Looking for a U.S. state with both no state income tax and no statewide sales tax? That’s a smart question — and a short list. Few places combine both features, and the trade-offs matter for anyone chasing FIRE. I’ll keep this blunt and practical: which states qualify, what the fine print looks like, and how this choice affects your savings rate, investing, and lifestyle choices. No fluff — only the stuff you can actually use to decide where to live (or not).
Which states have no income tax and no sales tax?
Only a tiny number of states meet both criteria at the state level. Two states stand out: Alaska and New Hampshire. Both have no statewide sales tax and — as of recent law changes — no state-level personal income tax. But they get to that position in very different ways. The headline is tempting: “tax-free paradise”. The reality is always more complicated.
Quick snapshot: Alaska vs New Hampshire
| State | State income tax | State sales tax | Important caveats |
|---|---|---|---|
| Alaska | None | None (no statewide sales tax; many localities levy local sales taxes) | Local sales taxes vary. Oil revenues and public dividends influence budgets. Remote living costs can be high. |
| New Hampshire | None (interest & dividends tax was repealed; wages not taxed) | None (no statewide sales tax) | High property taxes; business taxes exist. Services paid differently than in other states. |
Why that tiny list? A quick tax logic lesson
There are two common ways states “replace” lost income or sales tax revenue: higher property taxes and fees, or targeted taxes on businesses and specific goods (alcohol, fuel, tobacco, hotel taxes). Alaska funds a lot of government with resource revenue. New Hampshire leans heavily on property tax. That means your tax bill depends on your situation: renter vs homeowner, wage earner vs investor, family size, and spending patterns.
How this matters for FIRE — numbers and real trade-offs
If you’re optimizing for FIRE, taxes are only one lever. The other big ones are earnings, savings rate, and investment returns. Still, taxes change the math.
Imagine two identical households earning the same pre-tax income. One lives in a state with an income tax and low property tax; the other in a state with no income tax but high property tax. Depending on how much they spend locally, own in property, or earn from investments, the net after-tax cash flow can swing in either direction.
Two practical rules I use when advising readers:
- Always calculate total tax burden (income, sales, property, and local fees) for your personal mix of income and spending.
- Don’t chase a single tax break. Consider cost of living, healthcare access, job opportunities, and community — not just rate tables.
Local sales taxes: the Alaska twist
Alaska has no statewide sales tax, but municipalities can and do collect local sales taxes. That means a purchase in one town can cost noticeably more than the same purchase in another. For people who travel around the state, or shop online, the result is mixed: lower tax on some purchases, higher on others. The key takeaway: “no statewide sales tax” does not always mean “no sales tax at all.”
New Hampshire: no sales tax, no personal income tax — but watch the property bill
New Hampshire is attractive because there is no broad-based sales tax and, since recent law changes, no tax on wages, interest, or dividends at the state level. But property taxes are among the highest in the country. For homeowners — especially those with large properties in high-tax towns — that can erase much of the income-tax advantage. If your FIRE plan relies on investment income, recent changes that removed the I&D tax are good news. Still: budgets are funded differently here.
Practical example — what to run on a relocation calculator
If you’re serious about moving for tax reasons, run numbers for:
- Net disposable income after federal + state taxes
- Property tax estimate for neighborhoods you’d actually live in
- Local sales taxes you’ll face on daily purchases
- Changes in recurring costs (heating, transport, insurance)
Then plug the post-tax savings into your FIRE timeline. Don’t forget moving costs and the intangible costs of leaving friends/community.
What about city or county sales taxes in these states?
Both states handle sales tax differently. Alaska’s local option means many towns levy sales taxes. New Hampshire forbids local sales taxes; it’s simpler. Always check the specific town or borough where you plan to buy groceries, furniture, or big-ticket items.
How this affects investors and retirees
Investment income matters. New Hampshire recently removed its interest and dividends tax, which helps retirees and investors. Alaska has no personal income tax, so investment income faces no state-level income tax either. That can be meaningful for retirees who rely on dividends or withdrawals. But keep in mind federal tax still applies. And Medicare, Social Security taxation, and state healthcare costs are separate considerations.
