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. This means if you work and live in one of these states, you will not owe state income tax on your paycheck. However, most of these states tax other forms of income — investment gains, dividends, interest, or business profits — differently, and all of them fund state services through other taxes like sales tax, property tax, or corporate tax.

The absence of state income tax does not mean lower overall taxes. A state without income tax often has a higher sales tax or property tax to make up the difference. Before moving for tax reasons, compare the total tax burden in your current state against your target state, including sales tax, property tax, and any local taxes.

Key Takeaways

  • Nine states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire — do not tax wages or salaries.
  • New Hampshire taxes interest and dividend income but not wages, while the other eight states tax neither wages nor most investment income.
  • States without income tax typically rely on sales tax, property tax, corporate tax, or other revenue sources, so your total tax burden may not be lower.
  • If you are self-employed or have significant investment income, the tax treatment of business profits and capital gains matters more than the wage tax rate.

The eight states with no income tax on any form

Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, and New Hampshire (with one exception noted below) do not tax wages, investment income, or business profits at the state level. If you earn $100,000 in wages in Texas, you owe no state income tax on it. If you earn $100,000 in capital gains in Florida, you owe no state income tax on that either.

Alaska is the only state among these nine that also collects oil revenue and returns a portion to residents as the Alaska Permanent Fund Dividend. This is not income tax; it is a distribution of state oil wealth. Residents receive a check once a year, typically between $1,000 and $2,000, though the amount varies year to year based on oil prices and fund performance.

The other seven states — Florida, Nevada, South Dakota, Texas, Washington, and Wyoming — have no special income distribution. They straightforward do not tax income at the state level.

New Hampshire: wages are untaxed, but investment income is not

New Hampshire does not tax wages or salaries, but it does tax interest and dividend income at a flat rate of 5 percent. If you earn $50,000 in wages in New Hampshire, you owe no state tax. If you earn $5,000 in dividend income, you owe $250 in state tax.

This distinction matters most to retirees who live on investment income rather than wages, and to investors with significant dividend or interest earnings. A wage earner in New Hampshire enjoys the same tax treatment as someone in Texas or Florida. Someone living on retirement savings or stock dividends pays state tax in New Hampshire but not in the other eight no-income-tax states.

How states without income tax pay for schools and services

States without income tax must fund schools, roads, police, and other services through other revenue sources. The most common are sales tax, property tax, and corporate tax. Some states also tax specific industries or activities — Alaska taxes oil extraction, for example.

Sales tax rates in no-income-tax states are often higher than the national average. Texas has a base sales tax of 6.25 percent, plus local options that can raise it to 8.25 percent or higher. Washington state has a base sales tax of 6.5 percent, also subject to local additions. Florida's base is 6 percent. These rates are higher than many states with income tax.

Property tax varies widely. New Hampshire has one of the highest property tax rates in the nation to fund schools without income tax revenue. Texas property tax is moderate to high. Alaska property tax is low in most areas. Before relocating, research property tax rates in the specific county or city where you plan to live.

Comparing total tax burden across states

A state with no income tax is not necessarily a low-tax state. A family earning $75,000 in wages and spending $30,000 per year on taxable goods will pay different total taxes in different no-income-tax states depending on sales tax, property tax, and local taxes.

Use this rough comparison: if you earn wages and do not own property, a no-income-tax state with moderate sales tax may save you money. If you own a home, property tax becomes the dominant factor — New Hampshire's lack of income tax is offset by high property tax, while Texas offers both low income tax and moderate property tax. If you live on investment income, New Hampshire's 5 percent tax on dividends and interest may cost you more than a state with lower income tax rates but broader income definitions.

The only way to know is to calculate your own situation. Add up state income tax, local income tax (if any), sales tax on your typical spending, and property tax on a home at your target price in your target state. Compare that total to your current state.

Self-employment and business income in no-income-tax states

If you are self-employed or own a business, the lack of state income tax can be significant. A sole proprietor earning $100,000 in profit in Texas pays no state income tax on that profit. The same person in California would owe state income tax at rates up to 13.3 percent.

However, self-employed people still owe federal self-employment tax (Social Security and Medicare), which is the same in every state. And some no-income-tax states impose other taxes on businesses — gross receipts taxes, franchise taxes, or corporate taxes — that can offset the income tax savings. Washington state, for example, has a capital gains tax on long-term investment gains, which affects some business owners.

Before relocating a business for tax reasons, consult a tax professional who knows both your current state and your target state. The savings may be real, but they are not automatic.

Moving to a no-income-tax state: residency and timing

If you move from a state with income tax to a no-income-tax state, your old state may still claim you owe tax on income earned while you were a resident. Most states define residency by where you lived for the majority of the year, where you own a home, where your family lives, or where you hold a driver's license.

The safest approach is to establish residency in your new state before you stop working in your old state. This usually means getting a new driver's license, registering to vote, and establishing a permanent address. Keep records of when you moved — utility bills, lease or mortgage documents, and the date you notified your employer. If your old state audits you, these documents prove when your residency ended.

Some states are aggressive about pursuing former residents for tax owed. If you earned significant income in your old state and moved late in the year, you may owe tax on income earned before you moved, even if you are now a resident of a no-income-tax state.

Frequently Asked Questions

Do I have to move to a no-income-tax state to benefit from no state income tax?

No. You must be a resident of the state to avoid its income tax. Residency is determined by where you live, not where you work. If you work in Texas but live in Oklahoma, you owe Oklahoma income tax on your wages. If you live in Texas but work remotely for a company in New York, you owe no Texas income tax (Texas has no income tax) and no New York state income tax (you are not a resident).

If I retire and move to Florida, do I owe income tax on my retirement accounts?

No state income tax means no tax on retirement account withdrawals either. If you withdraw $50,000 from an IRA in Florida, you owe no Florida state income tax. You still owe federal income tax on traditional IRA withdrawals, but that is the same in every state. Roth IRA withdrawals are tax-free at both state and federal levels.

Can I claim residency in a no-income-tax state if I only visit there part of the year?

No. Most states require you to live there for more than half the year to claim residency. If you spend winters in Florida and summers elsewhere, you may not may have access to as a Florida resident for tax purposes. Some states look at where you own a home, where your family lives, or where you have other ties. Consult a tax professional if you split time between states.

Does living in a no-income-tax state affect my federal taxes?

No. Federal income tax is the same regardless of which state you live in. Your federal tax bracket, deductions, and credits do not change. The only difference is that you will not owe state income tax on top of your federal tax.

Are there any hidden taxes in no-income-tax states I should know about?

No hidden taxes, but less obvious ones. Some no-income-tax states tax specific activities — Washington taxes capital gains above $250,000 per year, Tennessee taxes investment income, and some states have gross receipts taxes on businesses. Research your target state's full tax code, not just income tax.