Top States with No Income Tax: Save More This Year
January 8, 2026
Unlock your savings this year by exploring the top states with no income tax. Discover how living in these states can impact your finances positively!
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No personal-income-tax states remove a layer of owner-level tax on salaries and pass-through income — and that changes how founders and investors choose where to form or run a company in 2025. This guide shows which states currently don’t tax personal income, how that absence affects businesses, and the other taxes and operational costs that often offset apparent savings. You’ll get concise, state-by-state notes, the differences for LLCs, C‑Corps and S‑Corps, practical steps to incorporate (including for foreign founders), and compliance strategies to reduce total tax. We include checklists, comparison tables, and the incorporation support Prodezk offers if you’re ready to act. By the end you’ll have a clear decision framework, a grip on non‑income tax liabilities like sales, property and franchise taxes, and a service-backed path to register and manage a business in a no‑income‑tax state.
States with no personal income tax mean owners — and many pass‑through entities — don’t pay state-level wages or personal income taxes. That increases owner take‑home pay and can improve after‑tax returns for many small-business owners and investors. But “no personal income tax” doesn’t erase corporate, franchise or other business levies — and states often make up revenue with sales or property taxes. The short notes below list the nine states and highlight business-relevant trade-offs so you can compare quickly.
The nine states without a personal income tax in 2025 are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Each removes state personal income tax, which can materially affect decisions about owner compensation and pass‑through returns. Note that several of these states still impose corporate or franchise levies, and many rely on sales or property taxes to fund services. A useful comparison looks at sales tax rules, property tax burdens and any corporate‑level levies that would affect operating companies.
When a state doesn’t tax personal income, owners keep more of salaries, distributions and capital gains that would otherwise be reduced by state tax. That makes these states attractive for high‑earning founders, remote owners, and investors who want higher net cashflow or easier owner‑level tax planning for pass‑through entities. The catch: higher sales taxes, property taxes, and state corporate or franchise charges can shrink or erase the advantage. You should always model total tax — sales, property, payroll and any corporate levies — to decide if a specific state delivers real savings for your business model.
Each no‑income‑tax state funds government differently; understanding those trade‑offs is the next step in choosing where to form or operate.
The table below gives a quick, business-focused comparison of the nine states.
The table summarizes the key tax attributes owners and operators typically review when evaluating a no‑income‑tax state for formation or relocation.
This comparison shows that “no personal income tax” is only one factor in state competitiveness — sales, property and corporate or franchise levies can meaningfully change operating costs.
Even without state personal income tax, businesses face other tax categories that drive costs and compliance work. Sales tax, property tax, franchise or corporate levies, and targeted excise taxes all affect pricing, margins and location choices. You also need to understand how nexus rules create multi‑state obligations. The next sections break down sales tax and the roles of property and corporate taxes so you can model total cost accurately.
Sales taxes influence pricing, customer behavior and the margin on taxable goods or services. State rates are usually combined with local add‑ons that differ by city or county. For e‑commerce and many service providers, economic nexus rules can create collection duties in states where you have customers, even if you formed the company elsewhere. Managing sales tax means calculating tax at the point of sale, handling exemptions, and filing returns on time to avoid penalties. Model sales tax exposure across your markets and factor compliance costs into pricing and platform choices.
In practice, a documented sales‑tax process reduces audit risk and unexpected liabilities.
Property taxes on commercial real estate and tangible assets are recurring costs that can offset the advantage of no personal income tax—especially for asset‑heavy businesses like manufacturing and retail. Corporate and franchise taxes add an entity‑level cost for C‑Corps and sometimes for other entity types via franchise‑style or gross‑receipts assessments. Local incentives, abatements or credits can lower these burdens for qualifying projects, but they usually require applications and compliance commitments. Understanding property assessments and any corporate levies that apply to your model is essential for long‑term cost forecasting.
A comparative tax model that includes sales, property and corporate taxes reveals the true net advantage of any no‑income‑tax state for your company.
Entity choice determines how income is taxed at the owner and entity levels — and that interaction changes in no‑income‑tax states. LLCs and S‑Corps generally pass income through to owners, so owners living in a no‑income‑tax state can see bigger after‑tax returns. C‑Corps face federal corporate tax and potential state corporate/franchise levies, which creates double‑taxation risk on distributed profits. Filing complexity, annual fees and franchise taxes vary by state and can push the balance toward one structure depending on growth plans, investor needs and owner residency. The sections below outline LLC advantages and compare C‑Corp vs S‑Corp tradeoffs.
Forming an LLC in a no‑income‑tax state often improves after‑tax owner income because pass‑through profits aren’t hit by state personal income tax for resident owners. LLCs offer flexible profit allocation, simpler administration than many corporations, and in some states stronger privacy protections that appeal to nonresident owners. Downsides include federal self‑employment taxes and state annual fees or franchise charges that add predictable costs. For many small and mid‑sized businesses, the simplicity and pass‑through benefits make LLCs attractive — but always weigh formation costs and any franchise assessments.
Choosing an LLC is a judgment between tax treatment, administrative effort and long‑term growth plans.
The table below compares entity types across tax attributes to clarify trade‑offs.
