Nine US states have no individual income tax — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. For STR investors, this means the federal §168(k) bonus depreciation deduction is the whole story: full Year-1 write-off at 100% federal, no state layer to add back or worry about. Property acquired and placed in service after January 19, 2025 qualifies under the One Big Beautiful Bill Act (OBBBA, P.L. 119-21). Visit the full state conformity hub to compare the no-income-tax states to every other US jurisdiction.
Federal deduction sized at $150,000. Compare any two states in the conformity tool →
The 9 No-Income-Tax States, At a Glance
Eight of these states have no individual income tax at all. New Hampshire is a special case — no wage/salary tax and (as of 2025) no interest/dividend tax, but a Business Profits Tax that touches above-threshold entities.
| State | Type | Notes for STR investors |
|---|---|---|
| Alaska | Full no-tax | No individual income tax since 1980. Federal §168(k) is the entire benefit. |
| Florida | Full no-tax (individuals) | Fla. Const. Art. VII §5. C-corp F-1120 filers face §168(k) add-back with 7-year subtraction recovery — irrelevant to most individual STR owners. |
| Nevada | Full no-tax | Nev. Const. Art. 10. Commerce Tax on gross receipts >$4M is basis-irrelevant for most STR owners. |
| New Hampshire | Limited (business-only) | No wage/salary or interest/dividend tax. 7.5% Business Profits Tax (RSA 77-A) applies to entities above the statutory threshold and decouples from §168(k). |
| South Dakota | Full no-tax | S.D. Const. Art. XI. No individual or corporate income tax. |
| Tennessee | Full no-tax (individuals) | Hall Income Tax on interest/dividends fully repealed 2021. Franchise & Excise Tax (F&E) at 6.5% decouples from §168(k) — applies to LLCs/corps, not individuals via disregarded entities. |
| Texas | Full no-tax (individuals) | Tex. Const. Art. VIII §24. Franchise tax rules aligned with OBBBA in Dec 2025 — most individual STRs are below the ~$2.47M no-tax-due threshold anyway. |
| Washington | Full no-tax (ordinary income) | Wash. Const. Art. VII uniformity clause. 2022 capital gains excise tax applies only to certain long-term gains >$250K, not to STR rental income. |
| Wyoming | Full no-tax | Wyo. Const. Art. 15. No individual or corporate income tax. |
What This Means for Your STR Federal Deduction
The federal side is the whole game. OBBBA restored 100% §168(k) bonus depreciation permanently for property acquired and placed in service after January 19, 2025. For an individual STR investor in a no-income-tax state, the entire tax benefit flows from the federal return.
Worked example — $1.1M STR, $150K bonus deduction
- Federal Year-1 deduction: $150,000 × 37% federal marginal bracket = $55,500 federal tax savings.
- No-income-tax state Year-1 layer: $0 (no state tax to reduce or add back).
- Total Year-1 tax benefit: $55,500 — clean, no state paperwork, no basis divergence.
Compare against a decoupled state investor at the same 37% federal bracket. In California: federal savings identical ($55,500), but the state return adds back the entire $150,000 at the 13.3% top marginal rate — a ~$19,950 Year-1 state tax on the deduction, eventually recovered over the property's MACRS life. The no-income-tax investor is ~$19,950 ahead in Year-1 cash on the state line alone.
Same story against New York (~$16,350 add-back at 10.9%), Hawaii (~$16,500 at 11.0%), or New Jersey (~$16,125 at 10.75%). In every case, the no-income-tax state removes an entire layer of Year-1 friction.
The New Hampshire Business Profits Tax Wrinkle
New Hampshire is the odd one out. There is no individual income tax on wages, salaries, or (as of the 2025 Hall Income Tax repeal) interest and dividends. But the state does impose a Business Profits Tax (BPT) under RSA 77-A on any "business organization" — including sole proprietorships, LLCs, and pass-throughs — with gross business income above the statutory threshold (approximately $103,000 in recent years; check the current threshold).
