States with No Income Tax

Not all U.S. states handle income tax the same way.

On top of federal taxes, each state has its own rules for income, property, and even certain business activities, which can significantly impact your returns. Nine states stand out because they don’t levy a state income tax, giving investors more control over their profits. This guide dives into those nine states and key factors to consider when choosing an investment property market.

_{Note: This article is for informational purposes only. Always consult a CPA or qualified tax professional familiar with both your home country and the state you’re investing in. Tax laws and their implications vary based on individual circumstances.}

Key takeaways

• Nine U.S. states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
  
  
• No income tax lets you keep more rental income, but consider property taxes, insurance, and local expenses that reduce your net earnings.
  
  
• Waltz helps international investors finance rental property purchases in 41 states and Washington D.C. through fast, transparent, and fully digital lending solutions.

What does “no state income tax” mean for investors?

When a state doesn’t levy a personal income tax, you keep more rental income and potential capital gains. However, no income tax doesn’t mean no taxes at all. Investors still need to account for:

• Property and local taxes: Even in states without income tax, property taxes can be high. These taxes are assessed by counties or municipalities and directly affect your cash flow. Understanding the local property tax rate is essential before calculating net returns.

• Sales taxes: Purchases related to your rental business, such as maintenance, appliances, or renovations, may be subject to sales tax. In some states, sales tax rates vary by city or county, so including these costs in your budget is important.

• Local or capital gains taxes: Some cities or municipalities may impose their own taxes on income or investment gains. 

While tax-free states can strengthen your returns, it’s important to evaluate the total tax burden, not just one category in isolation. These nine states offer some of the most attractive environments for rental property investors. While tax advantages are a major draw, each state also has its own real estate strengths.

Alaska

Alaska stands out for having no state income tax and no statewide sales tax, although some local taxes are in effect. The state’s economy is anchored by the energy and tourism industries, and it offers unique vacation rental opportunities in scenic destinations like Anchorage, Fairbanks, and Juneau. While the remote geography limits year-round demand and insurance rates are high due to the harsh conditions, Alaska’s minimal housing density and premium rental pricing make it attractive for investors seeking high yields. 

Florida

Florida’s no-income-tax policy continues to draw investors from both the U.S. and abroad. The state charges a 6% sales tax, and property taxes vary. Strong rental demand, driven by tourism, job growth, and retirement trends, maintains steady rental activity in high-performing markets like Orlando, Tampa, Miami, and Jacksonville. These areas consistently rank among the nation’s top in rent growth and property values. Investors should be aware that insurance premiums rise due to hurricane risk, but steady rental demand helps balance this risk for those seeking healthy cash flow.

Nevada

Nevada offers no state income tax along with a 6.85% state sales tax, relatively low property taxes, and favorable landlord laws, all of which strengthen rental returns. Growing metros like Las Vegas, Henderson, and Reno attract tourists and tenants from high-cost states like California, driving both population and rental growth. Nevada has a diverse economy, rooted in tourism, technology, and logistics, which supports consistent year-round rental demand. While parts of northern Nevada face wildfire risks, overall insurance costs are moderate, making Nevada a steady investment location.

New Hampshire

New Hampshire provides a rare combination of no state income tax and no state sales tax, creating a highly tax-efficient environment for investors. Cities in the southern part of the state, such as Nashua, Manchester, and Portsmouth, serve as strong commuter hubs due to their proximity to Boston. The state has a reliable tenant base and relatively low vacancy rates, and its low risk of natural disasters keeps insurance rates affordable. Although the state has higher property taxes, which can reduce net yields, this is balanced by steady demand. 

South Dakota

With no state income tax and a 4.2% state sales tax, South Dakota offers one of the lowest overall operating cost structures in the nation. Steady rental demand in cities like Sioux Falls and Rapid City is supported by the growing healthcare and manufacturing sectors. The state also benefits from low operating costs, a stable economy, and low insurance premiums due to minimal natural disaster risk. Although South Dakota has a smaller population and limited short-term rental potential, investment properties in this state attract steady long-term income tenants.

Tennessee

Tennessee has no state income tax, and its state sales tax of 7% is higher than the average. However, this is offset by low insurance premiums and a strong rental market in growing metros like Nashville, Chattanooga, and Knoxville. Supported by a strong tourism industry, investment properties in Tennessee are ideal for both long-term and short-term rental strategies, benefiting from manageable climate risks. Although the state’s high sales tax reduces overall gains slightly, the low property and insurance rates make it a balanced investment. 

Texas

Texas has no state income tax and a 6.25% state sales tax, both of which contribute to the state’s dynamic real estate market. Major metros like Austin, Dallas-Fort Worth, Houston, and San Antonio offer strong employment growth and consistent rental demand across various industries, including tech, healthcare, and energy, to name a few. Texas has a wide variety of property types, from suburban new builds to downtown multifamily units, and a high influx of population boosts the market momentum. It’s important to note that property taxes and insurance costs are higher in certain regions, particularly along the Gulf Coast; however, Texas remains a standout market for international investors overall. 

Washington

Washington state has no personal income tax, a state sales tax rate of 6.5%, and property taxes relative to the average home value. Seattle, Tacoma, and Spokane have thriving rental markets due to strong job growth in tech and logistics. High-demand areas see steady tenant demand coupled with limited new supply. Though Washington has no income tax, the state imposes a capital gains tax on certain long-term assets. Washington also has higher overall living costs than many other U.S. states, and earthquake and flood risks may raise insurance premiums depending on where you buy. Even so, investors value Washington real estate for its steady tenant demand and limited housing supply, which can lead to substantial rental premiums. 

Wyoming

Wyoming has no state or corporate income tax, a 4% statewide sales tax, and a local tax rate of 1.56%. The state stands out for its low overall tax and insurance costs, coupled with attractive long-term rental opportunities in cities like Cheyenne, Casper, and Jackson. Recently, Wyoming has attracted growing interest from remote workers and high-net-worth individuals relocating from states with higher taxes. Despite this, Wyoming’s population density remains lower than most other states, which limits urban rental options. Nonetheless, the overall market remains stable, and insurance costs are minimal, making Wyoming a solid long-term investment.

For more detailed insights, check out our state-by-state investing guides.

Explore investment property loans across the U.S.

States without income tax can help you retain more of your rental income, but remember that every market comes with trade-offs. Property taxes, insurance premiums, and local demand still shape your total return.
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If you’re ready to invest in one of these states, having the right financing partner makes all the difference. Waltz helps international investors secure U.S. rental property financing through a fully digital process, making it easy to compare options, meet lender requirements, and close from abroad.

 Try Waltz today.

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