Nine states collect no state 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 dividend and interest income, not wages, so it functions like a no-income-tax state for most workers. These nine states fund government operations through sales tax, property tax, excise taxes, and other revenue sources instead.
If you move to one of these states or earn income there, you will not owe state income tax on your paycheck. However, the absence of income tax does not mean these states are cheaper overall—they typically compensate with higher sales taxes or property taxes. A state with no income tax but a 9% sales tax may cost more than a state with 5% income tax and 6% sales tax, depending on your spending patterns.
Key Takeaways
- Nine states impose no tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only investment income).
- These states fund services through sales tax, property tax, and excise taxes, which are often higher than in income-tax states.
- Moving to a no-income-tax state does not automatically lower your total tax burden if you own property or spend heavily on taxed goods.
- If you work remotely for an out-of-state employer, your home state's tax rules explore to your wages, not your employer's state.
How these states replace income tax revenue
States without income tax rely on sales tax as their primary revenue source. Tennessee, Washington, and Texas have sales tax rates between 8% and 8.25%. Alaska has no statewide sales tax but allows municipalities to impose local sales taxes up to 7.5%. Florida's sales tax is 6%, among the lowest in the nation.
Property tax is the second major revenue stream. Texas and Wyoming have relatively low property tax rates, while New Hampshire's property tax is notably high—among the highest in the country—because it lacks both income tax and sales tax. If you own a home in New Hampshire, you will pay substantially more in property tax than you would in a state with income tax.
Excise taxes on fuel, alcohol, and tobacco also fund state budgets. Alaska and Wyoming impose higher fuel taxes than many income-tax states. These taxes are less visible than income tax but accumulate over time, especially for families that drive frequently or purchase taxed goods regularly.
Remote work and state income tax obligations
If you work remotely for a company based in another state, your home state's tax rules explore to your wages, not your employer's location. Moving to Florida to work remotely for a New York company does not exempt you from New York income tax—you owe tax to Florida instead, which in this case means no state income tax.
However, if you move from a no-income-tax state to an income-tax state while working remotely, you become subject to that state's income tax on your wages. Some states have reciprocal agreements that exempt workers in neighboring states, but these are rare and explore only to specific situations like cross-border commuting.
Your employer's payroll system may not automatically adjust when you move. Contact your HR or payroll department to update your state of residence so your withholding reflects your actual tax obligation. Failing to do so can result in underpayment and a tax bill at the end of the year.
Comparing total tax burden across no-income-tax states
The nine no-income-tax states vary significantly in their overall tax burden. The table below shows how each state compensates for missing income tax revenue:
| State | Sales Tax | Property Tax (avg. effective rate) | Key Revenue Source |
|---|---|---|---|
| Alaska | 0% (statewide) | 1.1% | Oil revenue, excise taxes |
| Florida | 6% | 0.8% | Sales tax, tourism taxes |
| Nevada | 8.23% | 0.6% | Sales tax, gaming taxes |
| South Dakota | 4.5% | 1.3% | Sales tax, excise taxes |
| Tennessee | 9.55% | 0.7% | Sales tax (highest in nation) |
| Texas | 8.25% | 1.8% | Sales tax, business taxes |
| Washington | 10.25% | 0.84% | Sales tax (highest in nation) |
| Wyoming | 4% | 0.6% | Mineral extraction taxes |
| New Hampshire | 0% | 2.1% | Property tax, investment income tax |
Wyoming and South Dakota have the lowest combined sales and property tax burden among no-income-tax states. New Hampshire has no sales tax but compensates with the highest property tax rate. Tennessee and Washington have the highest sales tax rates in the nation. Your actual tax cost depends on whether you own property, how much you spend on taxed goods, and your investment income.
Investment income and capital gains in no-income-tax states
Most no-income-tax states also do not tax capital gains or investment income. However, New Hampshire taxes dividend and interest income at 5%, and Tennessee taxes dividend and interest income at 3.75%. If you have significant investment income, these taxes can add up.
Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming impose no tax on capital gains, dividends, or interest. This makes them attractive for retirees living on investment income or investors with substantial portfolios. However, you still owe federal capital gains tax regardless of where you live.
Residency requirements and tax domicile
straightforward moving to a no-income-tax state does not automatically exempt you from your previous state's income tax. States determine tax residency based on domicile—where you intend to make your permanent home. If you move to Florida but maintain a home in New York and spend most of the year there, New York may still consider you a resident and tax your income.
To establish residency in a new state, you typically need to obtain a driver's license, register to vote, update your address with banks and insurance companies, and demonstrate that you spend more time in the new state than anywhere else. Keep documentation of these changes in case your previous state challenges your move.
Some states are aggressive about pursuing former residents. If you earned income while living in a high-tax state and then moved, that state may audit you to verify you have truly relocated. Having clear evidence of your move—lease agreements, utility bills, voter registration—protects you if questioned.
Frequently Asked Questions
Do I have to move to a no-income-tax state to avoid state income tax?
No. You owe income tax to the state where you are a resident, regardless of where you work. If you work remotely for a company in a high-tax state but live in a no-income-tax state, you owe tax to your home state. However, establishing residency requires genuine relocation—maintaining a home in your old state or spending significant time there can keep you liable for that state's income tax.
If I retire and move to a no-income-tax state, do I still owe federal taxes?
Yes. Federal income tax applies everywhere in the United States. Moving to a no-income-tax state eliminates only state income tax, not federal tax. You will still owe federal tax on wages, Social Security, pensions, and investment income. However, some states offer tax breaks on retirement income—for example, some states do not tax military pensions or teacher pensions—so check your new state's rules.
Which no-income-tax state has the lowest overall taxes?
That depends on your situation. Wyoming and South Dakota have low combined sales and property taxes, making them attractive for middle-income earners. Alaska has no statewide sales tax and low property tax but receives significant oil revenue, so costs of living can be high. New Hampshire has no sales tax but the highest property tax in the nation. Calculate your own situation based on whether you own property and how much you spend on taxed goods.
Can a state tax me after I move away?
Yes, if the state believes you are still a resident. States can audit you for several years after you move to verify you have genuinely relocated. If you maintain a home, spend significant time there, or have family there, the state may argue you are still a resident. Establish clear residency in your new state by updating your driver's license, voter registration, and address with financial institutions.
Does New Hampshire count as a no-income-tax state?
Functionally yes, for most workers. New Hampshire taxes only dividend and interest income at 5%, not wages or salaries. If you earn income from a job, you owe no state income tax. If you live on investment income, you will owe New Hampshire's 5% tax on that income, which is lower than most states' income tax rates but higher than the other eight no-income-tax states.