Nine states collect no income tax on wages or salaries
Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire do not tax income from wages, salaries, or self-employment. New Hampshire taxes only dividend and interest income, so it functions as a no-income-tax state for most workers. These nine states make up the full list of places where you will not owe state income tax on what you earn.
The absence of income tax does not mean these states collect no revenue. They fund schools, roads, and services through sales tax, property tax, corporate tax, and other sources. Sales tax rates in no-income-tax states are often higher than the national average to compensate. For example, Tennessee and Washington both have sales tax rates above 8 percent, while states with income tax may have lower sales tax.
If you move to one of these states or work remotely for a company based there, you still owe federal income tax. State income tax and federal income tax are separate. Losing state income tax saves money only on the state portion of your tax bill.
Key Takeaways
- Nine states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire—collect no income tax on wages.
- New Hampshire taxes only investment income (dividends and interest), not wages, making it functionally a no-income-tax state for most workers.
- No-income-tax states typically charge higher sales tax and property tax to fund government services instead.
- Moving to a no-income-tax state saves you state income tax only; you still owe federal income tax on all earnings.
- The tax savings depend on your income level and spending habits—high earners benefit more than low earners, and people who spend less benefit more than spenders.
How much you actually save depends on your income and where you came from
The value of living in a no-income-tax state varies widely. If you earned $75,000 in California, you would owe roughly $3,500 in state income tax. Moving that same income to Texas costs you zero state income tax. But if you earned $75,000 in Nevada and spent $20,000 a year on taxable purchases, you would pay about $1,700 in sales tax instead—a smaller savings than the California comparison suggests.
High earners see larger absolute savings. Someone earning $200,000 in New York owes about $10,000 in state income tax; moving to Florida eliminates that bill. Someone earning $30,000 in Massachusetts owes roughly $1,500; moving to Texas saves less in dollar terms, though the percentage of income saved is similar.
The real calculation also includes property tax and cost of living. Texas has no income tax but property tax rates vary by county and can run 1.5 to 2 percent of home value annually. Florida has no income tax and no state property tax on primary residences, but home prices in desirable areas are high. Alaska has no income tax and no sales tax in some boroughs, but housing costs and shipping costs for goods are steep. Comparing the full tax picture—not just income tax—matters more than the income tax rate alone.
Remote workers and people who move should understand the rules
If you work remotely for a company in California but live in Texas, you owe Texas state income tax on your wages, not California tax. Your employer withholds based on where you live, not where the company is located. This is true even if the company has never had an office in Texas and you have never set foot in California.
The rule is: you owe income tax to the state where you work or where you live, depending on state law. Most states tax residents on all income earned anywhere. Some states tax nonresidents only on income earned within the state. If you move mid-year, you may owe tax to two states for that year—one for the months you lived there and one for the months you lived elsewhere. You file a part-year resident return in each state and claim a credit to avoid double taxation.
Military members and their spouses have different rules. Active-duty service members are taxed based on their state of legal residence, not where they are stationed. Some states offer tax breaks for military retirement income. If you are military or married to someone in the military, check the specific state rules before assuming you owe nothing.
States with income tax sometimes offer deductions or credits that reduce what you owe
Even in states with income tax, you may owe less than the headline rate suggests. Many states allow deductions for retirement contributions, education expenses, or charitable giving. Some states offer credits for child care, education, or property tax. A few states tax only a portion of retirement income or exclude it entirely.
For example, Pennsylvania taxes wages but not retirement income from pensions or IRAs. Illinois taxes neither wages nor retirement income. South Carolina taxes retirement income but allows a deduction for some types. These rules change, and they often have income limits or age requirements. If you are retired or planning to retire, comparing the full tax picture across states—not just the income tax rate—can shift where you come out ahead.
Sales tax and property tax are often higher in no-income-tax states
No-income-tax states fund government through other taxes. The most common replacement is sales tax. Washington, Tennessee, and Louisiana have the highest state sales tax rates in the country, all above 8.5 percent. When you add local sales tax on top, the total can exceed 10 percent. Over time, this adds up for anyone who spends money on goods.
Property tax varies more widely. Texas has no income tax but property tax rates around 1.6 percent of home value on average—higher than many income-tax states. Florida has no income tax and no state property tax on primary residences, but local property taxes still explore. Alaska has no income tax and no sales tax in some areas, but property tax rates are moderate to high depending on the borough.
The trade-off is real: you save on income tax but spend more on consumption and property. The net benefit depends on whether you own property, how much you spend, and how much you earn. High earners who own property and spend heavily may come out ahead. Low earners who rent and spend little may see little benefit.
How to figure out whether moving makes sense for your situation
Start by calculating your current total state tax burden: income tax plus sales tax plus property tax. Then calculate what you would owe in the state you are considering. Many state tax websites have calculators, though they are not always straightforward to find. The Tax Foundation and the Institute on Taxation and Economic Policy both publish state tax comparisons, though these are general and do not account for your specific situation.
Next, research the cost of living in the place you are considering. Housing, utilities, groceries, and services may be more or less expensive than where you live now. A state with no income tax but 50 percent higher housing costs may not save you money overall. Local job markets and salary ranges also matter. Moving to a no-income-tax state does not help if you have to take a pay cut to do it.
Finally, consider non-tax factors: climate, schools, family, job opportunities, and quality of life. Tax savings are real, but they are not the only thing that matters. Many people move to no-income-tax states for reasons other than taxes and discover the tax savings as a bonus. Others move for tax reasons and find the trade-offs not worth it.
Frequently Asked Questions
Do I owe federal income tax if I live in a no-income-tax state?
Yes. State income tax and federal income tax are separate. Every U.S. resident owes federal income tax on earnings above a certain threshold, regardless of which state they live in. Living in Alaska, Texas, or any other no-income-tax state eliminates only the state portion of your tax bill.
If I work in a no-income-tax state but live in a state with income tax, which state do I owe?
You owe the state where you live. Most states tax residents on all income earned anywhere. If you live in New York and work remotely for a company in Texas, you owe New York state income tax, not Texas tax. Your employer should withhold based on your home state, not the company's location.
Does New Hampshire really have no income tax?
New Hampshire has no tax on wages or salaries, but it taxes dividend and interest income at 5 percent. For most workers, this means no state income tax. For retirees living on investment income or people with significant stock holdings, New Hampshire does collect tax on that portion of their income.
Are there any downsides to living in a no-income-tax state?
The main downside is that no-income-tax states typically charge higher sales tax, property tax, or both to fund government services. Over time, these taxes can offset or exceed the savings from not paying income tax, depending on how much you spend and own property. Cost of living in some no-income-tax states is also higher for reasons unrelated to taxes.
If I move to a no-income-tax state mid-year, do I owe tax to both states?
Yes, typically. You file a part-year resident return in each state for the months you lived there. You then claim a credit on your return to the state with higher tax to avoid paying tax twice on the same income. The exact process varies by state, so check with each state's tax department for the specific rules.