubs, attracting talent from across the country – no state income tax being a cherry on top that helps lure both companies and employees.

That said, not all low-tax states have booming economies – some are rural with fewer industries (e.g. Wyoming or Alaska). Job availability can vary by region; a low-tax state might have hotspots of growth in its cities but limited options in smaller towns. Thus, if you’re considering a move, research the job market in your field for that state. The ideal scenario is a state that offers both a low tax burden and a thriving job market in your industry.

In summary, low-tax states can provide a financial boost and sometimes a vibrant economy, but do weigh factors like industry presence, urban vs. rural opportunities, and lifestyle preferences. A state’s tax policy is one key ingredient in the recipe of a fulfilling life and career there.

Challenges and Considerations When Moving to Low-Tax States

It’s clear that low-tax states have many financial advantages, but it’s important to consider potential trade-offs. Lower taxes might mean differences in public services, infrastructure, or other costs. Here are a couple of key considerations:

Public Services and Infrastructure

States that collect less in taxes naturally have less revenue to fund public services (unless they have alternative revenue sources). This can sometimes translate into leaner public programs. For example, a low-tax state may allocate less per pupil on public education or might not invest as heavily in public transportation. You might encounter fewer state-funded services or longer wait times for things because budgets are tight.

Infrastructure like roads, bridges, and public transit can also be affected. In some low-tax states, residents notice rougher roads or fewer highway expansions, simply because there’s less money in the pot for transportation projects. Similarly, services like state parks, libraries, or community health programs might be limited in number or rely on volunteer efforts.

None of this is to say that all low-tax states have poor services – many manage their budgets quite efficiently. But it’s wise to research the quality of schools, healthcare facilities, and other services in the specific area you’re considering. For instance, if you have kids, compare school district funding and performance. If you rely on public transit, see what’s available. In some cases, you might find you’ll need to spend out-of-pocket for private alternatives (e.g. enrolling kids in a private school or paying for more comprehensive health insurance) to make up for any gaps.

State Revenue Sources and Fees

When a state forgoes an income tax or keeps taxes ultra-low, it must find revenue elsewhere. Often this is through sales and property taxes, as discussed, but there are other mechanisms too. Some low-tax states use more fees, tolls, and charges for services. You might encounter things like higher DMV fees, higher state college tuitions, or new toll roads where there were none before – all as ways to raise money without calling it “taxes”.

For example, a state with no income tax may have a sales tax above 7% (as is true for several on the no-income-tax list). Or they might tax specific industries heavily (like oil extraction taxes in Alaska or tourism/hotel taxes in Nevada). Sin taxes (on alcohol, cigarettes, gambling) are another common tool – Nevadan and Floridian tourists pay a lot of taxes via hotels and casinos, which helps subsidize residents.

If you move to a low-tax state, be prepared for the possibility of paying for services à la carte. Want to visit the state park? There might be a hefty entrance fee because general taxes don’t cover it. Need to register your car? Some states have high registration fees or personal property taxes on vehicles instead of higher income tax. It’s not a dealbreaker; it’s just part of understanding the true cost of living there. The overall savings can still be huge – just go in with eyes open about where the state makes up revenue so you won’t be caught off guard.

Best Low-Tax States for Retirees

For those living on investment income, pensions, or Social Security, taxes can heavily impact your retirement budget. Some states are particularly attractive for retirees due to how they tax (or don’t tax) retirement income and because they keep other taxes low. Here are a few of the best low-tax states for retirees:

• Florida – No state income tax (so Social Security and retirement withdrawals aren’t taxed), and no estate or inheritance tax. Florida’s sales tax is moderate and many essentials like groceries are exempt. Property taxes are average, but Florida offers homestead exemptions that benefit seniors. It’s no wonder Florida is a top pick for retirees nationwide.

• Wyoming – No income tax at all, which means pensions and 401(k)/IRA income are tax-free at the state level. Wyoming also has very low property taxes (helping those on fixed incomes maintain their homes) and no estate tax. Healthcare availability can be a consideration in its rural areas, but financially, Wyoming lets retiree dollars stretch far.

• Delaware – Delaware is extremely tax-friendly for retirees: no sales tax on purchases, very low property taxes (often under $1,000/year for many homeowners), and while it has an income tax, Social Security is exempt and there are generous exclusions for pension and IRA income. Delaware also has no estate/inheritance tax. It provides a great balance for retirees, especially those coming from high-tax states in the Northeast.

• Nevada – With no income tax, Nevada won’t touch your retirement distributions or Social Security. There’s also no estate or inheritance tax. Sales taxes are on the higher side in Nevada, but items like groceries and medicine are exempt, softening the impact on retirees. Property taxes are below average, and many counties offer additional rebates for senior homeowners. Plus, the warm, dry climate and ample recreation in places like Las Vegas and Reno are a perk for many seniors.

• South Dakota – South Dakota’s absence of an income tax means retirees pay nothing on Social Security or investment income. It also has no estate tax. Sales taxes are moderate, and while property taxes are a bit higher than some peers, the state has property tax relief programs for seniors. South Dakota often ranks high in “best states to retire for taxes” lists for its simplicity and low overall burden.

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These states each offer a way for retirees to maximize their fixed income. Either they don’t tax retirement money at all, or they offset taxes with low costs elsewhere. For instance, a retiree in Florida or Nevada can draw down a 401(k) without worrying about state tax deductions, and a retiree owning a home in Delaware or Wyoming will pay very little in property levies compared to, say, New Jersey or Illinois.

Of course, taxes aren’t the only factor in retirement – weather, healthcare, proximity to family, and amenities matter too. But if we focus solely on taxes, the states above (along with others like Texas and Tennessee, which also tax no income) let retirees keep significantly more of their money. Fewer tax worries = more financial peace of mind in your golden years.