This comparison illustrates how entity choice interacts with state tax rules and administrative requirements.
C‑Corporations pay tax at the entity level and again on dividends, which can reduce the value of a no‑personal‑income‑tax domicile for distributed earnings. S‑Corporations (when eligible) pass income and losses to shareholders, allowing owners in no‑income‑tax states to avoid state personal tax on distributions — but S‑Corp rules limit certain shareholders and ownership types. State corporate or franchise taxes can still apply to C‑Corps and, in some cases, to S‑Corps in different forms. Choose between C‑Corp, S‑Corp and LLC by weighing reinvestment plans, exit strategy, investor expectations and owner residency.
Many founders consult a specialist to match entity choice with tax strategy and formation logistics.
Prodezk’s incorporation services translate entity‑level tax strategy into correctly filed formation documents and compliance workflows. We support LLC, C‑Corp and S‑Corp setups and offer targeted guidance to optimize tax position for the state you choose.
Incorporating in a no‑income‑tax state follows a straightforward sequence: choose state and entity, prepare and file formation documents, get federal identifiers, and register for required state taxes and permits. The process includes owner identity verification, Articles of Organization/Incorporation, and decisions about registered agents and operating or shareholder agreements. Prodezk supports each step with multilingual consultations, registered agent options and tax filing help — designed for foreign and Latino entrepreneurs who need clear, end‑to‑end support. Below is a practical step list and how a specialist can speed setup and keep you compliant.
The incorporation workflow usually takes days to weeks depending on state processing and document readiness. First, choose the best state and entity based on tax and operating needs. Second, prepare and file formation documents, appoint a registered agent and draft foundational agreements. Third, obtain an EIN (and ITIN if needed for nonresident owners), register for sales or payroll taxes where required, and open banking and accounting systems. Finally, maintain compliance with annual reports and timely tax filings to preserve good standing.
Following these steps helps you avoid common pitfalls like missing nexus‑driven tax registrations or late filings that trigger penalties.
Prodezk delivers end‑to‑end incorporation and tax support tailored to foreign and Latino entrepreneurs. We combine multilingual consultations with formation services, registered agent representation and tax filing assistance. Our approach prioritizes clear guidance, streamlined processes and strong information security — helping clients obtain EINs/ITINs, open U.S. bank accounts, and navigate federal vs. state tax obligations. With experience helping international founders, we assist with documentation, banking setup and ongoing compliance (income, sales tax and annual reports) in English, Spanish and Portuguese. If you want a single partner to reduce administrative friction and speed market entry, Prodezk can be that point of contact through the incorporation lifecycle.
This integrated model reduces friction for nonresident owners and gets you operational faster while staying compliant.
Evaluating state‑specific profiles means looking beyond the absence of personal income tax to sales tax rules, property tax levels, corporate or franchise levies, and industry incentives. States rely on different revenue sources and offer different credits—tourism economies lean on sales tax, energy states on resource revenue, and others provide targeted credits for manufacturing or R&D. Map these attributes to your cost structure and customers before picking a jurisdiction. The examples below highlight Florida, Texas and Nevada for common business types.
Florida’s lack of personal income tax boosts after‑tax returns for resident owners and simplifies owner‑level planning for pass‑through entities. The state’s economy is heavy on tourism and services, so hospitality and retail businesses find market demand and infrastructure — but must account for state and local sales taxes and property tax exposure in high‑traffic commercial areas. Florida also offers incentives and credits for certain industries and qualified projects that can lower effective tax. When evaluating Florida, balance property costs and sector incentives against the owner‑level tax benefit.
Texas combines no personal income tax with a franchise tax that applies to many businesses — owners benefit personally, but companies may face entity‑level assessments based on revenue or margins. Nevada emphasizes business‑friendly registration and privacy options for some structures, though sales and local taxes remain important revenue sources. Both states appeal if owner take‑home pay matters, but Texas’s franchise tax and Nevada’s fee structure require careful modeling to estimate net benefit. Decide whether owner‑level savings outweigh any franchise or registration costs for your sector.
Compare these features against your revenue mix and asset profile to find the best fit.
Lowering total tax burden in no‑income‑tax states means integrated planning across entity choice, incentives, sales tax management, property tax strategy and strict compliance. Smart steps include picking the right entity for retention and investor goals, pursuing credits and abatements, optimizing site selection to limit property tax exposure, and automating sales‑tax processes. Regularly review nexus exposure and keep up with annual reporting so costs remain predictable and audit risk is low. The sections below give concrete planning tactics and compliance best practices.
Good tax planning pairs the right entity with incentives and operational structure to lower combined federal and state costs. Decide whether pass‑through status or retaining earnings in a C‑Corp fits your growth and investor plans, and pursue state incentives for capital investment, job creation or R&D where eligible. Use pricing and sourcing strategies to limit taxable transactions in high sales‑tax jurisdictions, and weigh owning real estate vs. leasing to manage property tax exposure. Engaging advisors early aligns formation and operations to maximize after‑tax returns.
Applied consistently and reviewed annually, these steps help sustain tax advantages over time.
