Nine states have no income tax on wages, and three more tax only retirement income
Nine states collect no income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. Three additional states—Illinois, Mississippi, and Pennsylvania—tax only retirement income, not wages. If you work in one of these twelve states, you keep more of your paycheck than residents of states with income tax. The trade-off varies: some no-income-tax states fund government through higher sales tax, property tax, or business taxes instead.
Moving to a no-income-tax state can meaningfully reduce your tax burden, but the savings depend on your income level, what you own, and where you spend money. A high earner in California pays roughly 13.3% state income tax; the same person in Texas pays zero state income tax on wages. But Texas has no state income tax partly because it funds schools and roads through property tax, which can be substantial. Understanding what you gain and what you lose matters more than the headline.
Key Takeaways
- Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire impose no state income tax on wages or other income.
- Illinois, Mississippi, and Pennsylvania do not tax wages but do tax retirement income such as pensions and distributions from retirement accounts.
- States without income tax typically fund government through sales tax, property tax, or business taxes, so your total state tax burden depends on your spending and property ownership.
- Moving to a no-income-tax state saves the most money for high earners, but the benefit shrinks or reverses for low-income households if sales tax is high.
The nine states with no income tax at all
Alaska has no state income tax and no sales tax. It funds government largely through oil revenue and a modest tax on businesses. Residents pay federal income tax but nothing to the state on wages, investments, or retirement income.
Florida has no state income tax but charges 6% sales tax (plus local additions that can reach 7.5% total). Property tax rates are moderate to low. Retirees often move to Florida specifically to avoid state income tax on pensions and Social Security.
Nevada has no state income tax and no tax on retirement income. Sales tax is 6.85% statewide, plus local options that can add up to 1.5%. Property tax is low relative to other states.
South Dakota has no state income tax. Sales tax is 4.5% statewide, with local options adding up to 4.5% more. Property tax is moderate. South Dakota also does not tax retirement income.
Tennessee eliminated its income tax on wages in 2021 but still taxes investment income (interest, dividends, capital gains) at 3.85%. Sales tax is 9.55% statewide, the highest in the nation when local options are included. Property tax is low.
Texas has no state income tax and no tax on retirement income. Sales tax is 6.25% statewide, with local additions reaching 8.25% in some areas. Property tax is moderate to high and funds schools directly.
Washington has no state income tax but charges 6.5% sales tax statewide, with local options adding up to 3.9%. It recently introduced a capital gains tax on certain investment sales, though wages remain untaxed. Property tax is low.
Wyoming has no state income tax and no sales tax. It funds government through excise taxes, mineral taxes, and a modest property tax. Wyoming has the lowest overall tax burden for most households.
New Hampshire has no income tax on wages but taxes interest and dividend income at 5%. Sales tax does not exist; the state funds itself through property tax, which is moderate to high, and business taxes.
States that tax retirement income but not wages
Illinois does not tax wages but taxes retirement income (pensions, 401(k) withdrawals, IRA distributions) at a flat 4.95%. Sales tax is 6.25% statewide, with local additions reaching 8.25%. Property tax is among the highest in the nation.
Mississippi does not tax wages but taxes retirement income at rates up to 5%. Sales tax is 7% statewide, with local options adding up to 1%. Property tax is low.
Pennsylvania does not tax wages but taxes retirement income at 3.07%. Sales tax is 6% statewide, with local additions reaching 7%. Property tax is moderate.
How much you save depends on your income and spending
The tax savings from moving to a no-income-tax state are largest for high earners. Someone making $200,000 per year in California pays roughly $26,600 in state income tax; in Texas, that person pays zero state income tax on wages. But that same person in Texas likely pays more in property tax and sales tax than a California resident with the same income.
For low-income households, the math often reverses. A person earning $30,000 per year in a state with 5% income tax pays $1,500 in state income tax. If they move to a no-income-tax state with 9% sales tax, they pay roughly $2,700 per year in sales tax on $30,000 of spending. The no-income-tax state becomes more expensive.
The break-even point depends on your state's income tax rate, the no-income-tax state's sales and property tax rates, and how much you spend versus save. Use a tax calculator that compares your current state to your target state, plugging in your actual income, property value, and expected spending.
What to know before relocating for tax reasons
Moving to a no-income-tax state for tax reasons alone can backfire if you do not account for cost of living. Texas and Florida have no state income tax, but housing costs in Austin and Miami have risen sharply. Wyoming has the lowest tax burden overall, but job opportunities are limited outside energy, agriculture, and tourism.
State tax residency is not automatic when you move. Most states require you to establish residency by obtaining a driver's license, registering to vote, and renting or owning a home there. If you keep a home in your old state, work remotely for an employer in your old state, or spend more than half the year elsewhere, your old state may still claim you owe income tax. Consult a tax professional before relocating if your situation is complex.
Some states have reciprocal tax agreements with neighbouring states. If you live in one state but work in another, you may owe income tax to your work state, not your home state. This matters most for people who live near state borders.
Frequently Asked Questions
Do I have to pay federal income tax in a no-income-tax state?
Yes. State income tax and federal income tax are separate. Every U.S. resident owes federal income tax on wages, investments, and most other income, regardless of which state they live in. A no-income-tax state saves you only the state portion, not the federal portion.
Can I move to a no-income-tax state and still owe my old state income tax?
Yes, if you do not fully establish residency in the new state. Most states require a driver's license, voter registration, and a primary residence to recognize you as a resident. If you keep a home in your old state or work remotely for an old-state employer, your old state may claim you still owe tax. Check your old state's residency rules before you move.
Which no-income-tax state has the lowest overall taxes?
Wyoming has the lowest combined state and local tax burden for most households because it has no income tax, no sales tax, and low property tax. Alaska is also very low-tax overall. The answer changes based on your income level and spending habits, so compare your specific situation.
Does Tennessee really have no income tax anymore?
Tennessee eliminated income tax on wages in 2021 but still taxes investment income (interest, dividends, capital gains) at 3.85%. If you earn only wages, you pay no state income tax. If you have investment income, you owe tax on that portion.
What if I'm retired—which no-income-tax state is best for me?
Florida, Nevada, South Dakota, Texas, and Wyoming tax neither wages nor retirement income, making them popular with retirees. Alaska and Washington also exempt retirement income. Illinois, Mississippi, and Pennsylvania do tax retirement income, so they are less attractive for retirees despite not taxing wages. Compare property tax and sales tax in your target state, as those affect retirees significantly.