Nine states collect no income tax on wages or salaries
Nine states do not tax wages or salaries: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception—it taxes only interest and dividend income, not wages. The other eight tax neither wages nor investment income.
These states fund their operations through other revenue sources: sales tax, property tax, corporate tax, excise taxes on fuel and alcohol, and fees. The tax burden does not disappear in these states—it shifts to different categories of spending and property ownership. A state with no income tax may have a higher sales tax or property tax than a neighboring state that collects income tax.
If you live in one of these states, you will not file a state income tax return, and your employer will not withhold state income tax from your paycheck. If you move to one of these states from a state that does collect income tax, you will see an when ready change in your take-home pay, though your overall tax burden may not change much depending on how you spend and what property you own.
Key Takeaways
- Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income only).
- States without income tax fund government through sales tax, property tax, corporate tax, and excise taxes, so the tax burden shifts rather than disappears.
- If you earn wages in a no-income-tax state, your employer will not withhold state income tax, but you may pay more in sales or property tax.
- Moving to a no-income-tax state changes your paycheck but not necessarily your total tax bill, depending on your spending and property ownership.
- Retirees and investors should compare all tax types, because some no-income-tax states tax investment income or have high property taxes.
How these states replace income tax revenue
States without income tax rely on sales tax as their primary revenue source. Five of the nine no-income-tax states (Alaska, Delaware, Montana, New Hampshire, and Oregon) have no sales tax or very low sales tax, but they are exceptions. Most no-income-tax states have sales tax rates between 5 and 7 percent, and some allow cities to add local sales tax on top of that.
Texas has a state sales tax of 6.25 percent plus local options that can push the total to 8.25 percent. Washington's state sales tax is 6.5 percent, and local rates can reach 10.25 percent. Florida charges 6 percent state sales tax plus local additions up to 7.5 percent. When you buy groceries, gas, or clothing in these states, you pay tax at the register instead of through payroll withholding.
Property tax is the second major revenue source. Texas, Florida, and Washington all collect property tax to fund schools and local government. The rates vary by county and city, but a homeowner in Texas might pay 1.6 to 2 percent of home value annually in property tax, while a Florida homeowner might pay 0.7 to 1 percent. These are not small amounts on a $300,000 home.
Corporate tax, excise taxes on fuel and alcohol, and licensing fees make up the remainder. Alaska, which has no sales tax and no income tax, funds much of its government through oil revenue and a corporate tax on oil production. This structure means Alaska's tax burden falls heavily on businesses and resource extraction rather than individuals.
New Hampshire's partial income tax and what it means
New Hampshire taxes interest and dividend income but not wages or salaries. The tax rate on investment income is 5 percent. This distinction matters if you are retired and living on investment returns, or if you have a significant portfolio generating dividends.
A retiree in New Hampshire with $50,000 in annual dividend income would owe state tax on that income, while a retiree in Florida with the same income would owe nothing. However, New Hampshire has no sales tax, which offsets some of the investment income tax for people who spend heavily on goods. The overall tax picture depends on your specific income sources and spending patterns.
What happens to your paycheck if you move to a no-income-tax state
If you relocate from a state that collects income tax to one that does not, your take-home pay increases when ready because your employer stops withholding state income tax. A person earning $60,000 per year in a state with a 5 percent income tax loses $3,000 to withholding. Moving to Texas or Florida means that $3,000 stays in your paycheck.
That gain does not mean you pay less tax overall. You will likely pay more in sales tax and possibly property tax. If you spend $40,000 per year on taxable goods and services, a 7 percent sales tax costs you $2,800 annually—close to the income tax you no longer pay. The real difference emerges when you compare your total tax burden across all categories: income, sales, property, and excise taxes combined.
People who spend little (because they save aggressively or live frugally) benefit most from moving to a no-income-tax state. People who spend most of their income on taxable goods and services may see little or no overall tax savings. Homeowners in high-property-tax counties may actually pay more total tax than they did in their previous state.
