Best No-Income-Tax States for Freelancers (2026)
Nine US states don't tax wage or self-employment income. For a freelancer earning $100k net, that's potentially $5,000-9,000 a year in tax savings versus a high-tax state like California or New York. But "no income tax" doesn't mean "no tax" — sales tax, property tax, business filing fees, and gross receipts taxes can offset some or all of the savings. This guide ranks all 9 for freelancers in 2026.
The 9 no-income-tax states
- Alaska
- Florida
- Nevada
- New Hampshire — interest/dividend tax fully repealed as of TY 2025 (HB 2)
- South Dakota
- Tennessee — formerly taxed investment income, fully phased out 2021
- Texas
- Washington
- Wyoming
For all 9, you still owe federal income tax (10-37% by bracket) and 15.3% self-employment tax on net 1099 earnings. The state savings are on top of those federal liabilities.
The catch in each one
Florida — solid choice, watch sales tax
No income tax. Sales tax 6% state + up to 1.5% local = 7-7.5% effective. No state-level business tax for sole props or single-member LLCs. Annual LLC report fee: $138.75. Strong COL in Miami / South Florida; cheaper inland (Tampa, Jacksonville). Top pick for east-coast freelancers.
Texas — best for high earners; watch the franchise tax
No income tax. Sales tax 6.25% state + up to 2% local = 8.25% in major metros. Franchise tax (margin tax) applies to LLCs and corporations with annualized total revenue over $2.47 million for 2026 — most freelancers under that threshold owe $0. Small-business haven; Austin / Dallas / Houston have huge freelancer communities. Top pick for tech freelancers.
Washington — beware the B&O tax
No personal income tax. But Washington has a Business & Occupation (B&O) tax on gross receipts (not net profit), starting at 0.471% for retailing, 1.5% for services, with a small-business exemption (around $125k gross income for 2026). For a freelance consultant grossing $200k, that's potentially $1,800/year in B&O. Also: 2026 capital gains tax 7% on gains over ~$262k — affects high earners selling stock or businesses. Sales tax 6.5% state + up to 4% local. Seattle is high COL; smaller cities (Spokane, Tacoma) are cheaper.
Tennessee — quietly excellent
No income tax. Hall income tax (interest/dividends) fully repealed 2021. Sales tax 7% state + up to 2.75% local — high. Franchise & excise tax applies to LLCs (single-member LLCs taxed as disregarded entities ARE typically subject to F&E unless they elect to pay through individual). The $100 minimum franchise tax + 6.5% excise on net earnings hits LLCs but not sole props. Nashville and Knoxville have growing freelancer scenes.
Nevada — best LLC haven, but...
No income tax. Commerce tax on gross revenue over $4M — most freelancers exempt. Strong privacy laws for LLCs (no member listing required). Sales tax 6.85% state + up to 1.5% local. Las Vegas / Reno COL is rising fast. Trade-off: very high property tax in some counties.
Wyoming — the LLC king
No income tax. Lowest LLC formation/maintenance cost in the US (~$60 state + $50/year). No state-level business tax. Sales tax 4% state + up to 2% local = 4-6%, lowest of any no-income-tax state. Sparsely populated — great for remote freelancers, less great for in-person networking. Many out-of-state freelancers form Wyoming LLCs purely for the structure (then live elsewhere).
Alaska — high COL, government dividend
No state income tax. No state sales tax (some local sales taxes exist). Permanent Fund Dividend pays residents ~$1,300-2,000/year. But COL is ~25% above national average, and population centers are limited (Anchorage, Juneau, Fairbanks). Reasonable if you genuinely want to live there; not a relocation play.
South Dakota — cheap and quiet
No income tax. Sales tax 4.5% state + local. Strong banking/trust laws (a haven for asset protection planning). Low COL. Sparsely populated. Sioux Falls is the major freelancer hub. Wyoming-like profile but with more humidity.
New Hampshire — fully phased out
No tax on earned income. The Interest & Dividends tax was fully repealed effective January 1, 2025 (HB 2, 2023 session) — one year ahead of the original schedule. NH now has zero personal income tax of any kind. Sales tax: 0% — one of only 5 sales-tax-free states. Property tax is high to compensate. Excellent for freelancers near Boston who want NH residency for tax purposes but commute.
Quick comparison
| State | Sales tax (combined) | Business tax | LLC annual fee | Best for |
|---|---|---|---|---|
| Florida | ~7.5% | None for sole/SMLLC | $138.75 | East-coast freelancers |
| Texas | ~8.25% | Franchise > $2.47M revenue | $0 (No annual report fee) | Tech / high earners |
| Washington | ~10% | B&O 0.47-1.5% gross | $60 | Pacific NW (cap-gain risk) |
| Tennessee | ~9.55% | F&E on LLCs ($100 min) | $300+ | Sole props (avoid F&E) |
| Nevada | ~8.4% | Commerce > $4M | $350 | Privacy-focused LLCs |
| Wyoming | ~5.5% | None | $60 | LLC formation haven |
| Alaska | ~1.8% (local only) | None for individuals | $100 | In-state residents |
| South Dakota | ~6.4% | None | $50 | Asset protection |
| New Hampshire | 0% | BPT 7.5% on $103k+ profit | $100 | NH residents near Boston |
What "no income tax state" doesn't get you
- Federal tax savings. You still owe 10-37% federal + 15.3% SE. State income tax is usually only 3-9% of your bill. Moving from CA to TX saves real money but isn't a complete tax wipeout.
- Multi-state issues. If you move mid-year, you'll owe partial-year tax to your old state on income earned there. See our multi-state freelancer guide.
- Working remotely from a no-tax state for an out-of-state client. Generally you owe tax based on where you live and work, not where the client is. But some states (NY, MA, etc.) have aggressive "convenience of the employer" rules that can pull income back to a high-tax state.
- Property tax. Texas, New Hampshire, and Nebraska have very high property taxes that can offset income tax savings if you own a home.
The relocation reality check
For a single freelancer earning $100k net SE in California (combined CA + federal + SE = ~38%) moving to Texas (~30%): savings are about $8,000/year. Real, but not life-changing. For a $300k earner: savings approach $25,000/year — that's relocation-justifying. Below $80k income, the math rarely justifies a move on tax grounds alone.
FAQs
Can I form an LLC in Wyoming but live in California? You can, but California will still tax your income because you live and work there. You also have to register your Wyoming LLC as a foreign LLC in California ($800/year minimum tax + filing fees). Net savings: usually negative.
If I work for a California company while living in Texas, do I owe CA tax? Generally no — physical work location determines state tax for most freelancers. CA "source-of-income" rules can pull income back to CA only in narrow situations (real estate, services performed in CA).
Does SE tax change in a no-income-tax state? No. Self-employment tax is federal (Social Security + Medicare). It's the same 15.3% in all 50 states.
Which no-tax state is cheapest for an LLC? Wyoming. ~$60 to form, ~$60/year to maintain. South Dakota is close. Nevada and Tennessee are the most expensive.
What about Puerto Rico's Act 60? Puerto Rico isn't a state. PR offers 4% corporate / 0% capital gains under Act 60 for bona fide residents who actually move. Real benefit but real residency requirements (183 days in PR, closer-connection test). Not a "weekend setup" play.
Is Tennessee F&E tax avoidable? Sole proprietors and single-member LLCs treated as disregarded for federal can usually avoid F&E by filing as a sole prop. Anything that elects entity-level taxation hits F&E.
