10 Best Low-Tax States to Retire in 2027 (No Income Tax & Low Property Tax)

Wyoming vs. Tennessee: The Two Leaders

Wyoming and Tennessee sit at the top of any serious low-tax retirement list. Wyoming wins on raw tax mechanics — it levies no state income tax, so Social Security benefits, pension checks, and 401(k) or IRA withdrawals all arrive untaxed at the state level. It adds no estate or inheritance tax, no gift tax, and no tax on out-of-state retirement income. Its trust and asset-protection statutes rank among the friendliest in the country, a reason many wealthy retirees domicile trusts there even when they live elsewhere. The effective property tax rate sits near 0.55%, one of the lowest anywhere, and the average combined sales tax near 5.36% runs well below the national norm.

Tennessee attacks the same problem from the affordability side. It finished repealing the Hall tax on interest and dividends in 2021, so it now taxes no income of any kind. Where Wyoming asks you to accept long, cold winters and thinner big-city healthcare, Tennessee offers a temperate four-season climate, a median home price near $315,000, and metros like Nashville, Knoxville, and Chattanooga anchored by strong hospital systems such as Vanderbilt University Medical Center. The catch is a combined sales tax averaging about 9.55% — the steepest among no-income-tax states — which nicks anyone who spends heavily on taxable goods. For most retirees the milder climate and lower housing cost outweigh that sales-tax bite.

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The Full Field of Ten Low-Tax States

Below the two leaders sit eight more states that each solve a specific retiree problem:

• Florida (3rd): No income tax, no estate tax, a homestead exemption that removes up to $50,000 of assessed value, and a Save Our Homes cap limiting annual assessment growth to 3%. Effective property tax rates hover near 0.8%, but homeowners insurance now averages roughly $6,000 a year after recent hurricane seasons.

• Nevada (4th): No income tax, no estate tax, and a low effective property rate near 0.5%. Combined sales tax around 8.2% and median home prices near $450,000, lifted by Las Vegas and Reno, are the offsets for the desert climate and zero income tax.

• South Dakota (5th): No income tax, no estate tax, property rate near 1.1% balanced by a modest sales tax near 6.4%, and median homes near $300,000 — plus nationally known trust and asset-protection law that rivals Wyoming's. Real, snowy winters are the drawback.

• Alabama (6th): Owns the lowest property taxes on this list — an effective rate near 0.4% — and residents 65 and older are exempt from the state portion of property tax on a primary home. It taxes wages at a flat 5% but exempts Social Security and most defined-benefit pension income. Median homes near $260,000 keep total costs down.

• Texas (7th): No income tax, no estate tax, median homes near $340,000 — but carries a high effective property rate near 1.6%. Over-65 owners get extra homestead exemptions and a school-tax freeze that meaningfully cuts the senior burden.

• New Hampshire (8th): No tax on wages or retirement income and no sales tax at all, now that it has fully phased out its interest-and-dividends tax. Effective property rate near 1.6% and median homes near $470,000, plus hard New England winters, are the price of admission.

• Georgia (9th): A flat 5.39% income tax that, for retirees, often vanishes because it fully exempts Social Security and lets residents 65+ exclude up to $65,000 of retirement income per person. Property taxes run near 0.8% with no estate tax.

• Mississippi (10th): Exempts all retirement income — Social Security, pensions, IRA, and 401(k) — with no estate tax and the lowest median home prices in the country near $190,000, making its combined tax-plus-housing burden the smallest for budget-first retirees.

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How to Decide Between Them

The single biggest mistake is treating "no income tax" as a synonym for "low total tax." It is not. Texas and New Hampshire both skip income tax yet charge effective property rates near 1.6%, so a homeowner there can easily pay more in total than a resident of low-total-burden Wyoming.

The right filter starts with your income type, then layers property, sales, and estate exposure on top. A retiree living mostly on Social Security benefits most from targeted exemptions — which is why Alabama, Georgia, and Mississippi punch above their nominal rates. A retiree drawing a large 401(k) benefits most from outright no-income-tax states, or from Georgia's $65,000-per-person exclusion.

Run every finalist through four checks:

1. Add property tax to the sticker price of the home: Alabama's 0.4% on a $260,000 house is about $1,040 a year, while Texas's 1.6% on a $340,000 house tops $5,440 before senior exemptions — a $4,400 annual swing.

1. Confirm the estate and inheritance picture: Wyoming, Florida, Nevada, Texas, and every state on this list levy none at the state level, though the federal estate tax still applies above its exemption (approximately $13.61 million per person in 2024, adjusted annually).

1. Weigh sales tax against how much you actually spend on taxable goods: A no-sales-tax state like New Hampshire rewards big spenders, while Tennessee's 9.55% punishes them.

1. Verify healthcare access: The most tax-friendly rural states often have the weakest hospital networks — a savings you may repay in medical travel and specialist wait times.

