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 or salaries. New Hampshire also taxes interest and dividend income, but not wages. The other eight states tax neither wages nor investment income.

This does not mean these states have no tax burden. States without income tax typically rely on sales tax, property tax, fuel tax, and business taxes to fund schools, roads, and services. A resident of Texas may pay less income tax than a resident of California, but could pay more in sales tax or property tax depending on where they live and what they buy.

If you are considering a move to one of these states or already live in one, understanding how the tax system works there helps you plan your household budget and retirement. The absence of income tax does not automatically mean lower overall taxes—it depends on your income level, spending habits, and property ownership.

Key Takeaways

  • Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income but not wages).
  • States without income tax fund services through sales tax, property tax, and business taxes, which may be higher than in income-tax states.
  • Your total tax burden depends on your income source, how much you spend, and whether you own property—not just on income tax alone.
  • If you receive Social Security, retirement distributions, or investment income, the tax treatment varies by state even among the nine with no income tax.
  • Moving to a no-income-tax state for tax reasons makes the most sense if you have high wages or self-employment income; it matters less if most of your income is from Social Security or pensions.

How no-income-tax states fund government services

A state without income tax must raise revenue another way. Most rely on a combination of sales tax, property tax, and excise taxes on fuel, alcohol, and tobacco. Some also tax business income or corporate profits.

Texas, for example, has no income tax but charges a 6.25 percent state sales tax (plus local sales taxes that can push the total to 8.25 percent or higher). Washington state has no income tax but imposes a 6.5 percent sales tax and a capital gains tax on long-term investment profits above a certain threshold. Florida has no income tax but collects 6 percent sales tax and property tax.

The mix varies. Alaska has no sales tax but collects property tax and oil revenue. Nevada has sales tax and property tax but no income tax. Understanding the full tax picture in your state requires looking at all three: income tax, sales tax, and property tax.

Who benefits most from living in a no-income-tax state

High earners with W-2 wages or self-employment income see the clearest benefit. If you earn $150,000 a year in wages in California (which has a 9.3 percent state income tax on that bracket), you would owe roughly $14,000 in state income tax. The same income in Texas means zero state income tax on wages, though you would pay Texas sales tax and property tax on what you spend and own.

The benefit shrinks if your income comes from Social Security, pensions, or retirement account withdrawals. Many no-income-tax states do not tax Social Security benefits or traditional pension income. However, some income-tax states also exempt these sources. New York, for instance, does not tax Social Security or pension income, even though it has a state income tax on wages. You need to check the specific rules in both your current state and the state you are considering.

If you are retired and living on investment income, the picture is more complex. New Hampshire taxes interest and dividends but not wages. Washington taxes capital gains on long-term investments above $250,000 per year. Tennessee taxes interest and dividend income but not wages. Comparing your specific income sources to the tax rules in each state is necessary before making a move.

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

States without income tax often have higher sales tax to compensate. The median state sales tax in the nine no-income-tax states ranges from zero (Alaska) to 7.25 percent (Tennessee). Local sales taxes can add another 1 to 3 percent on top of the state rate.

Property tax also varies widely. New Jersey has no income tax in some contexts but is known for high property taxes. Texas property taxes average around 1.6 percent of home value annually, which is higher than many income-tax states. Florida property taxes average around 0.8 percent. Wyoming and South Dakota have lower property taxes. The state with the lowest overall tax burden depends on your personal situation—your income level, home value, and spending habits.

A useful exercise: calculate your estimated taxes in both your current state and the state you are considering. Add up income tax, sales tax on typical annual spending, and property tax on your home value. The total often surprises people who assume no income tax means lower taxes overall.

Special tax rules in each no-income-tax state

Each of the nine states has its own rules about what income is taxed and what is exempt. Alaska taxes no income and has no state sales tax, but property tax and local sales taxes explore. Florida taxes no income and has no tax on retirement income or Social Security; sales tax is 6 percent plus local additions. Nevada taxes no income and has no tax on retirement income; sales tax is 6.5 percent plus local additions.