Comparing total tax burden across states
The fairest way to compare states is to calculate your total state and local tax bill under each scenario. This requires knowing your income, spending, and property value—not just the income tax rate.
| State | Income Tax | Sales Tax Range | Property Tax (Typical) |
|---|---|---|---|
| Texas | None | 6.25–8.25% | 1.6–2% |
| Florida | None | 6–7.5% | 0.7–1% |
| Washington | None | 6.5–10.25% | 0.84–1.1% |
| New Hampshire | 5% (investment only) | None | 1.1–2.2% |
| Alaska | None | None (or local only) | 1–1.2% |
This table shows why a blanket statement like "no-income-tax states are cheaper" is misleading. Alaska has no income tax and no sales tax, but property tax and cost of living are high. New Hampshire has no income tax on wages but does tax investments. Florida has no income tax and lower property tax than Texas, but sales tax is comparable.
To estimate your actual tax bill, list your annual income, estimate your annual spending on taxable goods, and find your property's assessed value. Multiply each by the relevant rate in your current state and your target state. The difference is your real tax savings or cost.
Retirement and investment income in no-income-tax states
Retirees often consider moving to a no-income-tax state to reduce taxes on Social Security, pensions, and investment income. The advantage is real but varies by state. Florida, Texas, and Washington tax neither wages nor investment income, so a retiree living entirely on dividends, interest, and capital gains pays no state income tax. Alaska offers the same benefit.
New Hampshire taxes investment income at 5 percent, so it is less attractive for retirees with large portfolios. However, New Hampshire has no sales tax, which can offset the investment tax for people who spend moderately.
Some states that do collect income tax offer exemptions for retirement income. Illinois, for example, exempts all retirement income from state tax, which can make it competitive with no-income-tax states for retirees. Before moving based on tax considerations, compare your specific income sources and spending across both your current state and your target state.
Federal taxes are the same everywhere
State income tax and federal income tax are separate. Moving to a no-income-tax state does not change your federal tax bill. You will still owe federal income tax on wages, investment income, and other sources of income at the same rates as someone in California or New York.
The benefit of a no-income-tax state is the elimination of state-level income tax only. Your federal withholding remains the same, and your federal return is filed the same way. The savings come from not paying your state government, not from any change in federal obligations.
Frequently Asked Questions
Do I have to file a state tax return if I live in a no-income-tax state?
No. If you live in one of the nine no-income-tax states and earn only wages, you do not file a state income tax return. If you live in New Hampshire and have investment income, you must file a state return to report that income. Check your state's tax agency website if you have self-employment income or other sources, as some states require a return even with no tax owed.
Can I claim a deduction for state income tax if I moved to a no-income-tax state?
No. The federal deduction for state and local taxes (SALT) applies only to taxes you actually paid. If you moved mid-year and paid state income tax for part of the year, you can deduct that portion. Once you live in a no-income-tax state, you have no state income tax to deduct, though you can deduct property tax and sales tax up to $10,000 combined.
Which no-income-tax state has the lowest overall tax burden?
That depends on your income, spending, and property value. Alaska has no income tax and no sales tax, making it attractive for high earners who spend little. Florida has no income tax and lower property tax than Texas, making it good for retirees. Washington has no income tax but higher sales tax. Calculate your own scenario using the rates in your target state.
If I work remotely for a company in a high-income-tax state, do I owe that state's income tax?
Generally, no. You owe income tax to the state where you live and work, not where your employer is located. If you live in Texas and work remotely for a New York company, you owe Texas tax (none) and federal tax, not New York tax. However, some states have special rules for remote workers. Confirm with your state's tax agency if you are in this situation.
Do no-income-tax states have higher property taxes to make up the difference?
Not always. Florida has no income tax and relatively low property tax. Texas has no income tax but higher property tax. Washington has no income tax and moderate property tax. The relationship between income tax and property tax varies by state and is not automatic.