No income tax means your state or country does not collect a tax on the wages you earn

When a state has no income tax, it does not take a percentage of your salary, wages, or self-employment earnings. Nine U.S. states currently have no state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividend and interest income, not wages). If you live or work in one of these states, you will not file a state income tax return or owe state income tax on your paycheck.

This does not mean you pay no taxes at all. States without income tax typically collect revenue through sales tax, property tax, or both — often at higher rates than states that have income tax. The federal government still collects income tax from everyone, regardless of where you live. No state income tax is a specific exemption from one layer of taxation, not a complete absence of taxes.

Key Takeaways

  • Nine states have no state income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (wages only).
  • You still owe federal income tax even if your state has no income tax, and you must file a federal return each year.
  • States without income tax usually charge higher sales tax or property tax to fund schools, roads, and services.
  • If you move to a no-income-tax state mid-year, you may owe income tax to your previous state for the months you worked there.
  • Self-employed people in no-income-tax states still pay federal self-employment tax and federal income tax.

How no income tax affects your paycheck

If you work in a state with no income tax, your employer will not withhold state income tax from your paycheck. Your take-home pay will be larger than it would be in a state that collects income tax at the same income level. For example, a person earning $50,000 per year in Florida keeps more of each paycheck than someone earning the same amount in New York, where state income tax applies.

However, the difference in your actual spending power depends on what you buy and where you live. A state with no income tax but high sales tax (like Tennessee, which has 9.55% state sales tax) may cost you as much or more than a state with income tax and lower sales tax. Property taxes also vary widely — some no-income-tax states have low property taxes, while others are high. You need to calculate your total tax burden, not just income tax, to know whether you come out ahead.

Federal income tax still applies everywhere

The federal government collects income tax from every person who earns above a certain threshold, regardless of which state they live in. In 2024, most single filers must file a federal return if they earned $14,600 or more; the threshold is higher for those over 65 or filing as head of household. These thresholds change each year.

You file your federal return with the IRS using Form 1040, and you owe federal tax based on your income bracket. Your employer withholds federal tax from your paycheck automatically. If you live in a no-income-tax state, you straightforward do not file a state return — you still file the federal one. The two are separate systems.

What happens if you move to a no-income-tax state mid-year

If you move from a state with income tax to a no-income-tax state partway through the year, you typically owe income tax to your old state for the months you worked there. Your employer will have withheld tax based on your state of residence at the time. When you file your state return for that year, you report only the income you earned while a resident of that state.

For example, if you lived and worked in Massachusetts (which has income tax) from January through June, then moved to Texas (no income tax) in July, you file a Massachusetts return for January through June income and no Texas return. Massachusetts will have already withheld tax from your paychecks during those months. You do not get a refund for moving — the withholding covers your tax obligation for the time you were there.

Self-employed people and no income tax

If you are self-employed and live in a no-income-tax state, you do not owe state income tax on your business income. However, you still owe federal income tax and federal self-employment tax (Social Security and Medicare). Self-employment tax is 15.3% of your net business income and goes to the federal government, not your state.

You file Schedule C (Profit or Loss from Business) with your federal Form 1040 to report self-employment income. You also file Schedule SE to calculate self-employment tax. Because you have no state income tax return to file, your filing process is simpler than it would be in a state with income tax, but your federal obligations remain the same.

Sales tax and property tax in no-income-tax states

States without income tax fund schools, roads, police, and other services through sales tax, property tax, or both. Sales tax is collected at the point of purchase — when you buy groceries, clothes, or gas. Property tax is collected annually based on the value of real estate you own. Some no-income-tax states also charge excise taxes on specific items like fuel or alcohol.

The combined effect of these taxes can equal or exceed what you would pay in income tax in another state. Tennessee has no income tax but a 9.55% state sales tax plus local sales taxes that can push the total above 10%. Alaska has no income tax and no state sales tax, but property taxes vary by municipality. Texas has no income tax and no state sales tax, but property taxes are relatively high. Before moving for tax reasons, calculate what you will actually pay in your new location.

Retirement income and no-income-tax states

Some no-income-tax states offer additional tax breaks on retirement income. Tennessee and New Hampshire exempt retirement income (pensions, 401(k) withdrawals, and IRA distributions) from state tax, which makes them attractive to retirees. Alaska, Florida, Nevada, South Dakota, Texas, and Washington have no income tax on any source of income, including retirement distributions.

However, you still owe federal income tax on retirement withdrawals. Required Minimum Distributions from traditional IRAs and 401(k)s are taxable at the federal level. If you receive Social Security, part of it may be taxable federally depending on your total income. Moving to a no-income-tax state reduces your state tax burden in retirement but does not eliminate your federal obligations.

Frequently Asked Questions

Do I have to file a state tax return if I live in a no-income-tax state?

No, you do not file a state income tax return. You still file your federal return with the IRS. Some no-income-tax states may require you to file if you owe other state taxes (like self-employment tax in certain cases), but most residents file only federally.

If I work in a no-income-tax state but live in another state, which state taxes me?

You owe income tax to the state where you live, not where you work. Your employer withholds based on your state of residence. If you live in New York but work in Florida, New York taxes your income. You file a New York return and report all your income there.

Are no-income-tax states cheaper to live in overall?

Not necessarily. States without income tax often have higher sales tax, property tax, or both. Florida has no income tax but charges 6% state sales tax plus local taxes. You need to compare your total tax burden — income, sales, and property — in any state you are considering.

Can I claim a deduction for moving to a no-income-tax state?

Moving expenses are generally not deductible on your federal return unless you moved for work and meet specific IRS requirements. State moving deductions vary. Check your old state's rules before you move — some states allow deductions for moving out, though this is rare.

Do I still pay Social Security and Medicare taxes in a no-income-tax state?

Yes. Social Security and Medicare taxes (FICA) are federal taxes collected by the IRS, not state taxes. Your employer withholds these from your paycheck regardless of where you live or work. No state income tax does not affect FICA withholding.