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The Concrete Numbers Behind Each Option

To make the trade-offs tangible, model a couple with $70,000 of annual income and a median-priced home in each state. In Wyoming that couple pays no income tax and roughly $1,900 in property tax on a $345,000 home; in Texas the same $70,000 income is untaxed but a $340,000 home generates well over $5,000 in property tax before the over-65 freeze — the property line, not the income line, decides the winner. Mississippi's exempt retirement income plus its ~$190,000 median home can hold the couple's combined state tax-and-housing outlay to a fraction of the coastal options.

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Implementation Details and Sequencing Your Move

Sequencing the move protects the savings you just found. Establishing genuine domicile — not merely buying a second home — is what convinces a high-tax former state to release you from its rolls:

1. Lock domicile first: Spend the majority of the year in the new state, register to vote there, retitle vehicles, update your driver's license, move primary banking and mailing addresses, and update estate documents to the new state's law. Keep a simple day-count record for your first year; high-tax origin states routinely audit departing residents.

1. File property exemptions next: Alabama's over-65 waiver or Texas's school-tax freeze can save thousands the very first year and often require an application by a specific spring deadline. Florida's Save Our Homes cap only begins protecting you once the homestead is formally established.

1. Re-title assets and update estate documents third: A state with no inheritance tax and strong trust law — Wyoming and South Dakota especially — can shelter the wealth transfer you're planning.

1. Build an annual review: Legislatures adjust brackets, caps, and revenue rules yearly. Re-verify each rate and exclusion annually to ensure your low-tax state stays low-tax.

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FAQ

Is living in a state with no income tax always the best choice for retirement? Not necessarily. No income tax can save thousands a year, but property taxes, sales taxes, and cost of living can erase the gain. Texas has no income tax yet a ~1.6% property rate, which can outweigh the savings for a homeowner. Weigh total burden, not one line item.

How do I know if a state's property tax rate is truly low? Compare effective rates — the share of home value actually paid — not headline mill rates. Wyoming and Nevada land near 0.5%, while Texas and New Hampshire run near 1.6%. Then check for senior exemptions, homestead credits, and assessment caps that can lower your specific bill further.

Do these states tax pension or 401(k) income? Most do not. Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming tax no retirement income at all. Alabama exempts most pensions, Georgia excludes up to $65,000 per person at 65+, and Mississippi exempts all retirement income including 401(k) withdrawals.

What about estate or inheritance taxes in these states? None of the ten levy a state estate or inheritance tax, which is a major advantage for anyone leaving assets to heirs. Wyoming and South Dakota go further with trust and asset-protection statutes that make them popular for estate planning even among non-residents.

Are property taxes likely to spike in these states by 2027? Rates vary by county and rise with home values, but states with caps — Florida's 3% Save Our Homes limit, for instance — offer more stability. Expect roughly 1%–3% annual increases in most areas rather than dramatic jumps, and confirm local trends with the state revenue department.

Can I find affordable housing in these low-tax states? Yes, though affordability varies widely. Mississippi (~$190,000) and Alabama (~$260,000) are the cheapest; Tennessee (~$315,000) and South Dakota (~$300,000) are moderate; Nevada (~$450,000) and New Hampshire (~$470,000) run high. Compare local markets and add property tax to the price before deciding.

Which state has the absolute lowest property tax for retirees? Alabama, at an effective rate near 0.4%, is the lowest on this list, and residents 65 and older are exempt from the state portion on a primary home — trimming an already tiny bill even further and often bringing it under $1,000 a year on a median-priced house.

Do any of these states tax Social Security? No. Every state here either has no income tax at all or specifically exempts Social Security. Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming tax no retirement income; Alabama, Georgia, and Mississippi carve Social Security out explicitly.

Is Texas actually tax-friendly given its high property tax? For seniors, often yes. Texas has no income tax and no estate tax, and over-65 owners get added homestead exemptions plus a school-tax freeze that offsets much of the ~1.6% base property rate — but budget for that rate before relying on the freeze to rescue the math.

What's the cheapest overall state to retire on this list? Mississippi. It exempts all retirement income, has no estate tax, low property taxes, and the country's lowest median home price near $190,000 — the smallest combined tax-plus-housing burden for budget-first retirees.

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Sources

• Tax Foundation — state individual income, property, and sales tax data (https://taxfoundation.org)
• U.S. Census Bureau — American Community Survey median home value data (https://www.census.gov)
• AARP — state-by-state retirement tax guides (https://www.aarp.org)
• Kiplinger — state-by-state retiree tax rankings (https://www.kiplinger.com)
• Insurance Information Institute — homeowners insurance by state (https://www.iii.org)
• KFF (Kaiser Family Foundation) — state healthcare access data (https://www.kff.org)
• Zillow — home value index and median prices (https://www.zillow.com)
• Internal Revenue Service — retirement income and estate tax basics (https://www.irs.gov)

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