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 wages or salaries. New Hampshire taxes only interest and dividend income, not wages, so for most workers it functions like a no-income-tax state. These nine states make up roughly one-quarter of the United States.

The absence of income tax does not mean these states have no revenue. They fund schools, roads, and services through sales tax, property tax, corporate tax, and excise taxes on fuel and alcohol. The tax burden straightforward shifts to different sources.

If you work in one of these states or are considering a move, understanding how the tax structure works matters for your actual take-home pay and your total tax load across all categories.

Key Takeaways

  • Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only investment income).
  • No income tax does not mean lower overall taxes — these states typically have higher sales tax, property tax, or both to fund government services.
  • If you move to a no-income-tax state, you still owe federal income tax and may owe taxes to your previous state on income earned before you left.
  • Retirees may benefit from no state income tax on Social Security or pensions, depending on the state and the income source.
  • Remote workers should verify their state's rules on taxing income earned outside the state, as some states tax based on where you live, not where you work.

How no-income-tax states replace that revenue

States without income tax rely on sales tax and property tax to fund operations. Alaska has no state sales tax but charges property tax and excise taxes. Texas has no income tax and no state sales tax, but property taxes are among the highest in the country. Florida has no income tax but a 6 percent state sales tax plus local additions that can reach 7.5 percent or higher.

The total tax burden — income, sales, and property combined — varies widely. A household in Texas may pay less total tax than one in a high-income-tax state, or more, depending on income level and home value. A household in Washington state, which has no income tax but a high sales tax, may pay roughly the same total as one in a neighboring state with income tax.

Before moving for tax reasons, calculate your actual cost in the new state across all three categories. A state income tax calculator or a conversation with a tax preparer familiar with both your current state and your target state will show the real difference.

What happens to your taxes if you move to a no-income-tax state

You owe federal income tax regardless of which state you live in. Moving to Alaska or Texas does not change that. You will still file a federal return and pay federal tax on your wages.

Your previous state may tax income you earned before you moved. If you worked in California for six months and then moved to Nevada, California taxes you on those six months of income. The state where you worked, not where you live now, has the claim on that money. You report it on your California return for that tax year.

Once you establish residency in the no-income-tax state, you owe no state income tax on wages earned going forward. Residency is usually established by obtaining a driver's license, registering to vote, or leasing or buying a home in the new state. The exact rules vary by state.

Income sources that may still be taxed in no-income-tax states

Even in states with no income tax, certain types of income may be taxed. New Hampshire taxes interest and dividend income at 5 percent, though it exempts the first $2,400 per person per year. Tennessee taxes interest and dividend income at 3.75 percent. Alaska and the other seven states do not tax these sources.

Social Security benefits are not taxed in any of the nine no-income-tax states. Pensions and retirement account withdrawals are also not taxed by these states, which makes them popular destinations for retirees. However, you still owe federal tax on these sources if your total income exceeds the federal threshold.

Capital gains — profit from selling stocks, real estate, or other assets — are not taxed as income in these states. If you sell a rental property or investment portfolio in Texas or Florida, you owe no state tax on the gain, only federal tax if applicable.

Remote workers and the state where you owe tax

If you work remotely for a company in another state, the state where you live usually has the right to tax your income, not the state where your employer is based. If you live in Florida and work remotely for a New York company, Florida does not tax you (because it has no income tax), and New York generally does not tax you either (because you do not work there). You owe federal tax only.

The exception is if you are a resident of a high-income-tax state and work remotely for an employer in that state. Some states, including New York and California, have taxed remote workers who moved out of state during the pandemic. These cases are rare and usually involve disputes, but they show that the rules are not absolute.

Before moving and working remotely, confirm the tax rules with your employer's HR department or a tax preparer. Some employers require employees to live in specific states for tax purposes, and some will adjust your pay if you move to a lower-tax state.

States with low income tax as an alternative

If you cannot move to a no-income-tax state, several states have income tax rates below 3 percent. Louisiana, Mississippi, and North Dakota have top rates around 2.9 to 3.1 percent. Indiana and Pennsylvania have flat rates of 3.15 and 3.07 percent respectively. These states still tax income but at a much lower rate than high-tax states like California (13.3 percent), New York (10.9 percent), or New Jersey (10.75 percent).

Low-tax states may also have lower sales tax or property tax, or they may not. Research the total tax picture in any state you are considering, not just the income tax rate.

Frequently Asked Questions

Do I have to move to a no-income-tax state to avoid state income tax?

No. You owe state income tax based on where you live and where you work. If you work remotely for a company in California but live in Texas, you owe no Texas income tax. However, if you work in California, you owe California income tax even if you live in Nevada. Residency is the primary factor.

Will I pay less total tax in a no-income-tax state?

Not necessarily. No-income-tax states typically have higher sales tax or property tax. Your total tax burden depends on your income, home value, and spending habits. A high earner with a valuable home may pay more in property tax in Texas than in income tax in another state. Calculate your actual costs before moving.

Are Social Security and pensions taxed in no-income-tax states?

No. All nine no-income-tax states exempt Social Security, pensions, and retirement account withdrawals from state tax. You still owe federal tax on these sources if your total income exceeds the federal threshold, but the state takes nothing. This is a major advantage for retirees.

What if I move mid-year?

You owe income tax to the state where you lived and worked for each part of the year. If you lived in Illinois for six months and then moved to Florida, you file an Illinois return for those six months and a Florida return for the remainder. Your employer's W-2 will show your total wages; you split them by state on your returns.

Do I owe federal tax if I live in a no-income-tax state?

Yes. Federal income tax is separate from state income tax. Every person with income above the federal threshold owes federal tax regardless of state. Living in Alaska or Texas does not change that. You file both a federal return and a state return (or no state return if your state has no income tax).