Top Two States Offering Favorable Tax Conditions for Investments in 2025
Top Tax-Friendly States for Investing in 2025: Nevada and Tennessee
In 2025, investors are flocking to two states that offer a conducive environment for financial privacy and minimal taxes – Nevada and Tennessee.
Delaware may be known for its corporate-friendly policies, but in 2025, Nevada and Tennessee stand out as the most tax-friendly states for investing. Both states have minimal taxes and fees, relaxed formal requirements, and the ability to register companies with secret owners, making them popular destinations for tax avoidance and financial privacy among investors.
Nevada, in particular, is considered a "business-friendly" environment with no corporate income tax rate. It also has no statewide short-term rental tax, which could lead to lower taxes on vacation rentals compared to Tennessee. Nevada's maximum sales tax rate is 8.375%, potentially offering savings of up to $1.37 per $100 spent compared to Tennessee. However, Nevada faces challenges in healthcare access, quality, and outcomes, recently ranking 46th in a national report by The Commonwealth Fund.
Tennessee, on the other hand, has a generally low cost of groceries, housing, and transportation compared to national averages. When renting out long-term properties (more than 180 days), you might save on state property taxes in Tennessee. Tennessee has a lower overall median property tax bill compared to Nevada, with a reported figure of $1,695. However, Tennessee has one of the highest sales tax rates in the U.S., with a potential combined state and local sales tax rate of up to 9.75%.
Both states do not tax capital gains, income taxes, interest, or dividends, and they also have no state-level inheritance or estate taxes. It's important to note that living in your home state and buying an investment property in another state may require filing two state tax returns, potentially increasing the cost of your tax return and making your financial situation more complicated.
Property taxes in Nevada and Tennessee are about half the national average of .90%. According to ATTOM Data Solutions, the effective property tax rates in Nevada and Tennessee are .44% and .48%, respectively. When it comes to the states that don't tax the mentioned factors, the two states with the lowest effective property tax rates were selected.
In summary, Nevada and Tennessee are the most tax-friendly states for investing in 2025 due to low or nonexistent state taxes, low property taxes, and the absence of state-level inheritance or estate taxes. However, investors should consider other factors such as healthcare access, cost of living, and potential complications in filing multiple state tax returns before making a decision.
