Additional Coverage:
Planning Your Legacy: Exploring States Without Estate or Inheritance Taxes
For most Americans, the federal estate tax is not a concern, as it applies only to individuals with estates exceeding $13.99 million and married couples with more than $27.98 million in 2025. However, many states impose their own estate or inheritance taxes, often referred to as “death taxes.”
If you’re looking to preserve your wealth for future generations, relocating to one of the 33 states that do not levy these specific taxes might be appealing. It’s crucial, however, to consider other tax factors that could impact your overall financial picture in these locations.
Here’s a look at some of these states and their noteworthy tax landscapes:
1. Alabama and Alaska
- Alabama: Recently reduced its sales tax on groceries from 4% to 3%.
- Alaska: Residents receive an annual financial benefit through the Permanent Fund Dividend, which was $1,702 in 2024.
2. Arizona and Arkansas
- Arizona: Has implemented a flat income tax rate of 2.5%.
- Arkansas: Recent legislation cut the top individual income tax rate from 4.4% to 3.9%, effective January 1, 2024.
3. California and Colorado
- California: While generally known for high taxes, specific areas offer lower property tax rates relative to the state average, which could be a consideration for potential movers.
- Colorado: Residents can take advantage of a state electric vehicle (EV) tax credit of up to $6,000.
4. Delaware and Florida
- Delaware: Stands out with no state sales tax and low property taxes.
- Florida: Boasts no state income tax, and has permanently exempted essential items like diapers and baby clothing from sales tax.
5. Georgia and Idaho
- Georgia: Social Security benefits are exempt from income tax. The state has a flat income tax rate of 5.39% for 2024, set to decrease to 4.99% by 2028.
- Idaho: Features a flat income tax rate of 5.69%, does not tax Social Security benefits, and allows deductions for certain types of pension income.
6. Indiana and Kansas
- Indiana: Residents benefit from a flat state income tax rate of 3.05%.
- Kansas: Faces a state sales tax of 6.5% and some of the highest combined state and local sales tax rates nationwide.
7. Louisiana and Michigan
- Louisiana: Homeowners enjoy an exceptionally low 0.55% effective property tax rate, though the state has a 5% sales tax.
- Michigan: Residents pay a flat income tax rate of 4.25%, but also contend with some of the nation’s highest property taxes.
8. Mississippi and Missouri
- Mississippi: Offers a low flat income tax rate of 4.7% for earnings over $10,000, with future reductions planned. However, it holds the distinction of having the country’s highest-taxed groceries at 7%.
- Missouri: The top income tax rate will fall to 4.7% in 2025, with further reductions anticipated. Social Security benefits are not taxed.
9. Montana and Nevada
- Montana: Provides property tax rebates of up to $675 for eligible homeowners.
- Nevada: Has an impressively low effective property tax rate of just 0.44% on owner-occupied housing.
10. New Hampshire and New Mexico
- New Hampshire: Is phasing out its tax on interest and dividends, with a full repeal effective January 1, 2025. The state does not tax W-2 wages.
- New Mexico: Features progressive income taxes, with rates reaching up to 5.9%.
11. North Carolina and North Dakota
- North Carolina: Exempts groceries from state taxes (local taxes may still apply) and boasts some of the nation’s lowest property taxes.
- North Dakota: Residents benefit from a top income tax rate of just 2.5%.
12. Ohio and Oklahoma
- Ohio: Property taxes are relatively low, especially compared to neighboring states.
- Oklahoma: Offers low property tax rates and a reasonable top income tax rate of 4.75%.
13. South Carolina and South Dakota
- South Carolina: Features some of the country’s lowest property taxes and no state-level taxes on groceries.
- South Dakota: Does not tax personal income, but does have a grocery tax.
14. Tennessee and Texas
- Tennessee & Texas: Both states impose no state income taxes.
- Tennessee & Texas: Both have relatively high sales taxes.
Texans, however, saw lower property taxes enacted in 2023.
15. Utah and Virginia
- Utah: Is one of the few states that taxes Social Security benefits, at a flat rate of 4.55%, though some residents may qualify for a tax credit.
- Virginia: Does not tax Social Security benefits, but has a 5.3% sales tax in most areas and a progressive income tax system with rates up to 5.75%.
16. West Virginia, Wisconsin, and Wyoming
- Wyoming: Has no state income tax.
- West Virginia: Boasts some of the country’s lowest property taxes.
- Wisconsin: Residents face the nation’s eighth-highest property taxes.
The Bottom Line: Balancing Tax Benefits and Trade-offs
While these 33 states offer the advantage of no “death taxes,” making them attractive for preserving generational wealth, it’s essential to recognize that there are often trade-offs. States still need revenue, so lower taxes in one area might mean higher taxes in another, such as sales or property taxes. Additionally, the overall cost of living varies significantly from state to state.
Before making any major relocation decisions, it’s highly recommended to consult with a financial advisor. They can help you thoroughly assess the true financial benefits and potential savings of a move, and explore other strategies for building and protecting your wealth.
Beyond location, a strong financial foundation is key for everyone. Consider these general tips to optimize your finances:
- Tackle Debt: High-interest debt can hinder financial progress. Explore options like balance transfer credit cards or debt counseling to pay it off faster.
- Boost Your Income: If your budget feels tight, consider ways to earn extra income. This could range from a new job to a part-time side hustle, depending on your circumstances.
- Trim Expenses: Review your largest expenditures first, as they offer the most significant savings potential. For instance, comparing auto insurance quotes can quickly lower your bill, and the right travel credit card can offset vacation costs.