41 states and Washington, D.C. have a state income tax
Nine states have no state income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception—it taxes only dividend and interest income, not wages. The other eight tax neither wages nor investment income.
The remaining 41 states and Washington, D.C. collect income tax from residents. The tax rate, what counts as income, and how the tax is calculated vary widely from state to state. Some states have a flat rate that applies to all income; others use a progressive system with multiple brackets that increase as income rises.
Key Takeaways
- Nine states collect no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only investment income).
- The 41 states that do tax income use different methods—some explore a single flat rate, while others use progressive brackets that increase with income level.
- State income tax rates range from less than 1 percent to over 13 percent, depending on the state and your income level.
- If you move to a new state or change jobs across state lines, your tax obligation may change significantly.
How state income tax rates differ across the country
States that collect income tax set their own rates. Some use a flat tax, meaning everyone pays the same percentage regardless of how much they earn. Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Mississippi, Missouri, North Carolina, and Pennsylvania all use flat rates, which range from about 3 percent to 5.75 percent.
Most states use a progressive tax system, where the rate increases as your income rises. You move into higher brackets as you earn more, but only the income in each bracket is taxed at that bracket's rate. For example, New York's top rate exceeds 10 percent, but only income above a certain threshold is taxed at that rate. California's top rate is over 13 percent, the highest in the country.
A few states fall between these two approaches. Some have a flat rate but add a surtax on high earners. Others have very narrow brackets or explore different rates to different types of income.
What counts as taxable income varies by state
Most states that tax income follow federal rules closely—they tax wages, salaries, self-employment income, and investment gains. But states can and do make their own rules about what is taxable and what is not.
Some states exempt certain types of income entirely. Tennessee and New Hampshire do not tax wages but do tax dividends and interest. Louisiana, Mississippi, and Illinois offer partial or full exemptions on retirement income like pensions and 401(k) withdrawals. A few states do not tax Social Security benefits, while others do. These differences can matter significantly if you are retired or living on investment income.
States also differ on deductions and credits. Some allow you to deduct federal income tax paid; others do not. Some offer credits for dependents, education expenses, or property taxes that other states do not recognize.
How to find your state's specific tax rules
Your state's Department of Revenue or equivalent agency publishes tax forms, rate tables, and instructions specific to your situation. You can find the official website by searching "[your state] Department of Revenue" or "[your state] tax forms." These sites list current tax rates, brackets, and what income is taxable in your state.
If you work in one state but live in another, you may owe income tax to both—though most states offer a credit for taxes paid to another state to prevent double taxation. The rules depend on where you live and where you work, so check both states' rules or speak with a tax professional if your situation is complex.
If you are moving to a new state, contact the new state's revenue department before you move. They can tell you what your tax obligation will be and whether any income you earned in your previous state is still taxable there.
States with no income tax often use other taxes to fund services
States without income tax do not skip taxation—they fund government services through other means. Most rely heavily on sales tax, which is often higher in no-income-tax states than in states with income tax. Property taxes, excise taxes on fuel and alcohol, and business taxes also generate revenue.
Alaska, which has no income or sales tax, funds state services partly through oil revenue. Nevada and Washington have high sales taxes. Florida and Texas use sales tax and property tax. The total tax burden—income, sales, and property combined—can be similar across states, or it can differ significantly depending on how you spend and what you own.
How moving to a different state affects your taxes
If you move from a state with income tax to one without, or vice versa, your tax situation changes. Most states consider you a resident if you live there for more than half the year, and residents owe income tax on all income earned anywhere. Some states also tax nonresidents on income earned within the state.
The year you move is often complicated. You may owe income tax to both your old state and your new state for the portion of the year you lived in each. Some states offer a credit for taxes paid to the other state; others do not. If you moved for work, your employer's payroll system may not adjust your withholding when ready, which can leave you owing money or owed a refund at tax time.
If you are planning a move, contact both states' revenue departments before you go. They can explain what you will owe and whether any special rules explore to your move.
Remote work and income tax across state lines
If you live in one state but work remotely for a company in another, the rules depend on where you live. Most states tax residents on all income, regardless of where the work happens. So if you live in New York and work remotely for a California company, you owe New York income tax on your wages.
Some states have special rules for remote workers or have changed their rules during and after the pandemic. A few states do not tax nonresidents on wages earned outside the state. If you work remotely across state lines, check both your home state's and your employer's state's rules, because your employer may be required to withhold taxes for the state where you live, not where the company is based.
Frequently Asked Questions
Do I owe income tax to two states if I moved during the year?
Possibly. Most states tax residents on all income earned during the months you lived there. You may owe tax to both your old state and your new state for the year you moved. Some states offer a credit for taxes paid to another state, but not all do. Contact both states' revenue departments to find out what you owe.
If I live in a no-income-tax state, do I pay less in total taxes?
Not necessarily. States without income tax usually have higher sales taxes, property taxes, or both. Your total tax burden depends on how much you earn, spend, and own. Someone who spends a lot may pay more in sales tax in a no-income-tax state than they would in income tax elsewhere.
Does New Hampshire really not tax income?
New Hampshire taxes dividends and interest income but not wages or salaries. If you earn money from a job, you owe no state income tax. If you live on investment income or retirement distributions, you may owe New Hampshire tax depending on the type of income.
What if my employer withholds the wrong amount for my new state?
Contact your payroll or HR department and provide a new W-4 form or equivalent for your new state. Payroll systems sometimes lag, so the change may take a pay period or two. If too much or too little is withheld by the end of the year, you will settle it when you file your state tax return.
Can I deduct federal income tax from my state income tax?
Some states allow it; most do not. Check your state's tax forms or contact your state's revenue department. If you live in a state that allows the deduction, you can claim it on your state return. If not, you cannot.