The BPT rate is 7.5% (2026 rate). BPT explicitly decouples from federal §168(k) and §179 — meaning an above-threshold NH STR operator must add back federal bonus depreciation on the BPT return. On a $150,000 federal §168(k) deduction, an above-threshold NH investor loses ~$11,250 in BPT savings at 7.5%.
Practical implications:
- Sole proprietor or single-member LLC below the gross income threshold: Not subject to BPT — full federal §168(k) benefit with no state offset.
- Above-threshold LLC or multi-member entity: BPT applies; §168(k) is added back; deduction is recovered over the property's normal depreciable life on subsequent NH returns.
- Individual held (not via any entity): Only the individual rental gets combined with other business income of the individual for BPT purposes if the individual is treated as a business organization under RSA 77-A. Consult the current NH DRA guidance for structuring.
Property Tax Reality Check
No-income-tax states typically fund state and local services through higher property tax. That doesn't affect the §168(k) computation (depreciable basis is purchase price plus improvements, not net of property tax), but it does affect the pre-purchase cash-on-cash math.
Rough averages (varies dramatically by county and jurisdiction — check the specific location):
- Texas: ~1.6% of assessed value average, with some counties well above 2%. On a $1.1M STR, ~$17,600/yr in property tax.
- Florida: ~0.83% average, with meaningful variation between Miami-Dade, Broward, and central Florida counties. On a $1.1M STR, ~$9,130/yr.
- Tennessee, South Dakota, Wyoming, Nevada: Generally below the national average, but check specific county rates.
- New Hampshire: Among the highest in the country. On a $1.1M STR, property tax can approach or exceed $20,000/yr.
A comprehensive pre-purchase analysis needs to net property tax against §168(k) savings to produce an honest cash-on-cash figure. For a state-by-state side-by-side of the income tax layer specifically (which is what §168(k) interacts with), use the state conformity tool.
How to Model Your After-Tax Return in a No-Income-Tax State
The clean framing: in a no-income-tax state, your Year-1 tax benefit from §168(k) is your federal marginal rate multiplied by your bonus-eligible basis. Nothing more, nothing less. That's a simpler pro forma than in either full-conformer or decoupled states, but it also means the federal deduction has to be large enough to justify the transaction on its own.
The size of the deduction depends on the property itself: land ratio, age, price-per-square-foot, and amenity signals. A newer build in a resort-adjacent market with heavy 5-year interior finishes (custom cabinetry, quartz counters, appliances, decorative lighting, smart-home wiring) and 15-year outdoor amenities (pools, hot tubs, fire pits, outdoor kitchens, pergolas) will generate a materially larger bonus deduction than an older property with a lot of embedded structural work.
Under OBBBA, 100% Year-1 expensing applies to qualified 5-year, 7-year, 15-year, and 20-year property acquired and placed in service after January 19, 2025. The 27.5-year (residential) or 39-year (non-residential) structural components depreciate normally — no bonus.
To model the deduction on a specific address, run the address on your property. The report identifies each finish and outdoor feature, classifies it by MACRS life, and produces a line-item bonus-eligible breakdown you can hand to your CPA before making an offer.
Analyze a specific STR property
Run any listing through DepreciMax's $99 property report — line-item finish classification with full federal Year-1 tax math. Especially valuable in no-income-tax states where the federal deduction is the whole story.
State-by-State Summary
Alaska
Alaska has had no individual income tax since 1980 (last tax repealed under Alaska Const. Art. IX). Individual STR investors owe no Alaska personal income tax, so the federal §168(k) deduction stands alone. On a $150,000 §168(k) deduction, federal savings at 37% = $55,500; no incremental state savings or add-back. Alaska's corporate net income tax does conform to federal §168(k) for C-corps only.
Citation: Alaska Const. Art. IX; Alaska Department of Revenue.
Florida
Florida has no personal income tax (Fla. Const. Art. VII §5). For C-corp STR entities filing Form F-1120, Florida requires §168(k) add-back with a 1/7 annual subtraction over 7 years under F.S. §220.13(1)(e) — applies to assets placed in service before January 1, 2027 under current statute. Most individual STR investors hold in disregarded LLCs or S-corps and pay no Florida entity-level tax on the rental income.
