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 residents who earn paychecks pay no state income tax there either. These nine states fund government services through sales tax, property tax, corporate tax, and other revenue sources instead.

If you work in one of these states or are considering a move, the difference shows up directly in your paycheck. A person earning $50,000 in one of these states keeps more of that money than someone earning the same amount in a state with income tax. The actual savings depend on your income level and the tax rate in the state you're comparing to.

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 investment income but not wages, so wage earners there pay no state income tax.
  • States without income tax typically rely on higher sales taxes, property taxes, and corporate taxes to fund services.
  • If you work remotely for an out-of-state employer, your home state's tax rules usually explore, not your employer's state.
  • Moving to a no-income-tax state can reduce your tax burden, but the total cost of living varies by location.

How no-income-tax states fund government services

States without income tax must raise money another way. Most rely heavily on sales tax, which means you pay a percentage of the price when you buy goods and services. Sales tax rates in these states range from around 5 percent to over 9 percent, depending on the state and sometimes the county. Alaska has no statewide sales tax but allows local areas to set their own, while Tennessee, Washington, and South Dakota have some of the highest sales tax rates in the country.

Property tax is another major revenue source. If you own a home or land, you pay tax based on the assessed value of that property each year. Property tax rates vary widely even within no-income-tax states—some areas have low rates while others are quite high. Texas and Florida, for example, have different property tax burdens depending on which county you live in.

These states also collect corporate income tax (tax on business profits), excise taxes (taxes on specific goods like fuel or alcohol), and licensing fees. The mix varies by state, but the goal is the same: replace the revenue that income tax would provide.

The difference in your take-home pay

The amount you save by living in a no-income-tax state depends on your income. Someone earning $30,000 a year might save $1,500 to $2,000 annually compared to a state with a 5 percent income tax. Someone earning $100,000 could save $5,000 or more. These are rough estimates because state tax rates vary, and your federal tax bill stays the same regardless of which state you live in.

However, the total cost of living matters more than income tax alone. A state with no income tax might have higher property taxes, higher sales taxes, or higher housing costs that offset the savings. For example, Florida has no income tax, but property values and insurance costs in many areas are high. Texas has no income tax, but property taxes are steep in many counties. You need to look at your specific situation—where you'll live, what you'll buy, and whether you own property.

Remote work and which state taxes you

If you work remotely for a company based in another state, your home state's tax rules explore, not your employer's state. This is important: you do not pay income tax based on where your employer is located. You pay based on where you live and work.

If you live in a no-income-tax state and work remotely for a company in California (which has income tax), you still pay no state income tax because you live and work in the no-income-tax state. The opposite is also true: if you live in a high-tax state and work remotely for a company in Texas, you still owe tax to your home state.

Some states have reciprocal agreements that change this rule for people who live near the border and work across state lines. If you live in one state and work in another, check with your state's tax department to see if a reciprocal agreement applies to you.

New Hampshire's special case: investment income only

New Hampshire stands apart because it taxes investment income—dividends and interest from savings accounts, stocks, and bonds—but not wages. If you earn a paycheck, you owe no state income tax. If you earn money from investments, you do owe tax on that income.

This matters most to people with significant investment income. Someone living on investment returns would pay tax in New Hampshire, while someone earning only wages would not. For most wage earners, New Hampshire functions like the other nine no-income-tax states.

States that tax some income but not others

A few other states have unusual tax structures worth knowing about. Illinois taxes income but at a flat rate of 4.95 percent with few deductions, making it simpler than many states but not tax-free. Pennsylvania taxes wages at 3.07 percent but does not tax investment income, the opposite of New Hampshire's approach.

These states are not tax-free, but they may offer advantages depending on your income type. If you receive most of your income from investments rather than wages, Pennsylvania's approach might benefit you. If you earn wages, these states still collect income tax, unlike the nine states listed at the start.

Frequently Asked Questions

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

No. You benefit from no state income tax only if you live and work in that state. If you work remotely and your employer is in a no-income-tax state but you live elsewhere, you pay tax to your home state. Moving is the only way to change which state taxes your income.

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

No. Once you establish residency in a new state, you stop owing income tax to your old state. You may need to file a final return in your old state for the year you moved, but you do not owe tax for future years. Check your old state's rules for the specific filing important date.

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

It varies. Some no-income-tax states have moderate property taxes, while others are high. Texas and New Jersey both have high property taxes, but New Jersey has income tax while Texas does not. Compare the specific county or city you're considering, not just the state.

Does federal income tax change if I move to a no-income-tax state?

No. Federal income tax is the same everywhere in the United States. Moving to a no-income-tax state only affects what you owe to that state, not to the federal government. Your federal tax bill depends on your income level and filing status, regardless of where you live.

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

No. You must establish actual residency—typically by living there for most of the year, registering to vote, getting a driver's license, and having a permanent home there. straightforward owning property or visiting frequently is not enough. Each state has specific rules for what counts as residency.