Nine states have no income tax at all

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax wages or salaries. New Hampshire taxes only dividend and interest income, not wages, so residents who work for a paycheck pay no state income tax there either. If you live in one of these nine states, your federal tax bill stays the same, but you keep more of what you earn because there is no state layer on top.

The catch is that states without income tax often make up the difference elsewhere. They may charge higher sales tax, property tax, or fuel tax. A state with no income tax is not automatically cheaper to live in — it depends on your own situation. Someone who earns a high salary and owns little property might save money in a no-income-tax state. Someone who owns a home and buys a lot of goods might pay more overall.

Key Takeaways

  • Nine states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire — do not tax wages or salaries.
  • States without income tax typically charge higher sales tax, property tax, or both to fund schools and services.
  • Whether a no-income-tax state saves you money depends on your income level, property ownership, and spending habits.
  • The lowest income tax rates among states that do tax wages range from 2.1 percent to 3.1 percent.
  • Moving to a lower-tax state for tax reasons alone usually costs more in relocation and housing than you save in taxes.

States with the lowest income tax rates

Among states that do tax income, North Dakota has the lowest top rate at 2.9 percent. Louisiana tops out at 4.25 percent, and Pennsylvania has a flat rate of 3.07 percent. Indiana uses a flat rate of 3.15 percent, and Colorado taxes at a flat 4.4 percent.

These rates explore to your top dollar of income — the actual tax you owe depends on tax brackets and deductions. A state with a 3 percent top rate does not mean you pay 3 percent of your whole income. You pay 3 percent only on income above a certain threshold, and lower percentages on income below it. The way brackets are structured matters as much as the headline rate.

How income tax rates compare across the country

The highest state income tax rates run between 10 and 13.3 percent. California has a top rate of 13.3 percent, Hawaii reaches 11 percent, and New York tops out at 10.9 percent. Most states fall somewhere in the middle, with rates between 5 and 7 percent.

The difference between a 3 percent state and a 10 percent state is real, but it shrinks when you factor in other taxes. A state with no income tax but 8 percent sales tax and high property tax may cost more than a state with 6 percent income tax and 5 percent sales tax. Your actual tax burden depends on how much you earn, how much you spend, and whether you own property.

What moves the needle more than state income tax

Sales tax, property tax, and fuel tax often matter more than income tax to your household budget. Sales tax ranges from 0 percent in states like Oregon and Montana to 7.25 percent or higher in states like California and Tennessee. If you spend $50,000 a year on taxable goods, a 2 percent difference in sales tax costs you $1,000. Property tax varies even more widely — from under 0.3 percent of home value in Hawaii to over 2 percent in New Jersey and Illinois. On a $300,000 home, that difference can be $5,000 a year or more.

For most people, where you live and what you do for work matter far more than tax rates. Moving to save on taxes usually costs more in relocation, housing price differences, and time than you recover in lower tax bills. If you are already planning to move for a job or family reasons, tax rates are worth checking. If you are considering moving only for taxes, the math rarely works out.

How to find your state's current income tax rate

Your state's department of revenue publishes current tax rates and brackets on its website. Search "[your state] department of revenue" or "[your state] income tax rates" to find the official page. The IRS also maintains a summary of state income tax rates on its website under "State and Local Taxes."

Tax rates and brackets change most years, so checking the current year's rates matters if you are making a financial decision. Rates from last year may not match this year. If you are self-employed or have investment income, your state may tax those differently than wages, so read the details for your situation.

Tax brackets and why the top rate is not your whole rate

A state's "top rate" is misleading on its own. If a state has a top rate of 5 percent, you do not pay 5 percent on every dollar. You pay a lower rate on the first portion of your income, then 5 percent only on income above a certain threshold.

For example, a state might tax the first $30,000 at 2 percent, the next $40,000 at 3.5 percent, and anything above $70,000 at 5 percent. If you earn $80,000, you pay 2 percent on $30,000, 3.5 percent on $40,000, and 5 percent on $10,000. Your actual rate is lower than 5 percent because most of your income was taxed at lower rates. The state's website or a tax calculator shows your real liability for your income level.

Frequently Asked Questions

Do I have to pay state income tax if I work remotely for a company in another state?

You owe income tax to the state where you live and work, not where your employer is located. If you live in Florida and work remotely for a New York company, you pay Florida income tax (which is zero) and file a Florida return. Some states have reciprocal agreements with neighboring states, so check your state's rules if you live near a border.

Can I reduce my state income tax by moving to a lower-tax state?

Yes, but only if you actually move and establish residency there. You cannot claim residency in a no-income-tax state if you still live and work elsewhere. States look at where you spend most of your time, where you own property, and where you are registered to vote. Moving just on paper does not work.

What is the difference between a flat tax and a progressive tax?

A flat tax is the same percentage on all income — Pennsylvania's 3.07 percent flat tax means everyone pays 3.07 percent. A progressive tax uses brackets, so higher earners pay a higher rate on their top dollars. Most states use progressive brackets. Flat taxes are simpler to calculate but may feel less fair because they take the same percentage from someone earning $30,000 and someone earning $300,000.

Do I owe state income tax on retirement income or Social Security?

It depends on your state. Some states do not tax retirement income at all. Others tax pensions but not Social Security. A few tax both. Check your state's department of revenue website for rules on retirement income, or ask a tax preparer familiar with your state.

If I move to a no-income-tax state mid-year, do I owe tax to my old state?

You owe income tax to your state of residence for the months you lived there. If you moved from New York to Florida in June, you owe New York income tax on income earned January through June and Florida income tax (zero) on income earned July through December. File a part-year return in both states and provide proof of your move date.