South Dakota taxes no income and has no tax on retirement income; sales tax is 4.5 percent plus local additions. Tennessee taxes wages but not interest or dividend income; sales tax is 7.25 percent plus local additions. Texas taxes no income and has no tax on retirement income; sales tax is 6.25 percent plus local additions. Washington taxes no income on wages but does tax capital gains on long-term investments over $250,000 per year; sales tax is 6.5 percent plus local additions.

Wyoming taxes no income and has no tax on retirement income; sales tax is 4 percent plus local additions. New Hampshire taxes no income on wages but does tax interest and dividend income at 5 percent; there is no sales tax, but property tax and local taxes explore.

Moving to a no-income-tax state: what to consider

If you are thinking about relocating for tax reasons, start by identifying your primary source of income. If you earn wages or run a business, moving to a no-income-tax state can reduce your state tax bill significantly. If most of your income is Social Security or a pension, check whether your current state already exempts that income—you may not save anything by moving.

Next, research the full tax picture in the state you are considering. Look up the sales tax rate, the property tax rate for your county, and any special taxes (like capital gains tax in Washington or interest tax in New Hampshire). Many state revenue department websites have tax calculators or comparison tools.

Consider also the cost of living, job market, and climate—tax savings mean little if housing costs are much higher or if you cannot find work. Some no-income-tax states have booming job markets; others do not. A financial advisor or tax professional can help you model your specific situation before you move.

How residency and domicile affect your tax liability

Moving to a no-income-tax state only reduces your state income tax if you establish residency or domicile there. Most states define residency based on where you spend the majority of the year, where you own a home, or where you hold a driver's license and voter registration. If you move to Texas but keep your primary home and driver's license in California, California may still claim you as a resident and tax your income.

Domicile is a legal concept that can differ from residency. You have only one domicile, even if you live in multiple states. If you are retired and split time between two states, the state where you intend to return or where you have deeper ties may claim you as a domiciliary resident. This matters because some states tax domiciled residents on all income, even income earned elsewhere.

If you are planning a move, document your intent clearly: get a driver's license and voter registration in the new state, buy or lease a home there, and establish bank accounts and other financial ties. Keep records of the days you spend in each state. If a state later audits you and claims you were a resident when you say you were not, these records protect you.

Frequently Asked Questions

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

No. You stop paying income tax to your old state once you establish residency in the new state, which typically takes 30 to 90 days depending on the state's rules. You may owe income tax to your old state for the portion of the year you lived there before moving. File a part-year resident return in both states for the year you move.

Does Social Security count as income in no-income-tax states?

No. None of the nine no-income-tax states tax Social Security benefits. However, many income-tax states also do not tax Social Security, so this is not a unique advantage of moving. Check your current state's rules before assuming you will save money by relocating.

What happens to my retirement accounts if I move to a no-income-tax state?

Withdrawals from traditional IRAs and 401(k)s are not taxed by the state you move to if that state has no income tax. However, you may still owe federal income tax on those withdrawals. Roth IRA withdrawals are tax-free at both state and federal levels. Consult a tax professional about your specific accounts before moving.

Are property taxes higher in no-income-tax states to make up for lost income tax revenue?

Not always. Property tax rates vary widely within the group of no-income-tax states. Wyoming and South Dakota have relatively low property taxes, while Texas and Florida are moderate. Compare the property tax rate in your specific county to the rate in your current location rather than assuming all no-income-tax states have high property taxes.

Can I claim residency in a no-income-tax state if I work remotely for a company in another state?

Yes, as long as you establish genuine residency in the no-income-tax state. Most states do not tax remote work income if you are a resident of that state, even if your employer is elsewhere. However, some states tax income earned by residents regardless of where the work is performed. Verify the rule in both your current state and the state you plan to move to before relocating.