After spending time scrutinizing financial markets and Fed rates, the last thing you probably want to think about is how much the tax man will take from your earnings.
But tax planning while investing is crucial. Not only can you minimize federal taxes through strategies like tax-loss harvesting, but if you live in a low-tax state, you might reduce investment taxes on your passive income.
So here are two states that could give investors a “tax-friendly” edge in the marketplace — should you decide to move.
The most tax-friendly states for investing
To determine the “most tax-friendly states for investing,” Kiplinger first ranked each state based on three key factors.
First, only states that don’t tax capital gains, income taxes, interest, or dividends were considered. Of those eight, Kiplinger selected the two states with the lowest effective property tax rates.
Property taxes were based on the most recent data provided by ATTOM Data Solutions, which surveyed property tax rates from 84.9 million U.S. single-family homes.
Lastly, state and local sales tax rates were referenced from the most recent dataset issued by the Tax Foundation.
But no matter where you move, federal income taxes will still apply.
Best states for investors who hate paying taxes in 2025
Nevada and Tennessee.
Many types of state taxes are either low or nonexistent in Tennessee and Nevada, making these two the most tax-friendly for investing in 2025.
Here are just a few reasons why Nevada and Tennessee topped our list:
There are no individual income taxes in either state. (That includes wages, retirement distributions, and investment income on capital gains, interest, or dividends.)
Property taxes are about half the national average of .90%. Both Tennessee and Nevada have relatively low effective property tax rates of .44% and .48%, respectively, according to ATTOM.
Neither Tennessee nor Nevada has state-level inheritance or estate taxes. Without paying so-called state “death taxes,” you could pass on more investment wealth to your heirs.
Best low-tax states to invest in real estate, rental property, and other investment buys
However, choosing the state that offers the most potential tax benefit may depend on the type of investments you hold. For example, many types of investments generally reap similar state tax benefits regardless of whether you live in Tennessee or Nevada.
So, when it comes to naming the “most tax-friendly states for investing,” Kiplinger selected two primary types of investments: real estate and collectibles.
Your investment choices and the duration of those investments might lead you to prefer one state over another as the most
The Most Tax-Friendly States for Investing in 2025 (Hint: There Are Two)
