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, salaries, or self-employment. If you live or work in one of these states, you keep more of your paycheck than residents of states with income tax.

New Hampshire is a partial exception: it taxes interest and dividend income but not wages. The other eight states tax neither wages nor investment income.

No income tax does not mean no state taxes. These states fund schools, roads, and services through sales tax, property tax, corporate tax, or other fees. Some have higher sales taxes than income-tax states to make up the difference.

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 typically rely on sales tax, property tax, or corporate tax to fund government services, so your total tax burden depends on where and how you spend money.
  • Moving to a no-income-tax state can reduce your federal tax burden only if you actually change your state of residence and establish residency there.
  • Retirees may benefit from no income tax on pensions or Social Security, but rules vary by state and depend on when you earned the income.

How no-income-tax states replace that revenue

Alaska has no state sales tax but collects oil revenue and uses a permanent fund dividend to distribute some of that money to residents. It also taxes corporate income and property.

Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming all use sales tax as their primary revenue source. Sales tax rates in these states range from 4% to 7.25% on most purchases, and some add local sales taxes on top. Tennessee and Washington also tax capital gains in limited ways.

The trade-off is real: if you spend heavily on taxable goods, you may pay more in sales tax than you would have paid in income tax elsewhere. Property owners in these states often face higher property tax rates to fund schools and local services.

Whether moving to a no-income-tax state saves you money

Moving to one of these states only reduces your taxes if you actually establish residency there. You cannot claim to live in Texas while working and living in California and expect to avoid California income tax. States track where you spend most of your time, where your family lives, where you own property, and where you register your vehicle.

Your total tax savings depend on your income level and spending habits. A high earner who buys little and owns no property might save thousands per year. Someone who rents and spends most income on groceries and services might save little or nothing, because sales tax applies to many of those purchases.

If you are considering a move, calculate your state income tax in your current state, then estimate sales tax and property tax in the no-income-tax state. The IRS does not recognize tax avoidance as a reason to change residency, but genuine relocation for work or family reasons is common and legitimate.

Retirement income and no-income-tax states

Retirees often move to no-income-tax states to reduce taxes on pensions and Social Security. However, the rules are complicated and vary by state.

Tennessee and New Hampshire tax neither wages nor pensions, making them popular with retirees. Florida, Nevada, South Dakota, Texas, Washington, and Wyoming also exempt pensions from income tax. Alaska exempts both pensions and Social Security.

Social Security benefits are not taxed by any state, regardless of where you live. However, if you have other retirement income—a 401(k), IRA withdrawals, or a pension—the state tax treatment depends on when you earned that money and which state you live in. Some states exempt military pensions but not civilian ones. Others exempt pensions earned before a certain date. Check the specific rules for the state you are considering.

Federal taxes are the same everywhere

State income tax and federal income tax are separate. Moving to a no-income-tax state does not change what you owe the federal government. Your federal tax bracket, deductions, and credits remain the same whether you live in Alaska or New York.

The federal government taxes income from all sources—wages, self-employment, investments, and retirement accounts—at the same rates regardless of state. State income tax is an additional layer that some states impose and others do not.

Self-employed workers and business owners in no-income-tax states

If you are self-employed, living in a no-income-tax state means you avoid state income tax on your business profit, but you still owe federal self-employment tax and federal income tax. Some no-income-tax states impose a corporate income tax or a gross receipts tax on business revenue, so check your specific state's rules.

Texas, for example, has no income tax but does impose a franchise tax on businesses with revenue above a certain threshold. Washington taxes capital gains above a certain amount. Nevada and South Dakota have no corporate income tax or capital gains tax, making them popular with business owners.

If you operate a business and are considering relocation, research both state and local taxes in your target state. A state with no income tax might have other business taxes that offset the savings.

How to verify your state's tax status

Your state's department of revenue website lists current income tax rates and rules. The IRS also publishes a summary of state tax systems, though it is not updated in real time.

If you are moving or changing jobs, contact the revenue department of both your current state and your destination state. They can tell you whether you owe taxes in each state during a transition year, how to file, and what important date explore. Some states require you to file even if you owe no tax, to establish that you have left.

Frequently Asked Questions

Can I claim to live in a no-income-tax state if I only visit there sometimes?

No. States determine residency by where you spend the majority of your time, where your family lives, where you own property, and where you register your vehicle and driver's license. Owning a vacation home or spending a few months per year in a state does not make it your state of residence for tax purposes. The IRS and state tax agencies investigate claims that seem inconsistent with your actual living situation.

Do I have to pay sales tax in a no-income-tax state if I am just visiting?

Yes. Sales tax applies to purchases made in that state, regardless of where you live. If you buy something in Florida and take it home to Georgia, you pay Florida sales tax at the register. You do not owe Georgia sales tax on the same purchase.

What if I work in a no-income-tax state but live in one that has income tax?

You typically owe income tax to the state where you live, not where you work. However, some states tax income earned within their borders. Check both states' rules, because you may owe tax to both and then claim a credit on one return to avoid double taxation. Your employer's payroll department can tell you which state they withhold for.

Are property taxes higher in no-income-tax states?

It varies. Some no-income-tax states have high property taxes to fund schools and local services; others have moderate rates. Alaska and Wyoming have relatively low property taxes, while New Jersey (which has income tax) has among the highest property taxes in the nation. Compare property tax rates in the specific city or county you are considering, not just the state.

Does living in a no-income-tax state help me avoid federal taxes?

No. Federal income tax is separate from state income tax. You owe federal tax on your income regardless of which state you live in. The federal government taxes all U.S. residents and citizens on their worldwide income at the same rates.