41 states and Washington, D.C. have a state income tax; 9 states have none

Nine states collect no state income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. The remaining 41 states plus Washington, D.C. do charge income tax, though the rate, what counts as income, and how the tax works varies widely from place to place.

If you live in a no-income-tax state, you still pay federal income tax. You may also pay state sales tax, property tax, or other state taxes depending on where you live. Moving to a no-income-tax state does not mean you pay no taxes overall—it means your state does not tax your wages, investment income, or other personal earnings.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire have no state income tax.
  • New Hampshire taxes only investment income and does not tax wages, making it a partial exception.
  • The 41 states with income tax charge rates ranging from under 1% to over 13%, depending on your income level.
  • No-income-tax states often rely more heavily on sales tax, property tax, or other revenue sources to fund state services.
  • Your federal income tax obligation does not change based on whether your state has income tax.

The nine states with no income tax

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire are the only states that do not tax personal income. These states fund their operations through other means: sales tax, property tax, business taxes, or in Alaska's case, oil revenue and a permanent fund dividend paid to residents.

New Hampshire deserves a note: it taxes investment income (interest, dividends, capital gains) but not wages or salaries. If you work for an employer in New Hampshire, you pay no state income tax on your paycheck. If you earn money from investments, you do pay New Hampshire's tax on that income. This makes New Hampshire technically a partial exception to the no-income-tax group.

How income tax rates differ in the 41 states that have it

States with income tax set their own rates and rules. Some use a flat tax—everyone pays the same percentage regardless of income. Others use a progressive system where higher earners pay a higher percentage. The lowest state income tax rates are under 1% (in states like Colorado and Illinois), while the highest exceed 13% (in states like California and Hawaii).

The income you count as taxable also varies. Most states tax wages, salaries, interest, and dividends. Some exclude certain types of income—for example, some states do not tax retirement income, military pensions, or Social Security benefits. A few states tax only certain types of income. You need to check your specific state's rules, because what one state taxes, another may not.

Why some states chose not to tax income

States without income tax made that choice for different reasons and at different times. Some, like Texas and Florida, never adopted income tax when they became states or early in their history. Others, like Alaska and Wyoming, are resource-rich states that historically relied on oil, mining, or other industry taxes to fund government.

The trade-off is that no-income-tax states typically charge higher sales tax or property tax to make up the revenue. For example, Tennessee and Washington have sales tax rates above 8%, and Florida's property taxes are substantial. A person who earns $50,000 in Florida pays no state income tax but may pay more in sales and property tax than someone earning the same amount in a state with moderate income tax and lower sales tax.

What counts as income for state tax purposes

Most states tax earned income (wages, salaries, self-employment income) and unearned income (interest, dividends, capital gains from selling investments). However, many states exclude certain types of income entirely. Social Security benefits are not taxed by any state. Military pensions are exempt in some states. Retirement account withdrawals (401k, IRA) are taxed in most states but not all.

Some states also offer deductions or credits that reduce your taxable income. For example, many states let you deduct contributions to a 401(k) or traditional IRA before calculating state tax. A few states offer credits for property tax or rent paid. These rules change, so if you are planning a move or expecting a major change in income, check your state's current tax code or speak with a tax professional.

How state income tax affects your overall tax bill

Your federal income tax is the same no matter which state you live in. State income tax is separate and additional. If you live in a state with a 5% income tax and earn $40,000, you owe federal income tax on that $40,000 plus state income tax on that $40,000. If you live in a no-income-tax state, you owe only the federal tax.

However, you may pay other state and local taxes instead. Sales tax, property tax, and local income taxes (in some cities and counties) can add up quickly. A person in a no-income-tax state might pay less total tax than someone in a high-income-tax state, or they might pay more—it depends on their specific situation, where they live within the state, and how much they earn, spend, and own.

State income tax and your paycheck

If your employer withholds state income tax from your paycheck, you will see it listed separately from federal withholding. The amount withheld depends on your state's tax rate, your income level, and the W-4 form you filed with your employer. If you live in a no-income-tax state, your employer will not withhold state income tax, and your paycheck will be slightly larger than it would be in a state that does tax income.

When you file your state tax return (if your state requires one), you report your income and calculate what you owe. If too much was withheld, you get a refund. If too little was withheld, you owe the difference. Self-employed people and those with investment income often need to make estimated tax payments to their state throughout the year.

Frequently Asked Questions

Do I have to pay federal income tax if I live in a no-income-tax state?

Yes. Federal income tax is separate from state income tax. Every U.S. resident who earns above a certain threshold must file a federal return and pay federal tax, regardless of whether their state has income tax. Living in Alaska, Florida, Texas, or any other no-income-tax state does not change your federal obligation.

If I move to a different state, do I owe income tax to both states?

Not usually. You owe state income tax to the state where you lived and worked during the year. If you moved mid-year, you may owe tax to both your old state and your new state for the portions of the year you lived in each. Some states have reciprocal agreements that prevent double taxation. File a return in each state where you earned income and report the move; the states will sort out what you owe.

Does New Hampshire really not tax wages?

Correct. New Hampshire taxes investment income (interest, dividends, capital gains) but not wages or salaries. If you work for an employer in New Hampshire, no state income tax is withheld from your paycheck. If you earn money from investments, you pay New Hampshire's tax on that income.

Are there any states that tax only certain types of income?

Yes. New Hampshire taxes only investment income. Illinois has a flat tax on income but exempts retirement income. Some states exclude military pensions or Social Security. Check your state's tax agency website or speak with a tax professional to understand what income your state taxes.

If I work in one state but live in another, which state taxes my income?

Generally, the state where you work taxes your income. However, some states have reciprocal agreements where you pay tax to your home state instead. A few states tax based on where you live, regardless of where you work. The rules vary, so if you work across a state line, contact both states' tax agencies or consult a tax professional to confirm your obligation.