Citation: Fla. Const. Art. VII §5; F.S. §220.13(1)(e); Florida Department of Revenue TIP 25C01-01.
Nevada
Nevada individuals owe no state personal income tax on STR income (Nev. Const. Art. 10). The federal §168(k) deduction is the entire tax benefit. Nevada's Commerce Tax on gross receipts over $4M does not allow §168(k) deductions (gross receipts basis), but few individual STR investors reach that threshold.
Citation: Nev. Const. Art. 10; Nevada Department of Taxation.
New Hampshire
No individual income tax on wages/salaries; Hall Income Tax on interest/dividends repealed 2025. The Business Profits Tax (BPT) at 7.5% under RSA 77-A applies to business organizations above the statutory gross income threshold and decouples from §168(k). Above-threshold STR operators must add back federal bonus. Small STR operations below the threshold are unaffected.
Citation: RSA 77-A:1, RSA 77-A:3-b; New Hampshire Department of Revenue Administration.
South Dakota
South Dakota has no individual income tax and no corporate income tax (S.D. Const. Art. XI). STR investors receive the federal §168(k) benefit without any state-level adjustment. On a $150,000 federal bonus deduction, federal savings at 37% = $55,500; no state tax at all.
Citation: S.D. Const. Art. XI; South Dakota Department of Revenue.
Tennessee
No individual income tax — the Hall Income Tax on interest and dividends was fully phased out in 2021. Individual STR investors owe no Tennessee state income tax and get the full federal §168(k) benefit. Tennessee Franchise & Excise Tax (F&E), which applies to LLCs and corporations at 6.5%, permanently decoupled from §168(k) for assets purchased on or before 12/31/2022 per Notice ET-2. Most individual STR investors hold in disregarded LLCs and are not subject to F&E.
Citation: Tenn. Code §67-4-2006; Tennessee Department of Revenue Notice ET-2.
Texas
Texas has no individual income tax (Tex. Const. Art. VIII §24). STR investors receive the full federal §168(k) benefit ($55,500 at 37% on a $150K deduction). In December 2025, Texas franchise tax depreciation rules were updated to align with OBBBA bonus depreciation effective with the 2026 franchise tax report — but most individual STRs are below the ~$2.47M no-tax-due franchise threshold anyway.
Citation: Tex. Const. Art. VIII §24; Tex. Tax Code §171.101; Texas Comptroller (December 2025 update).
Washington
Washington has no individual income tax on ordinary or rental income (Wash. Const. Art. VII uniformity clause). The 2022 capital gains excise tax applies only to certain long-term capital gains above $250K — not to ordinary STR income. On a $150,000 federal §168(k) deduction, WA STR investors get the full federal benefit ($55,500 at 37%) and owe no state income tax on the property. Washington's B&O tax applies to gross receipts but §168(k) is irrelevant (gross basis).
Citation: Wash. Const. Art. VII; Washington Department of Revenue.
Wyoming
Wyoming has no individual income tax and no corporate income tax (Wyo. Const. Art. 15). STR investors receive the full federal §168(k) benefit with zero state-level adjustment. On a $150,000 federal bonus deduction, federal savings at 37% = $55,500; no state tax at all.
Citation: Wyo. Const. Art. 15; Wyoming Department of Revenue.
Frequently Asked Questions
Do no-income-tax states still allow bonus depreciation?
Bonus depreciation under IRC §168(k) is a federal deduction — it applies on every US federal return regardless of state. No-income-tax states neither add it back nor allow an incremental state deduction, because they don't tax the underlying income at the individual level to begin with. For STR investors, the federal §168(k) deduction (100% for property acquired and placed in service after January 19, 2025 under OBBBA) is the entire tax benefit.
Does moving to Florida or Texas reduce my bonus depreciation on my STR?
No. The federal §168(k) deduction is unaffected by where you live. What changes is the state layer: in a decoupled state like California you would owe additional state tax on the federal deduction (100% add-back at 13.3%); in Florida or Texas there is no state individual income tax on the STR income at all, so no add-back is possible. Moving to a no-income-tax state doesn't reduce bonus depreciation — it eliminates the state layer entirely, in either direction.
