When it comes to choosing the right place to live or relocate your business, one of the most critical factors is picking the best state for taxes. In 2026, fresh rankings and tax-competitiveness data are shedding light on which U.S. states offer the most favorable tax environments—and which ones may impose heavier burdens. Whether you’re eyeing individual income tax, corporate tax, sales tax, or overall tax burden, knowing where your money goes matters.
Why tax rankings matter in 2026
When you evaluate the best state for taxes, you’re not just looking at one number. You’re balancing personal income tax, corporate income tax (if you're a business owner), sales & excise taxes, property taxes, and the overall tax burden—how much of your income goes to taxes across the board. Studies such as the Tax Foundation’s 2026 State Tax Competitiveness Index provide solid data on these variables.
That index, along with supplementary sources, lets individuals and businesses identify the best state for taxes based on their unique situations. While everyone’s circumstances differ (income level, property ownership, business vs. consumer status), these rankings give a helpful starting point.
Top candidates for “best state for taxes” in 2026
Based on recent analyses, a handful of states consistently emerge near the top. These states combine low or no income tax (personal and/or corporate), low sales tax burdens, and other features that make them standout:
1. Wyoming
Wyoming is widely regarded as the top contender for being the best state for taxes. The Tax Foundation ranking places it at No. 1 for overall tax competitiveness.
It imposes no state individual income tax and no corporate income tax at the state level.
Sales tax and property tax are moderate or comparatively low.
For someone focused on finding the best state for taxes, Wyoming offers a very tax-friendly climate.
2. South Dakota
Another top performer, South Dakota also ranks in the top tier of states for minimal tax burden.
No individual income tax; no corporate income tax.
It has reasonable employer/unemployment insurance tax scenarios.
If business taxes are a concern, South Dakota is a strong option.
3. Alaska
Alaska is often overlooked because of its remote geography, but it stands out from a tax perspective.
No state individual income tax and no state sales tax in many localities (though there are some local taxes).
That said, corporate tax exists, and the cost of living or logistics may offset tax advantages for some.
Still, for tax-focused decision-making, Alaska ranks among the most favorable.
4. Florida
Florida frequently comes up when people search for the best state for taxes, especially for individuals.
No state individual income tax.
Corporate tax exists at a moderate rate; sales and property tax rates are competitive.
For someone relocating primarily for personal tax relief, Florida is a strong contender.
5. Montana
Though less heralded, Montana is worth considering if you want the best state for taxes with a slightly different profile.
It has lower or no sales tax (in fact, no general state sales tax).
It improved its individual income tax ranking through reforms.
Montana may appeal if you want tax benefits but also value lifestyle, moderate living costs, and a less-competitive race for relocation.
Key criteria to evaluate a “state for taxes”
When examining which state is the best state for taxes in 2026, consider the following components:
Individual income tax rate: States with no or very low personal tax rates often top the list.
Corporate income tax rate: Important for business owners, self-employed, or pass-through entities.
Sales tax and local sales/utility taxes: These affect daily expenses and the cost of living.
Property tax burden: Especially relevant if you own property or plan to buy real estate.
Overall tax burden: Measures how much of your personal income goes to state-and-local taxes—giving a comprehensive picture.
Tax policy stability and reforms: Some states are actively reforming and climbing rankings. For example, states like Tennessee, Iowa, and Louisiana have made significant improvements.
Strategic considerations for you
Since you might be evaluating relocation or establishment (either personally or for business), here are some practical points to keep in mind when assessing the best state for taxes:
Align with your priority: If your focus is personal income tax (e.g., as an individual), states like Florida or Alaska may shine. If business taxes dominate your concern, then Wyoming or South Dakota may offer better relief.
Consider cost of living and lifestyle: A state might have very low taxes but high living costs or different lifestyle trade-offs. Tax advantage alone doesn’t guarantee overall savings.
Check local (county/municipal) taxes: Even in states with favorable state-level taxes, local governments may impose additional sales, property or other taxes. For example, Alaska has no state sales tax in many areas, but localities may still tax.
Look at imminent reforms: Tax landscapes evolve—some states are actively reforming. For example, changes in corporate tax, flat income tax adoption, elimination of certain taxes like interest & dividend tax.
Think long-term: If you are planning business growth, property ownership, or retirement, consider how tax rates may impact future income, investments, dividends, and estate/planning issues.
Total tax burden matters: Don’t get caught focusing only on one tax type; the overall tax burden (income + sales + property + other state/local taxes) gives the truest measure of how tax-friendly your state really is.
What’s changed for 2026
Important shifts in the 2026 tax landscape that affect the best state for taxes:
The Tax Foundation’s updated 2026 index reveals some states that previously ranked high are being overtaken due to reforms elsewhere and tax changes. For instance, New Hampshire eliminated its interest-&-dividends tax as of January 2025, boosting its ranking.
States like Tennessee, Iowa, and Louisiana moved up significantly in competitiveness due to major tax reforms (income tax reductions, corporate rate cuts, elimination of certain levies).
Some states are seeing “tax creep” in less-visible areas: digital service taxes, changes to estate & capital-gains taxes, or structural changes in property taxes. These pave the way for shifts in what might be the best state for taxes next year.
Final thoughts
If you’re deciding on the best state for taxes in 2026, the evidence clearly suggests that states such as Wyoming, South Dakota, Alaska, Florida and Montana stand out. Yet the “best” state will depend on your unique situation—personal income level, business ownership, property holdings, lifestyle preferences, and long-term goals.
Be sure to evaluate not just the headline tax rate, but the broader tax burden and the trajectory of reforms. Tax-friendly states can offer substantial savings and strategic advantages—provided you align your relocation or business strategy to that environment.
