Cheapest States for Freelancers: A Tax and Cost of Living Comparison 2026

One of the most powerful financial decisions a freelancer can make — especially if they work entirely remotely — is choosing where to live. State income taxes, cost of living, health insurance costs, and LLC fees vary enormously across the United States. For a freelancer earning $100,000 per year, the difference in after-tax, after-cost income between the best and worst states can easily exceed $20,000 annually.

This guide analyzes the most important financial factors by state to help you identify where your freelance income goes furthest.

States With No Income Tax

Nine states currently impose no individual income tax: Alaska, Florida, Nevada, New Hampshire (taxes interest and dividends only), South Dakota, Tennessee, Texas, Washington, and Wyoming. For a freelancer earning $100,000, avoiding a 5 to 10 percent state income tax saves $5,000 to $10,000 per year.

• Texas: No income tax, large freelancer communities in Austin and Houston, reasonable cost of living outside major metros
• Florida: No income tax, warm climate, large remote worker population, no state estate tax
• Nevada: No income tax, low overall tax burden, Las Vegas and Reno offer affordable urban living compared to California
• Wyoming: No income tax, very low cost of living, LLC-friendly with no state franchise tax

States to Approach Carefully

California has a top marginal state income tax rate of 13.3 percent — the highest in the nation. Combined with the high cost of living in most metro areas, California freelancers face a significantly higher financial burden than peers in no-tax states. The LLC minimum franchise tax of $800 per year also applies regardless of income.

New York has a top rate of 10.9 percent and New York City residents pay an additional city income tax of up to 3.876 percent. If you are a freelancer living in Manhattan, your combined federal, state, and city income tax burden can approach 50 percent at higher income levels.

Health Insurance Costs by State

Health insurance premiums on the ACA Marketplace vary significantly by state. States with robust insurance markets and lower healthcare costs — including Minnesota, Wisconsin, and several mid-Atlantic states — tend to have more competitive premiums. Southern states and rural states often have fewer insurers competing, which can drive premiums higher.

→ Best Health Insurance Plans for Freelancers in the US

LLC Costs by State

If you are considering forming an LLC, state filing fees and annual fees matter. Wyoming charges just $100 to form an LLC and has no annual fee. California charges $70 to file but then $800 per year regardless of income. Delaware is popular for large businesses but less advantageous for single-member freelancer LLCs due to annual franchise taxes.

→ LLC vs Sole Proprietorship for Freelancers

Cost of Living Adjustment

A $100,000 income in Austin, Texas has significantly more purchasing power than the same income in San Francisco or New York. Tools like MIT’s Living Wage Calculator and NerdWallet’s Cost of Living Calculator can help you estimate how your income would translate in different cities.

The Remote Freelancer Advantage

If your clients are entirely remote and you have no location-specific ties, you have more flexibility than almost any other type of worker in the United States. The combination of no-income-tax state residence, affordable mid-size city cost of living, and a strong freelance income can produce a very high quality of life.

→ How to Set Your Freelance Rates in the US → Complete Freelance Finance Guide