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 interest and dividend income, not wages. The other eight states tax neither wages nor investment income.
These nine states fund their budgets through sales tax, property tax, excise tax on specific goods, and other revenue sources instead. The tax burden shifts differently depending on how much you spend, own property, or buy taxed items like gasoline or cigarettes. Moving to a no-income-tax state does not automatically mean lower total taxes—it depends on your income level, spending habits, and whether you own a home.
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 rely on sales tax, property tax, and excise taxes, so your total tax burden depends on spending and property ownership, not just income.
- Moving to a no-income-tax state saves money only if your income is high enough that state income tax would have exceeded the sales and property taxes you will pay instead.
- Some no-income-tax states have higher sales tax rates than neighboring states with income tax, offsetting the wage tax savings for middle-income earners.
How each no-income-tax state funds its budget
Alaska funds government through oil revenue and a permanent fund dividend paid to residents, rather than broad-based taxes. The state has no sales tax statewide, though some municipalities add local sales tax. Property tax rates are low compared to national averages.
Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming all rely heavily on sales tax. Sales tax rates in these states range from 5.45% (South Dakota) to 7.25% (Tennessee and Washington). Property tax varies widely within each state. Texas and Florida have moderate property tax rates; Wyoming has low property tax but high excise taxes on fuel and other goods.
New Hampshire taxes interest and dividend income at 5%, but not wages. The state funds operations through a 9% tax on business profits and a 5% tax on investment income, plus property tax and a modest statewide sales tax of 0%—though some towns add local options tax on restaurant meals and lodging.
Who saves money by moving to a no-income-tax state
High earners save the most. If you earn $150,000 per year in a state with 5% income tax, you pay $7,500 annually in state income tax alone. Moving to Texas or Florida eliminates that $7,500, even if you pay higher sales tax on purchases. The sales tax savings compound over years.
Middle-income earners see smaller or no savings. Someone earning $50,000 in a state with 4% income tax pays $2,000 per year in income tax. If they move to a state with 7% sales tax and spend $40,000 annually, they pay $2,800 in sales tax—more than they saved. The math changes if they own a home with low property tax, or if they move from a state with both high income tax and high sales tax.
Low-income earners often pay less total tax in states with income tax, because those states typically have lower sales tax rates and property tax exemptions for low-income households. A person earning $25,000 may owe little or no state income tax in high-tax states but will pay sales tax on every purchase in a no-income-tax state.
State-by-state sales tax and property tax comparison
| State | State Sales Tax | Property Tax (% of home value, typical) | Notes |
|---|---|---|---|
| Alaska | 0% (local varies) | 1.0% | Oil revenue reduces reliance on broad taxes |
| Florida | 6.0% | 0.8% | Low property tax; popular for retirees |
| Nevada | 6.85% | 0.6% | Lowest property tax of the nine states |
| South Dakota | 5.45% | 0.8% | Lowest sales tax of the nine states |
| Tennessee | 7.25% | 0.7% | Highest sales tax among the nine |
| Texas | 6.25% | 1.6% | Higher property tax offsets low income tax |
| Washington | 7.25% | 0.9% | Tied for highest sales tax |
| Wyoming | 4.0% | 0.6% | Second-lowest sales tax; high excise taxes |
| New Hampshire | 0% (local options) | 2.0% | Highest property tax; taxes investment income |
Local sales tax and property tax vary within states. Some Texas counties add 2% local sales tax, raising the total above 8%. Some New Hampshire towns add 9% tax on restaurant meals and lodging. Always check your specific county or municipality before calculating total tax burden.
How to calculate whether moving makes financial sense
List your annual income, annual spending on taxable goods, and home value (if you own). In your current state, calculate state income tax owed, sales tax on annual spending, and property tax. Do the same for the state you are considering.
Example: You earn $80,000 in California (9.3% income tax = $7,440), spend $50,000 on taxable goods (7.25% sales tax = $3,625), and own a $400,000 home (0.76% property tax = $3,040). Total state tax: $14,105. In Texas, you owe $0 income tax, $3,125 in sales tax (6.25% on $50,000), and $6,400 in property tax (1.6% on $400,000). Total state tax: $9,525. You save $4,580 per year.
If you rent instead of own, the calculation favors no-income-tax states more strongly, because you avoid property tax entirely. If you own a home in a high-property-tax no-income-tax state like Texas or New Hampshire, the savings shrink or disappear.
Tax residency and moving considerations
Changing your state tax residency requires more than moving. You must establish a permanent home in the new state, register to vote there, get a driver's license, and show intent to stay. Some states challenge people who move but keep a home in the old state, or who spend part of the year elsewhere.
If you are self-employed or a business owner, moving to a no-income-tax state can save substantially on business taxes. However, if your clients are in a high-tax state, that state may still tax your business income based on where the work is performed or where clients are located. Consult a tax professional before moving for tax reasons if you own a business.
Retirement income is treated differently in each state. Some no-income-tax states exempt military pensions or 401(k) withdrawals from other taxes. Florida and Texas exempt all retirement income from state tax. New Hampshire taxes investment income, including retirement account distributions, at 5%. Check the specific rules for your type of income before moving.
Frequently Asked Questions
Do I have to pay federal income tax if I live in a no-income-tax state?
Yes. Federal income tax is separate from state income tax and applies to all U.S. residents regardless of which state they live in. Moving to Alaska, Texas, or any other no-income-tax state does not reduce your federal tax burden.
Can I claim residency in a no-income-tax state if I work remotely for a company in another state?
Yes, but your employer's state may still tax your wages if you are considered a resident there. Most states tax wages earned by residents, even if the work is done remotely. If you move to a no-income-tax state and work for a company in a high-tax state, you typically owe tax only to your new state of residency. Confirm with your employer's payroll department and a tax professional.
Which no-income-tax state has the lowest total tax burden?
It depends on your income and spending. Nevada has the lowest property tax (0.6%) and moderate sales tax (6.85%), making it favorable for high earners who own homes. Wyoming has the lowest sales tax (4.0%) but charges high excise taxes on fuel and goods. South Dakota has low sales tax (5.45%) and moderate property tax (0.8%). For renters, South Dakota and Wyoming are usually cheapest.
Does New Hampshire count as a no-income-tax state?
Partially. New Hampshire does not tax wages or salaries, but it taxes interest and dividend income at 5%. If your income comes entirely from wages, New Hampshire functions like the other eight no-income-tax states. If you live on investment income or retirement distributions, New Hampshire taxes that income.
What if I move to a no-income-tax state but still own property in my old state?
You will owe property tax to the state where the property is located, regardless of where you live. You will not owe income tax to your old state if you have moved and established residency in a no-income-tax state, but you remain liable for property tax on any real estate you own there.