Beyond state taxes: other costs that bite your savings rate
Here’s what often gets missed when people say “tax-free”:
Housing costs. If property values are high or property taxes are heavy, it kills the math. Insurance and utility costs. In remote areas, energy bills and insurance can be higher. Local sales tax and excise taxes. Some essentials — fuel, alcohol, cigarettes — carry heavy excise taxes. Service levels. Lower taxes sometimes mean fewer public amenities, which can push private costs up (private schools, private road maintenance, etc.).
Short case: Two early-retirement-seeking friends
Sam wants low tax on investment income and prefers small-town living. Sam values nature over nightlife and is happy to pay higher property taxes for quiet. Sam leans New Hampshire. Alex wants low tax on wages and minimal sales tax on purchases, works remotely, and wants occasional big-city access. Alex considers Alaska but checks local sales tax levels and transportation costs first. Both save aggressively and invest in low-cost index funds. The tax choice nudges their timelines, but earnings and savings rate do most of the heavy lifting.
Checklist before you relocate to chase taxes
Do these six things before signing a lease or buying a house:
- Calculate total tax burden for your exact income mix.
- Estimate property tax and homeowners’ insurance for your target towns.
- Check local sales tax rules where you shop most.
- Model how healthcare and long-term care costs compare.
- Think about career opportunities and income volatility in the new state.
- Visit during different seasons to test transport and energy realities.
Countries with no federal income tax — a short comparison
If you’re looking globally, several countries and territories don’t levy broad personal income tax at the federal level. These places often raise revenue through VAT, corporate taxes, natural resource income, or tourism-related fees. Examples include several Middle East states and small island jurisdictions. Moving abroad pulls in a host of other issues: residency rules, foreign tax obligations (your home country might still tax you), cost of living, and legal permanence. Think of “no personal income tax” as an attractive headline — not the whole story.
Bottom line — taxes matter, but context matters more
No statewide income tax and no statewide sales tax can be a powerful advantage for some people. For others it’s an illusion. The state-level headline doesn’t capture local sales taxes, property tax burdens, cost of living differences, and how public services are funded. If you’re pursuing FIRE, let taxes inform your decision but never be the only reason to relocate. Run the numbers, then run them again with conservative estimates.
Next steps if you want help
If you want a worksheet, start with your last year’s income and spending. Break spending into categories that are more or less likely to be taxed by sales tax (groceries, gasoline, furniture). Add a property-tax estimate. Then compute after-tax savings and update your FIRE timeline. Small moves in your savings rate generally beat small tax arbitrage opportunities. But the right combination of both can accelerate your path.
FAQ
Which states have no income tax and no sales tax?
Two U.S. states meet both conditions at the state level: Alaska and New Hampshire. Both lack a statewide sales tax and, given recent legal changes, do not impose a broad personal income tax. Always check local-level taxes because Alaska allows municipalities to collect sales taxes.
Does Alaska have no sales tax at all?
Alaska has no statewide sales tax, but many local governments levy a local sales tax. Rates vary by town, so purchases can be taxed in one borough and untaxed just a short drive away.
Does New Hampshire tax investment income?
New Hampshire previously taxed interest and dividends. Recent changes repealed that tax, so wages and common investment income are not taxed at the state level. However, the state still raises revenue through property taxes and business taxes.
Are these states “tax-free” for everyone?
No. “Tax-free” is a simplification. Federal taxes still apply. Local sales taxes, property taxes, excise taxes, and fees can create meaningful bills. Your personal tax picture depends on your income sources, spending, and property ownership.
Which is better for FIRE: no income tax or no sales tax?
It depends on your profile. If you’re investment-income heavy, no income tax helps. If you’re a big consumer of taxable goods, no sales tax helps. Always model both scenarios using your real numbers.
Will moving to one of these states speed up my FIRE date?
Possibly, but usually only marginally. The biggest accelerators remain increasing income and savings rate. A state move can shave months or years, depending on your income and spending mix — but it’s rarely a silver bullet.
