Did you know that in high-tax states like California, New Jersey, or New York, personal income tax alone can eat up more than 10% of your income? And that’s before federal taxes!
It is no wonder more business owners are considering heading to income tax-free states. On the surface, it sounds like the perfect escape. Pack up and wave goodbye to taxes forever. But before you call the movers, you need to know this: relocating isn’t just about sunshine and tax savings; it is a major life decision with both opportunities and hidden costs.
So, let’s walk through the key considerations every business owner should weigh before making the leap.
Which States Have No Income Tax in 2025?
As of 2025, the following states do not impose personal income tax:
- Alaska
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
At first glance, this appears to be a straightforward list of “safe havens” for business owners seeking to retain a larger portion of their earnings. But “no income tax” does not mean “no taxes at all.” Each state fills the revenue gap in its own way (through higher sales tax, property taxes, or unique business levies).
For example:
- Florida has no income tax, but it does tax commercial rent and has a corporate income tax.
- Texas charges a franchise or “margin” tax on businesses.
- Washington doesn’t tax wages, but it does impose a capital gains excise tax and a business & occupation tax.
The bottom line: relocating can lower your personal income tax dramatically, but you need to look at the whole tax picture.
Key Considerations Before You Move
Moving to a tax-free state sounds simple until you dig into the details. Here are the main factors to consider:
The Overall Tax Burden
Taxes have a way of balancing out. States without income tax often raise revenue elsewhere. Sales taxes in states like Texas and Nevada are among the highest in the country. Property taxes in Texas are significantly higher than the national average. Even if you save on income tax, you may end up spending more in other areas.
Your Business Footprint
Moving yourself doesn’t automatically move your business. If you still have employees, offices, warehouses, or customers in your old state, that state may still consider you “doing business” there. In that case, you could be on the hook for taxes even after your personal move.
Residency Proof
States like California and New York don’t let go easily. If you are leaving a high-tax state, be prepared to prove your move in the event of an audit. That means switching your driver’s license, registering to vote, enrolling kids in local schools, and cutting ties to your old state. Maintaining dual residency can lead to complex tax disputes.
Lifestyle Factors
Beyond taxes, think about what life looks like day-to-day. Does the cost of living balance out the savings? Do you like the climate, schools, and community? Saving money is cool, but so is quality of life for you and your family.
How Much Does It Cost to Move to a Tax-Free State?
Here’s one question many people overlook: how much does moving actually cost?
The experts at Tax Goddess did the math, and the number came up to around $20,000 to $30,000 on average.
The figure includes:
- Moving household goods: hiring movers, shipping cars, and transporting belongings.
- Travel expenses: flights, hotels, meals, and multiple trips to finalize the move.
- New housing setup: down payments, rent deposits, furnishings, and utilities.
- Business changes: updating business registrations, licences, payroll systems, and banking.
- Professional fees: legal, tax, and advisory services to ensure the move is successful.
And here’s what is often forgotten: the transition year can trigger double taxation. If you split your time between two states in a single year, you may end up filing as a part-year resident in both. That means you’ll need careful tax planning to avoid paying more than you save in the first year.
Benefits of Moving to an Income Tax-Free State
- Lower Income Tax Burden: Eliminate state income tax and potentially keep more of your profits.
- Long-Term Wealth Building: Over time, the savings compound, especially for business owners with high incomes or large exits on the horizon.
- Business-Friendly Environments: Many no-income-tax states attract entrepreneurs with pro-business laws, incentives, and fewer regulations.
- Lifestyle Opportunities: Some states, like Florida and Texas, also offer warm climates and booming economies, which can benefit both business and lifestyle.
Challenges and Grade-Offs
- Hidden Taxes: Franchise taxes (Texas), business & occupation taxes (Washington), corporate taxes (Florida), and estate taxes (Washington) still exist.
- High Property or Sales Taxes: No income tax can sometimes mean higher bills at the cash register or on your annual property statement.
- Relocation Stress: Moving isn’t just financial; it is also emotional. Leaving family, friends, and established networks can be difficult.
- Business Nexus Issues: If your company keeps operations in your old state, you might not eliminate taxes there.
Is Moving Right for You?
Relocation to a tax-free state makes the most sense for:
- Business owners with highly mobile income streams (consulting, online businesses, investors).
- Entrepreneurs who are planning for a significant liquidity event, such as the sale of a business.
- Families ready for a lifestyle change that aligns with long-term financial goals.
The key is balance. If the long-term tax savings outweigh the $20,000-$30,000 cost and the lifestyle trade-offs, a move could be the best wealth decision you’ll ever make.
Bottom Line
Moving to an income tax-free state is about more than chasing sunshine or escaping a state auditor. It is a strategic move that can potentially unlock massive tax savings, but it comes with a price tag (financially, logistically, and personally).
For many business owners, the math makes sense. Over a decade, eliminating state income tax can put hundreds of thousands (or even millions) back in your pocket. But without a clear plan, moving could cost you more than it saves.
Maximize Your Tax Savings With Tax Goddess
Tax Goddess specializes in helping business owners like you avoid taxes legally.
Want to move to a new state and avoid taxes legally?
We can help you run the numbers, evaluate the trade-offs, and equip you with a custom plan to maximize your tax savings. Our strategies have helped business owners and professionals claim more than $2 BILLION in tax savings! So, let’s help you build a strategy that truly puts money back in your pocket.
Book a FREE CONSULTATION now, and let’s discuss how much you can save.