Annual reports, franchise filings, sales tax returns and property assessments are recurring costs that affect net tax efficiency — missed deadlines can produce penalties that erase location savings. Keep accurate records, use a registered agent, set reminders for state filings and automate sales tax collection to cut compliance burden and reduce audit exposure. Some states charge significant annual fees that, over years, change whether a no‑income‑tax state is truly cheaper. Prioritizing proactive compliance preserves tax benefits and avoids surprises.
A compliance calendar and outsourced support turn administrative obligations into manageable line items rather than liabilities.
No‑income‑tax states can be attractive to foreign founders and investors because owner distributions and salary income may escape state personal taxation, increasing net returns from U.S. operations. But international owners still face federal tax obligations, need federal identifiers (EIN/ITIN), U.S. banking, and must understand how nexus rules create state obligations across jurisdictions. Multilingual support and cross‑border document help reduce friction and speed market entry. The sections below outline practical steps for international investors and the language support that helps.
Nonresident entrepreneurs usually start by obtaining federal identifiers, forming a U.S. entity and opening banking relationships, and by reviewing federal tax treaties and withholding rules that interact with state obligations. Even if a state doesn’t tax personal income, federal tax and nexus‑driven state taxes (sales, franchise) can still apply based on activity and customer location. Common mistakes include underestimating nexus from remote sales, mishandling withholding, and delaying required registrations. A clear checklist and local incorporation support reduce risk and clarify ongoing compliance.
A coordinated federal and state approach turns absence of state personal income tax into a real net benefit.
Prodezk provides multilingual assistance in English, Spanish and Portuguese for foreign and Latino entrepreneurs. Our services include consultations, document preparation, and cross‑border filing support to simplify U.S. market entry. We help obtain EINs/ITINs, provide registered agent representation, and assist with income and sales tax filings and annual compliance. Positioned as an all‑in‑one resource, Prodezk streamlines formation and tax steps with attention to data security and personalized advice. For international clients who prefer language‑aligned support, this integrated service reduces administrative friction and accelerates readiness.
Multilingual, end‑to‑end support lets foreign founders focus on growth instead of paperwork.
No‑income‑tax states can cut personal tax for owners, but businesses may face higher sales, property or franchise taxes that offset those savings. Some states also have complex compliance or higher registration costs. Always run a full analysis of all taxes and operating costs to confirm that the overall financial picture fits your business model.
These states promote owner take‑home pay and investment-friendly messaging. They often offer incentives like tax credits, grants or reduced fees for priority industries, making them attractive to startups and established firms. The lack of personal income tax also simplifies owner planning, which adds to the appeal.
Yes. Businesses may still owe sales, property, corporate or franchise taxes. The absence of state personal income tax helps owners, but other obligations can affect operating costs. Know the full tax landscape before deciding where to form or operate.
Pass‑through entities with high owner distributions — like many LLCs and S‑Corps — often benefit most. Service and tech firms with limited property exposure also tend to see gains. Asset‑heavy businesses should carefully evaluate property and sales tax impacts to ensure the state remains advantageous.
Maintain accurate records, understand state tax rules, and use robust accounting systems. A registered agent helps manage filing deadlines and annual reports. Regularly review nexus exposure and stay updated on state law changes to avoid penalties and preserve good standing.
Foreign entrepreneurs can use incorporation services that offer multilingual support, tax filing help and guidance on federal and state obligations. Providers like Prodezk offer tailored support for documentation, compliance and operational setup to smooth the transition into the U.S. market.
Incentives differ widely. Some states offer job‑creation or investment credits, R&D incentives, or reduced fees for targeted sectors. Others use grants or property tax abatements. Research available programs in your chosen state to maximize savings and support.
Very few states combine no personal income tax with no general state sales tax — most no‑income‑tax states still rely on sales tax, local levies or other revenues. Some states limit sales taxes but compensate with property or excise taxes. Expect sales tax exposure unless a jurisdiction explicitly lacks a general sales tax, and then check what other taxes fill the revenue gap.
Balance owner‑level savings with transaction‑level taxes and local property burdens when selecting a state.
Total operating cost depends on sales, property, corporate/franchise taxes and non‑tax factors like labor, supply chain and market access — so there’s no one‑size‑fits‑all answer. Businesses with high owner distributions and low property or sales‑tax exposure often see lower total tax. Asset‑heavy or high‑margin sales businesses may find property and sales taxes offset the savings. Use a decision framework that compares projected sales tax, property tax, franchise/corporate levies and compliance costs against owner savings to find the true difference.
For tailored analysis and help turning a state choice into a compliant formation, consider a provider experienced with international and Latino entrepreneurs like Prodezk, which offers multilingual, end‑to‑end formation and tax guidance.
This practical approach ensures your location decision is based on total cost and operational fit — not just a single tax attribute.
Choosing a no‑income‑tax state can improve owner take‑home pay and simplify some tax planning — but only a full review of sales, property and corporate levies will show the true net benefit. If you want help mapping those trade‑offs and turning a state decision into a compliant formation, Prodezk’s incorporation and multilingual tax services can guide you through the process. Take the next step to protect your savings and get operational with confidence.
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