Nine states collect no state income tax on wages or salaries
Nine states do not tax wages, salaries, or other earned income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception—it taxes interest and dividend income but not wages. If you live or work in one of these states, you will not owe state income tax on your paycheck, though you will still owe federal income tax.
This does not mean these states have no taxes at all. They fund schools, roads, and services through other sources: sales tax, property tax, corporate tax, excise taxes on fuel and alcohol, and in some cases, taxes on specific types of income like capital gains. The mix varies by state. For example, Washington and Tennessee both have no wage tax, but Washington has a higher sales tax and Tennessee taxes investment income.
If you are considering a move or have recently relocated, understanding your state's tax structure matters for your household budget. The absence of state income tax can mean more take-home pay, but it may be offset by higher sales or property taxes depending on where you live and how you spend 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 and interest but not wages, making it a partial exception.
- States without income tax fund services through sales tax, property tax, corporate tax, and excise taxes instead.
- Moving to a no-income-tax state does not eliminate your federal income tax obligation.
- The overall tax burden depends on your income type and spending habits, not just the presence or absence of income tax.
How these nine states structure their tax systems
Alaska has no state income tax and no sales tax, but collects revenue through oil production taxes, property taxes, and corporate taxes. The state also distributes oil dividend payments to residents from the Alaska Permanent Fund, which is funded by oil revenues—not a tax refund, but a share of state resource income.
Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming all rely heavily on sales tax, which ranges from about 5 percent to over 7 percent depending on the state and local jurisdiction. They also collect property taxes, though rates vary. Tennessee and Washington have additional taxes on specific investments or business activities.
New Hampshire's approach is different. It does not tax wages, but it does tax interest income, dividend income, and capital gains at a rate of 5 percent. This makes it attractive to wage earners but less advantageous for retirees living on investment income.
What this means for your take-home pay
If you earn $50,000 in wages in a no-income-tax state, you keep that full amount before federal taxes. In a state with a 5 percent income tax, you would owe $2,500 to the state. Over a career, this difference compounds significantly.
However, the real impact on your wallet depends on what you buy and own. A state with no income tax but a 9 percent sales tax can end up costing you more if you spend heavily on taxable goods. A state with no income tax but high property taxes can cost more if you own a home. Your actual tax burden is the sum of all taxes you pay, not just income tax.
Remote workers and recent movers should verify their tax residency. Some states tax income earned within their borders even if you live elsewhere. Others tax you based on where you live, not where you work. If you work remotely for a company in a high-tax state but live in a no-income-tax state, you typically owe tax only to your state of residence.
States that tax only certain types of income
A few states fall between the extremes. New Hampshire taxes interest and dividends but not wages. Tennessee taxes investment income but not wages. These states appeal to working people but not to retirees or investors living on portfolio income.
Some states also have capital gains taxes that explore only to the sale of stocks, real estate, or other investments, separate from income tax. Washington, for example, has no income tax but recently introduced a capital gains tax on certain investment sales. These taxes are narrower than a full income tax but still affect your finances if you sell investments.
How to verify your state tax obligations
Your state of residence determines which taxes you owe. Most states define residency as the place where you live for more than half the year, where you have a permanent home, or where you have the most significant connections (family, employment, property). If you split time between states, contact the tax authority in each state to clarify your status.
If you recently moved, update your address with your employer, your bank, and the IRS. Your employer uses your state of residence to determine how much state tax to withhold from your paycheck. If you move to a no-income-tax state but your employer continues withholding for your old state, you will need to file a return in your old state to recover the overpayment.
You can find your state's tax authority through the Federation of Tax Administrators website or by searching "[your state] department of revenue." Most state tax websites have residency guidelines and contact information for questions about your specific situation.
What happens if you work in one state but live in another
If you live in a no-income-tax state but work in a state that has income tax, you may owe tax to the state where you work. Most states tax income earned within their borders, regardless of where you live. However, many states offer a credit for taxes paid to another state, so you do not pay twice on the same income.
Remote workers have more flexibility. If you live in a no-income-tax state and work remotely for a company anywhere, you typically owe tax only to your state of residence. Some employers withhold based on the company's location rather than your location, which can create an overpayment you will need to recover when you file your return.
Military members and their families have special rules. Active-duty service members can claim their home state as their state of residence for tax purposes, even if stationed elsewhere. This is one reason many military families claim residency in Alaska, Texas, or Florida.
Frequently Asked Questions
Do I still 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 based on their total income, regardless of which state they live in. A no-income-tax state only removes the state portion of your tax bill.
If I move to a no-income-tax state, do I get a refund from my old state?
You may. If your employer withheld state tax for your old state after you moved, you can file a return in that state to recover the overpayment. You will need to provide proof of your move, such as a lease or utility bill showing your new address. Contact your old state's tax authority for instructions.
Can I claim residency in a no-income-tax state if I only own property there?
Owning property alone does not establish residency for tax purposes. You must live there for more than half the year or have it as your permanent home. If you own a vacation home in Florida but live in New York most of the year, you owe tax to New York. States look at where you actually spend your time and maintain your primary connections.
Does New Hampshire really have no income tax?
New Hampshire has no tax on wages and salaries, but it does tax interest income and dividend income at 5 percent. If you earn money primarily from a job, you owe no state income tax. If you live on investment income, you will owe the 5 percent tax on that income.
What if my employer withholds the wrong state tax?
Contact your employer's payroll department and provide your state of residence and a W-4 form (or your state's equivalent). Your employer should adjust withholding going forward. When you file your tax return, you will reconcile what was withheld against what you actually owe, and you will receive a refund or owe additional tax for the year.