Nine states have 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. New Hampshire taxes only dividend and interest income, not wages. The other eight tax neither wages nor investment income.

These states fund government services through sales tax, property tax, corporate tax, and excise taxes instead. The absence of income tax does not mean lower overall taxes — some of these states have higher sales or property taxes to compensate.

If you work remotely for a company in another state, you typically owe income tax to the state where you live, not where your employer is located. Moving to an income-tax state does not automatically reduce your tax burden if that state relies heavily on sales or property tax.

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 only).
  • States without income tax often charge higher sales tax or property tax, so your total tax burden depends on how much you spend and own, not just your salary.
  • If you move to an income-tax state, you owe tax based on where you live and work, not where your employer's headquarters is located.
  • Retirees in some of these states may still owe federal income tax and taxes on Social Security or pensions, depending on the income source.

How income tax works in states that have it

States with income tax withhold a percentage of your paycheck based on your state of residence and file a state tax return each year, similar to federal income tax. The rate varies by state — some charge a flat percentage, others use a graduated scale where higher earners pay a higher rate.

When you move to a new state mid-year, you typically owe tax to both states for the months you lived in each. Your new state's tax authority will want proof of when you moved (a lease, utility bill, or driver's license change). Some states offer credits to avoid double taxation, but you still have to file in both places.

The nine no-income-tax states and what they tax instead

Alaska has no income tax and no state sales tax, but charges property tax and a corporate income tax. It also taxes oil production heavily, which funds the state budget.

Florida has no income tax and no tax on retirement income. It relies on sales tax (currently 6 percent statewide, higher in some counties), property tax, and corporate tax.

Nevada has no income tax and no tax on retirement income. Sales tax is 8.23 percent statewide. The state also taxes casino and gaming revenue heavily.

South Dakota has no income tax. Sales tax is 4.5 percent statewide, plus local options that can raise it to 7.5 percent or higher. Property tax varies by county.

Tennessee has no income tax on wages but taxes investment income (dividends and interest) at 3.85 percent. Sales tax is 9.55 percent statewide, one of the highest in the country.

Texas has no income tax and no tax on retirement income. Sales tax is 8.25 percent statewide. Property tax rates vary widely by county and school district.

Washington has no income tax on wages. Sales tax is 10.25 percent statewide, the highest in the country. The state also taxes capital gains on certain investments.

Wyoming has no income tax and no sales tax. It relies on property tax, excise taxes, and mineral extraction taxes. This combination makes it one of the lowest-tax states overall.

New Hampshire has no income tax on wages or salaries but taxes dividends and interest income at 5 percent. Sales tax does not exist, but the state charges a 9 percent tax on meals and lodging.

Total tax burden: income tax is only part of the picture

A state without income tax does not automatically mean lower taxes overall. Someone earning $60,000 a year in Texas (no income tax, 8.25 percent sales tax) may pay less total tax than someone earning the same in Wyoming (no income tax, no sales tax, but higher property tax). The difference depends on how much you spend, what you own, and where you invest.

If you spend heavily on taxable goods, a high-sales-tax state costs more. If you own property, property tax matters more. If you have investment income, states that tax dividends and interest (like Tennessee and New Hampshire) affect your bottom line differently than states that do not.

Use a tax calculator or speak with a tax professional in the state you are considering to estimate your actual liability based on your income, spending, and assets.

Retirement income and pensions in no-income-tax states

Most of the nine no-income-tax states also do not tax retirement income, including pensions, 401(k) withdrawals, and Social Security. Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no tax on any of these sources. Alaska taxes none of them. New Hampshire taxes none of them.

Tennessee is the exception: it taxes dividends and interest but not wages, pensions, or Social Security. This makes Tennessee attractive to retirees who live on pension income but less attractive to those with significant investment portfolios.

Federal income tax still applies to all retirement income in every state. You will owe federal tax on 401(k) withdrawals, taxable Social Security benefits, and pension income regardless of where you live.

Remote work and state income tax obligations

If you work remotely for a company based in California but live in Texas, you owe tax to Texas (where you live and work), not California. Your employer will withhold based on your state of residence, not their location.

If you move mid-year, notify your employer's payroll department of the change. You will owe tax to both states for the portions of the year you lived in each. Some states offer credits to prevent double taxation, but you still file returns in both.

A few states (including New York and Illinois) have tried to tax remote workers who live elsewhere, but these laws have faced legal challenges. The general rule remains: you owe tax where you live and work, not where your employer is.

Moving to a no-income-tax state: what to document

If you move to one of these states, keep records of your move date: a signed lease, utility bills in your name with the new address, a new driver's license or state ID, or a change-of-address form with the post office. Your old state may ask for proof that you left, and your new state may ask for proof that you arrived.

File your final return in your old state for the months you lived there, and your first return in your new state for the months you lived there. Some states have reciprocal agreements that simplify this process, but you still file in both.

Update your voter registration, vehicle registration, and insurance documents to reflect your new address. These changes create a paper trail that supports your claim of residency if either state questions it.

Frequently Asked Questions

Do I have to pay federal income tax if I live in a no-income-tax state?

Yes. Federal income tax applies in every state. Living in Alaska, Florida, Texas, or any other no-income-tax state does not reduce your federal tax obligation. You will file a federal return and pay federal tax on your income regardless of where you live.

If I move from a state with income tax to one without, do I get a refund?

No. You owe tax to your old state for the months you lived there. You will not receive a refund for those months. You will owe tax to your new state starting the month you move. File a return in both states for the year you moved.

Does New Hampshire really have no income tax?

New Hampshire has no tax on wages or salaries, but it taxes dividends and interest income at 5 percent. If your income comes entirely from wages, you pay no state income tax. If you have investment income, you owe tax on that portion.

Which no-income-tax state has the lowest overall taxes?

Wyoming has no income tax, no sales tax, and relatively low property tax in most counties, making it one of the lowest-tax states overall. Alaska has no income tax and no sales tax but higher property tax. The answer depends on your income, spending, and assets.

Can my employer force me to move to a no-income-tax state to avoid taxes?

No. You cannot be required to move as a condition of employment. If you move voluntarily, your employer will withhold tax based on your new state of residence. The choice to relocate is yours alone.