(Fun fact: Several other states not on the overall low-tax list still give retirees special breaks. For example, Pennsylvania and Mississippi exempt virtually all retirement income from taxation, despite having an income tax for others. So, if you’re planning retirement, consider both overall low-tax states and states with targeted retiree tax benefits.)

Best Low-Tax States for Small Businesses & Entrepreneurs

If you’re a small business owner or entrepreneur, the state you operate in can greatly affect your bottom line. Taxes on business profits, property, and sales, as well as business-specific taxes, vary by state. The following states are often cited as the most tax-friendly for businesses (especially pass-through entities and small corporations):

• Wyoming – Wyoming is a superstar for business. It has no corporate income tax and no personal income tax, meaning whether your business is a C-corp or an S-corp/LLC, the state won’t tax your profits. It also has no franchise tax or gross receipts tax. Sales tax is low (4% base). For a small business, this is about as good as it gets – minimal tax paperwork and low tax costs. It’s no surprise Wyoming ranks #1 in the Tax Foundation’s State Business Tax Climate Index.

• South Dakota – Like Wyoming, South Dakota levies no corporate or personal income tax. It’s another top-ranked state for business tax climate. There’s a modest sales tax (4.5%), but South Dakota avoids burdening businesses with extra taxes. Many finance and credit card companies actually base operations in South Dakota to take advantage of the tax environment. For a local small business, the simplicity and low cost of South Dakota’s tax code are huge advantages.

• Nevada – Nevada imposes no personal or corporate income tax on most businesses. This draws many entrepreneurs (think tech startups escaping California taxes). Nevada does have a modified business tax (MBT), essentially a small payroll tax for businesses with employees, and a gross receipts tax (commerce tax) on very high-revenue businesses (over $4 million in revenue). But for the vast majority of small businesses, those taxes either don’t apply or are relatively low. Coupled with no franchise tax and moderate sales tax, Nevada is very business-friendly.

• Texas – Texas has no personal income tax, which benefits owners of pass-through entities (LLCs, S-corps, sole props) – your business profits won’t be taxed on your personal return. Texas does have a franchise tax (a form of gross receipts tax) on businesses, but it exempts truly small businesses (no tax if revenue < $1.3 million, and reduced rates up to $20 million) and the rates are fairly low (~0.375% for most). There’s no corporate income tax beyond that. Property taxes are higher in Texas (which can affect businesses that own property), and sales tax is moderately high. Even so, many companies choose Texas for its large economy and tax advantages. From a small business perspective, if you can manage property taxes, Texas offers a huge market with generally low tax friction.

• Florida – Florida combines a large consumer market with a relatively friendly tax scheme. There is no personal income tax, so small business owners don’t get taxed on business income flowing through to them. Florida does levy a corporate income tax (currently 5.5% flat) on C-corporations, but small businesses often avoid that by organizing as S-corps or LLCs. Florida has no franchise tax on capital stock, no inventory tax, and no estate tax. Sales tax (~6% state + local) is in the mid-range. For many entrepreneurs, Florida strikes a good balance: you might pay a bit of corporate tax if you choose that structure, but you enjoy no personal tax and a pro-business environment, all while accessing a booming market.

  
  

In general, the best states for businesses tend to be those that lack one or more major taxes: Wyoming, South Dakota, and Nevada (no income taxes), Texas and Washington (no personal income tax), and states like Delaware (no sales tax and specialized corporate courts) or Alaska (no income or sales tax, though remote). Tax Foundation’s index confirms many of these: the top five in 2025 were Wyoming, South Dakota, Alaska, Florida, and Montana – all states that either omit a tax or keep rates very low.

For a small business owner, less money paid in taxes means more to reinvest in the business (or to take home as profit). It also can mean lower prices for your customers or more competitive wages for employees. Keep in mind, other factors like workforce, infrastructure, and access to markets matter too. But if you’re purely looking at tax efficiency for your startup or small enterprise, the states above are hard to beat. Saving on taxes can give you a real competitive edge – it’s like an immediate boost to your profit margin just based on where you set up shop.

Thinking about moving or retiring to a low-tax state? Let Cardiff Tax Pros help you plan the transition smartly — especially if you’re coming from California.

 Frequently Asked Questions About Low-Tax States

❓ What state has the lowest overall tax burden in 2025?

Wyoming consistently ranks as the state with the lowest overall tax burden. It has no income tax, low property taxes, and below-average sales taxes, making it ideal for individuals and small business owners looking to maximize savings.

❓ Which states have no income tax in 2025?

As of 2025, the following 9 states do not tax individual income:

• Alaska

• Florida

• Nevada

• New Hampshire (earned income only; interest/dividends taxed)

• South Dakota

• Tennessee

• Texas

• Washington (limited capital gains tax)

• Wyoming

  
  

❓ What is the most tax-friendly state for retirees?

Florida and Wyoming are two of the most tax-friendly states for retirees. They offer no state income tax, favorable property tax treatment, and no taxation on Social Security or pension income.

❓ Why are people moving out of high-tax states like California?

Some families and entrepreneurs are leaving states like California due to:

• High state income tax rates (up to 13.3%)

• Expensive housing and property taxes

• Rising sales taxes, including district add-ons

  These factors make lower-tax states more appealing, especially for remote workers, retirees, and small business owners.

  
  

❓ Are low-tax states also cheaper to live in?

Not always. Some states with low taxes (like Washington or New Hampshire) still have high housing costs. The best value comes from states like Tennessee, Texas, and Arkansas, which offer both low taxes and a lower cost of living.

Need help navigating sales tax for your small business? Contact us today!