How do property taxes affect the tax advantage?
High property taxes can negate the advantage of no income tax. If you buy an expensive house in a high-tax town, your yearly property bill can exceed what you’d pay in state income tax elsewhere.
Do these states tax Social Security or retirement income?
Both Alaska and New Hampshire do not tax Social Security at the state level. But other states do, so it’s an important factor for retirees. Always confirm how different income sources are treated.
Are local sales taxes in Alaska high?
Local sales tax rates in Alaska vary, typically between 1% and 7% depending on the municipality. Some towns have no sales tax at all.
What about municipal services if taxes are low?
Lower state taxes sometimes mean heavier reliance on local revenue or private services. Fewer services or lower-quality infrastructure can translate into private costs (e.g., private school, private road maintenance, or paid emergency services).
How does healthcare factor into the decision?
Healthcare access and cost vary widely. Remote regions may have fewer providers, longer travel times, and higher costs for certain services. Factor this into both budget and quality-of-life calculations.
What should remote workers consider?
Remote workers should check residency rules, local tax nexus for employers, and whether their employer withholds state taxes. For high-earning remote workers, switching state residency can be useful — but confirm administrative steps to establish residency.
Do states without income tax always have higher sales tax?
Not always. Some states with no income tax have average sales taxes; others compensate with higher sales or property taxes. Each state balances revenue differently.
How do business taxes affect entrepreneurs?
States may have no personal income tax but still levy business taxes, franchise taxes, or higher corporate rates. Entrepreneurs should compare the full business tax picture and compliance costs.
Will moving for tax reasons trigger taxes where I currently live?
Some states enforce aggressive residency rules and may try to tax you if they believe you haven’t genuinely changed residency. Keep careful records: time in state, home sale or lease, voter registration, and driver’s license change help prove a move.
Are sales taxes applied to online purchases in these states?
Remote seller rules differ by state and locality. Local sales taxes in Alaska can apply to online purchases depending on economic nexus and local ordinances. Check local rules for remote seller thresholds and compliance.
What are common hidden costs of moving to a low-tax state?
Higher housing costs, increased insurance or utilities, travel costs to family or major cities, and the need to pay for services privately are common hidden costs.
How do states without sales tax raise revenue?
They often rely on property taxes, business taxes, excise taxes, natural resource revenues, tourism fees, or a mix of those. The composition matters for different household types.
Can retirees benefit from these states?
Yes — especially if a retiree relies on investment income. But benefits depend on healthcare access, property tax exposure, and whether retirement income is taxed elsewhere.
What about school quality and local services?
Some low-tax states have excellent schools funded differently (e.g., local property taxes). Others trade lower taxes for fewer services. Visit and talk to locals before deciding.
How do I prove residency for tax purposes?
Typical evidence includes a new driver’s license, voter registration, lease or deed, utility bills in your name, and time spent in the state. Requirements vary; some states have specific day-count tests.
If I have investment income, where will I be taxed?
Federal taxes still apply. State treatment depends on where you are a resident and where investments are sourced. If you relocate, your new state rules determine state tax exposure.
Do these states tax capital gains?
State capital gains taxation follows the state’s income tax rules. In states with no personal income tax, the state typically doesn’t tax capital gains at the individual level. Federal capital gains tax still applies.
Are these tax rules permanent?
Tax laws change. States can introduce or repeal taxes based on budgets and politics. Always check current law before making a move driven by taxes.
How often should I revisit my tax residency decision?
Re-evaluate annually or when your life changes: big income shifts, property purchases, or family moves. Laws can change too, so stay informed.
Is there a one-size-fits-all recommendation?
No. Taxes are personal. The best state for one person can be the worst for another. Model your numbers, visit, and decide with both head and heart.
Where can I get authoritative, up-to-date tax info?
Check official state revenue or treasury resources and reputable national tax research organizations for up-to-date rules and statutes. For personal advice, consult a licensed tax professional who can run the numbers for your exact situation.