Nine states have no income tax at all

Nine U.S. states collect no income tax from residents: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. If you live in one of these states, you pay no state income tax on wages, salaries, or other earned income. New Hampshire is a partial exception — it taxes interest and dividend income but not wages.

These states fund government services through other taxes instead: sales tax, property tax, excise taxes on fuel and alcohol, and business taxes. The absence of income tax does not mean these states are cheaper overall. Alaska and Wyoming have no sales tax, but Florida and Texas have sales taxes above 8 percent. Property taxes vary widely even within no-income-tax states.

If you are considering a move based on tax burden, compare your total state and local taxes in your current location against the full tax picture in the state you are thinking about. A state with no income tax but high property tax may not save you money.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire have no state income tax on wages.
  • New Hampshire taxes investment income but not wages, making it a partial exception to the no-income-tax group.
  • States without income tax rely on sales tax, property tax, and business taxes, so your total tax burden depends on how much you spend and own property.
  • Moving to a no-income-tax state saves money only if your new total state and local taxes are lower than what you pay now.

States with the lowest income tax rates (those that do tax income)

If you live in a state that does tax income, the lowest rates are found in a handful of places. Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Mississippi, Missouri, North Carolina, and Pennsylvania all have flat income tax rates of 4.63 percent or lower. Flat tax means everyone pays the same percentage regardless of income.

Illinois has a flat rate of 4.95 percent. Indiana, Kentucky, Michigan, and Pennsylvania all tax at 3.23 percent or lower. Mississippi's rate is 5 percent. North Carolina's rate is 4.99 percent. Colorado and Missouri both use 4.63 percent. These rates explore to all income brackets equally — there is no graduated system where higher earners pay more.

States with graduated tax systems (where the rate increases as income rises) tend to have higher top rates. Even if the lowest bracket is low, you will pay more as your income climbs. Comparing states with graduated systems requires knowing your own income level.

How state income tax rates have changed in recent years

State income tax rates shift periodically as legislatures pass new laws. Some states have lowered their rates in recent years. North Carolina, for example, has reduced its top rate multiple times over the past decade. Other states have raised rates or adjusted tax brackets to account for inflation.

Tax law changes happen at different times in different states and do not follow a predictable schedule. If you are making a financial decision based on current tax rates, check your state's department of revenue website for the most recent rates. Rates you read about from even two years ago may no longer be accurate.

Some states also offer tax credits or deductions that lower your effective tax rate even if the stated rate is higher. These vary by age, income, family size, and other factors. Your actual tax bill depends on both the rate and the deductions or credits you can use.

Why some people move for lower income tax

For high-income earners, the difference between a 5 percent state tax and a 10 percent state tax can mean thousands of dollars per year. Someone earning $200,000 pays $10,000 more in state income tax at 10 percent than at 5 percent. Over a career, that compounds.

Retirees sometimes move to no-income-tax states because they live on fixed income and want to reduce their annual tax bill. If you receive a pension or Social Security, moving to a state that does not tax those sources can lower your total tax burden significantly.

However, moving is expensive and disruptive. You also need to consider whether you have family, job prospects, or other ties to your current location. A lower tax rate does not offset the cost of moving if you are unhappy in the new state or cannot find work.

How to find your state's current income tax rate

Your state's department of revenue publishes current tax rates and brackets on its website. Search "[your state] department of revenue" or "[your state] income tax rates" to find the official page. The IRS also maintains a list of state tax rates on its website, though your state's own source is more reliable for the most current information.

If you are self-employed or have investment income, you may owe additional taxes beyond the standard income tax rate. State tax codes are complex, and what you owe depends on your specific situation. A tax professional or your state's tax helpline can answer questions about your own return.

Tax burden beyond income tax

State income tax is only one part of your total tax burden. Sales tax, property tax, and local taxes also matter. A state with no income tax but a 10 percent sales tax may cost you more than a state with 5 percent income tax and 6 percent sales tax, depending on how much you spend and own.

Property taxes vary dramatically by county and municipality, even within the same state. Two people living in the same no-income-tax state can pay very different total taxes if one lives in a high-property-tax county and the other in a low-property-tax county.

The Tax Foundation and similar organizations publish comparisons of total state and local tax burden by state. These give a fuller picture than income tax alone. If you are considering a move, use these resources to compare your likely total taxes in both locations.

Frequently Asked Questions

Does living in a no-income-tax state mean I pay no state taxes at all?

No. States without income tax still collect sales tax, property tax, and other taxes. Your total state and local tax burden depends on all these sources combined, not just income tax. Some no-income-tax states have high sales or property taxes that offset the savings from no income tax.

If I move to a no-income-tax state, when do I stop paying income tax to my old state?

You stop paying income tax to your old state once you establish residency in the new state. Most states consider you a resident once you move there with the intent to stay. You may owe partial-year taxes to both states in the year you move. Check both states' rules on residency and file accordingly, or consult a tax professional.

Do retirees in no-income-tax states pay tax on Social Security or pensions?

It depends on the state. Most no-income-tax states also do not tax Social Security or pensions, but a few do tax one or the other. New Hampshire, for example, does not tax wages but does tax interest and dividends. Check the specific state's rules before moving based on retirement income.

Can I reduce my state income tax by moving to a lower-tax state if I work remotely?

Possibly, but it is complicated. Some states tax income earned by residents even if the work is done remotely for an out-of-state employer. Others tax based on where the employer is located. A few states have no income tax at all, so location does not matter. Consult a tax professional before relocating for remote work.

Are the lowest-tax states also the cheapest places to live overall?

Not necessarily. Cost of living includes housing, food, utilities, and other expenses, not just taxes. Some no-income-tax states have high housing costs. Others have low housing costs but high sales taxes. Compare your total expected expenses, not just taxes, when deciding where to move.