Here, we’ve rounded up the states that have no income tax. But when you peel back the layers, you’ll find that residents aren’t exactly living tax-free.

1. Alaska

Grazing moose near Anchorage, Alaska
BILD LLC / Shutterstock
Moose near Anchorage, Alaska

Alaskans take great pride in their tax-free status. Not only is there no income tax, but the 49th state has no state sales tax either.

Alaska even goes a step further. Every resident receives an annual payment from the Alaska Permanent Fund Corporation. Funded by oil revenues, this dividend fluctuates each year and was $1,600 for 2018.

Still, despite the lack of income tax, life can get expensive in Alaska. Because it’s so remote, everything from gasoline to groceries, clothes and medical care is imported or more expensive than in other states.

Alaska has no income tax BUT

Alaska taxes petroleum production and at the pump
Kyle Waters / Shutterstock
Alaska taxes petroleum production and at the pump

Without an income tax, Alaska’s funding depends on petroleum and property taxes.

In fact, Alaska has one of the highest average property taxes in the country, mostly concentrated in its largest cities.

Although there’s no state sales tax, local municipalities and boroughs are allowed to collect a general sales tax of up to 7%. Plus, drivers in Anchorage are paying an extra 10 cents per gallon at the pump as of 2018.

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