Is New Hampshire really a "no income tax" state for STR investors?
New Hampshire has no personal income tax on wages, salaries, or (as of 2025 after the Hall Income Tax repeal) interest and dividends. But the Business Profits Tax (BPT) under RSA 77-A applies to business organizations — including LLCs and pass-throughs — with gross business income above the statutory threshold. The BPT rate is 7.5% and it decouples from §168(k), so above-threshold STR operators must add back federal bonus depreciation. Sole proprietors and small STR operations below the threshold are unaffected.
What about property tax in these states?
No-income-tax states generally rely more heavily on property tax to fund state and local services. Texas averages roughly 1.6% of assessed value in property tax; Florida averages roughly 0.83%. Property tax is a separate line item from income tax and doesn't interact with §168(k), but it materially affects the pre-purchase cash-on-cash math and should be modeled explicitly in any STR pro forma.
Do the no-income-tax states have any add-back on §168(k)?
For individual STR investors, no — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming impose no individual income tax, so there is no state return on which to add back. New Hampshire's BPT does decouple from §168(k), applying only to above-threshold business organizations. Corporate-level taxes in several of these states (Florida F-1120, Tennessee F&E, Texas franchise) have their own conformity rules but do not affect the typical individual STR investor holding via a disregarded LLC.
Does Tennessee's Hall Income Tax repeal affect STR bonus depreciation?
The Hall Income Tax on interest and dividends was fully phased out in 2021 — it never taxed STR rental income directly. Tennessee individuals owe no state income tax on STR income before or after the repeal, so §168(k) treatment for individual investors is unchanged. The Tennessee Franchise & Excise Tax (F&E) at 6.5% applies to entity-level income and decouples from §168(k) per Notice ET-2, but most individual STR investors hold via disregarded LLCs not subject to F&E.
Are no-income-tax states always the best STR markets tax-wise?
Not necessarily. Zero state income tax removes one drag from Year-1 cash math, but property tax burden, occupancy tax, insurance costs, HOA fees, and market fundamentals (occupancy rate, ADR, seasonality) all matter more to long-run STR returns than state income tax status. Full-conformer high-rate states like Oregon actually deliver a larger state-side §168(k) benefit than any no-income-tax state — the state layer works in your favor rather than being neutral.
Does OBBBA change how no-income-tax states treat bonus depreciation?
For individuals, no. OBBBA restored 100% federal §168(k) permanently for property acquired and placed in service after January 19, 2025. In no-income-tax states, there is no individual state layer to reconcile with the federal change. On the corporate side, several no-income-tax states have updated franchise tax or business income tax rules (Texas franchise tax rules updated December 2025; Florida F-1120 retains its 7-year subtraction recovery), but these apply only to entity-level filers, not the individual STR investor.
- Alaska: Alaska Const. Art. IX; Alaska Department of Revenue
- Florida: Fla. Const. Art. VII §5; F.S. §220.13(1)(e); Florida DOR TIP 25C01-01
- Nevada: Nev. Const. Art. 10; Nevada Department of Taxation
- New Hampshire: RSA 77-A:1, RSA 77-A:3-b; NH DRA
- South Dakota: S.D. Const. Art. XI; South Dakota DOR
- Tennessee: Tenn. Code §67-4-2006; TN DOR Notice ET-2
- Texas: Tex. Const. Art. VIII §24; Tex. Tax Code §171.101; Texas Comptroller (Dec 2025)
- Washington: Wash. Const. Art. VII; Washington DOR
- Wyoming: Wyo. Const. Art. 15; Wyoming DOR
- IRS §168(k) — Modified Accelerated Cost Recovery System, additional first-year depreciation
- One Big Beautiful Bill Act of 2025 (P.L. 119-21) — restored 100% §168(k) for property acquired and placed in service after January 19, 2025
Every state's §168(k) position, in one place
Interactive map, sortable table, and deep-dive guide for each of the 51 jurisdictions — post-OBBBA verified.
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