Nine states have no income tax at all
Nine U.S. 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 investment income and interest but not wages. These nine states rely on other revenue sources instead, such as sales tax, property tax, and business taxes.
The absence of income tax does not mean these states are tax-free overall. Most charge higher sales taxes to compensate. For example, Tennessee and Washington both have no income tax but sales tax rates above 8 percent. Alaska has no state sales tax but collects revenue through oil taxes and other business levies. The total tax burden depends on how you spend money and what you own, not just on income tax alone.
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 instead).
- States without income tax typically charge higher sales taxes or property taxes to fund schools, roads, and services.
- Moving to a no-income-tax state saves money only if your spending and property ownership patterns match that state's tax structure.
- Retirement income treatment varies by state — some no-income-tax states still tax pensions or Social Security, while others exempt them entirely.
- Federal income tax applies everywhere regardless of state tax policy, so moving to a no-income-tax state does not reduce your total federal obligation.
How states without income tax replace that revenue
States that do not tax income must fund schools, highways, courts, and other services through other means. The most common replacement is a higher sales tax. Washington and Tennessee both charge around 9.5 percent sales tax statewide, plus local additions that can push the total above 10 percent. Florida charges 6 percent state sales tax but allows counties to add up to 1.5 percent more.
Some no-income-tax states rely heavily on specific industries. Alaska collects a large share of revenue from oil and gas taxes. Nevada depends on casino and gaming taxes. Texas uses business taxes and property taxes. Wyoming funds itself partly through mineral extraction taxes and tourism revenue. The mix varies, which means the real tax burden on a resident depends on what they buy, where they live within the state, and what they own.
Sales tax rates in no-income-tax states
| State | State Sales Tax Rate | Typical Local Addition |
|---|---|---|
| Alaska | No state sales tax | 0–7.5% |
| Florida | 6% | 0–1.5% |
| Nevada | 6.85% | 0–1.5% |
| South Dakota | 4.5% | 0–4.5% |
| Tennessee | 9.55% | Included above |
| Texas | 6.25% | 0–2% |
| Washington | 6.5% | 0–3.9% |
| Wyoming | 4% | 0–2% |
| New Hampshire | No sales tax | No local sales tax |
The rates shown are current but change periodically. Local rates vary significantly within each state — a purchase in one county may cost more in tax than the same purchase in a neighboring county. When comparing the true cost of living, add the state rate to the local rate for the specific city or county where you plan to live or work.
How retirement income is treated in no-income-tax states
One reason people move to no-income-tax states is to reduce taxes on retirement income. However, the treatment of pensions, Social Security, and investment income varies. Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not tax any retirement income, including pensions and Social Security. Alaska does not tax income of any kind. This makes these six states attractive to retirees.
Tennessee and New Hampshire have different rules. Tennessee does not tax wages or pensions, but it taxes interest and dividend income at 6 percent. New Hampshire does not tax wages but taxes interest, dividends, and capital gains at 5 percent. Neither state taxes Social Security benefits. If your retirement income comes mainly from investment returns rather than pensions or Social Security, Tennessee and New Hampshire may not save you money compared to other states.
Property tax and other costs in no-income-tax states
Because income tax is absent, some no-income-tax states charge higher property taxes to fund schools and local services. Property tax rates vary widely within each state and depend on local school funding needs. New Jersey, for comparison, has an average effective property tax rate around 0.8 percent of home value. In Texas, the average is around 1.6 percent. In New Hampshire, it averages around 2.1 percent. These are statewide averages — your actual rate depends on your county and municipality.
Other costs to consider include vehicle registration fees, licensing fees, and utility taxes. Some no-income-tax states charge higher fees for driver's licenses or vehicle registration to offset lost income tax revenue. Before moving, research the specific county or city where you plan to live, because local tax policy often matters more than state policy.
Federal income tax still applies everywhere
Moving to a state without income tax does not change your federal income tax obligation. You still owe federal tax on wages, self-employment income, investment gains, and other sources at the same rates as someone in a state with income tax. The only difference is that you avoid the state portion of the tax. For many people, state income tax is a smaller part of the total tax burden than federal tax, so the savings may be less dramatic than expected.
If you are self-employed or have significant investment income, the federal tax savings from business deductions or capital gains treatment matter more than state tax policy. Consult a tax professional before making a move based on tax considerations alone, because the interaction between federal, state, and local taxes is complex and depends on your specific situation.
Frequently Asked Questions
Do I pay less total tax if I move to a no-income-tax state?
Not necessarily. You avoid state income tax but typically pay higher sales tax, property tax, or both. The total depends on how much you earn, how much you spend, and what property you own. Someone who earns a high salary but spends little may save money. Someone who buys a lot or owns expensive property may pay more overall.
Can I claim residency in a no-income-tax state to avoid taxes in my current state?
No. Tax residency is determined by where you actually live and work, not by where you claim to live. States use factors like driver's license address, voter registration, and days spent in the state to determine residency. Falsely claiming residency in another state is tax fraud. You must genuinely move and establish residency to change your tax status.
Does New Hampshire really have no income tax?
New Hampshire has no tax on wages or salaries, but it taxes interest and dividend income at 5 percent. It also does not tax Social Security or pension income. If your income comes from wages or retirement benefits, New Hampshire functions like a no-income-tax state. If you live on investment returns, you will owe state tax.
Which no-income-tax state has the lowest overall tax burden?
This varies by individual. Alaska has no state income tax and no state sales tax, making it attractive if you spend a lot. Wyoming has low sales tax and low property tax. South Dakota has low sales tax. The answer depends on your income level, spending habits, and property ownership. Use a tax calculator specific to your situation before deciding.
If I work remotely for a company in another state, which state taxes my income?
Generally, the state where you live taxes your income, not the state where your employer is located. If you live in a no-income-tax state and work remotely for a company in a state with income tax, you owe tax to your home state (which is zero) and federal tax. Your employer's state does not tax you. Confirm this with your employer's payroll department, as some states have specific rules for remote workers.