Which states do not collect state income tax
Nine states have no state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception — it taxes only dividend and interest income, not wages. The other eight collect no income tax at all on wages, salaries, or investment returns.
These states fund government operations through other revenue sources: sales tax, property tax, excise taxes on fuel and alcohol, and business taxes. The mix varies by state. Some have high sales taxes to compensate; others rely more heavily on property tax or corporate revenue.
Whether living in a no-income-tax state saves you money depends on your total tax burden, not just income tax. A state with no income tax but a 10 percent sales tax may cost you more than a state with 5 percent income tax and 6 percent sales tax, depending on how much you earn and spend.
Key Takeaways
- Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax on any income; New Hampshire taxes only investment income, not wages.
- States without income tax replace that revenue with higher sales tax, property tax, excise taxes, or business taxes, so your total tax bill depends on your spending and property ownership.
- Moving to a no-income-tax state saves money only if your new total tax burden is lower than where you came from.
- Retirees may benefit more than wage earners in no-income-tax states, since pension and Social Security income is not taxed in most of these states.
The eight states with zero income tax on any source
Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming collect no state income tax on wages, salaries, capital gains, or dividends. If you earn $100,000 in any of these states, you owe no state income tax on that amount.
Alaska and Texas are the largest by population. Florida has attracted retirees for decades partly because pensions and Social Security are not taxed. Nevada and Washington have no income tax but higher sales taxes — Nevada's is 8.23 percent and Washington's is 10.25 percent depending on location. Wyoming and South Dakota have lower sales taxes but higher property taxes in many counties.
Tennessee and South Dakota recently eliminated their income taxes. Tennessee phased out its Hall income tax (which taxed only investment income) between 2021 and 2022. South Dakota never had a state income tax. Tennessee now funds schools and services through sales tax, which is 9.55 percent statewide.
New Hampshire's partial income tax
New Hampshire taxes interest and dividend income at 5 percent but does not tax wages or salaries. This means if you earn $100,000 in wages, you owe nothing; if you earn $10,000 in stock dividends, you owe $500 to the state.
New Hampshire calls this the "interest and dividends tax." It applies to residents and non-residents with New Hampshire income sources. The state uses this revenue to fund schools without a broad sales tax — New Hampshire has no statewide sales tax, only local property taxes and a meals and rooms tax on restaurants and hotels.
How no-income-tax states replace that revenue
A state that does not tax income must fund schools, roads, police, and courts another way. The methods vary widely and affect different people differently.
Sales tax is the most common replacement. Washington has no income tax but a 10.25 percent sales tax (before local additions). Nevada is 8.23 percent. Tennessee is 9.55 percent. If you spend $50,000 a year, a 10 percent sales tax costs you $5,000 — roughly what you would pay in state income tax in a state with a 5 percent income tax rate on $100,000 income.
Property tax is another major source. Texas has no income tax but property tax rates average 1.6 percent of home value statewide, with some counties higher. A $300,000 home costs $4,800 per year in property tax. Alaska has no income tax and no statewide property tax, but some boroughs charge local property tax.
Excise taxes on fuel, alcohol, and tobacco are higher in many no-income-tax states. Wyoming and South Dakota use these heavily. Business taxes and corporate income taxes also fund services in states without personal income tax.
Whether a no-income-tax state actually costs less
Moving to a no-income-tax state does not automatically lower your taxes. You must compare your total state and local tax burden in your current state against the total in the new state.
A person earning $150,000 in California (13.3 percent state income tax) pays roughly $19,950 in state income tax alone. That same person in Texas (no income tax) pays zero income tax but may pay more in property tax and sales tax combined, depending on where they live and what they buy. A $500,000 home in Texas costs about $8,000 per year in property tax; a $500,000 home in California costs about $5,000 per year (1 percent of assessed value). The comparison changes if you rent instead of own, or if you spend little.
Retirees often benefit more. If you receive a $60,000 pension and $30,000 in Social Security, a state with income tax may tax the pension but not the Social Security. A no-income-tax state taxes neither. Over 20 years, that difference compounds.
State-by-state breakdown of no-income-tax states
| State | Income Tax | Sales Tax | Property Tax (avg.) |
|---|---|---|---|
| Alaska | None | 0% (local only) | 1.1% |
| Florida | None | 6% | 0.8% |
| Nevada | None | 8.23% | 0.6% |
| New Hampshire | 5% (interest/dividends only) | 0% | 2.1% |
| South Dakota | None | 4.5% | 1.3% |
| Tennessee | None | 9.55% | 0.7% |
| Texas | None | 6.25% | 1.6% |
| Washington | None | 10.25% | 0.9% |
| Wyoming | None | 4% | 0.6% |
Rates shown are statewide averages. Local sales taxes and property taxes vary by county and city. Some states add local sales tax on top of the statewide rate; others do not. Property tax is calculated as a percentage of assessed home value and varies widely within states.
Frequently Asked Questions
Do I have to move to a no-income-tax state to avoid state income tax?
No. You owe state income tax based on where you live and work, not where you were born or where you own property. If you move to a no-income-tax state and establish residency there, you stop owing income tax to your previous state (with rare exceptions for non-residents who still work there). Residency rules vary; most states consider you a resident after 183 days in the state or if you own a home there.
Will I owe federal income tax in a no-income-tax state?
Yes. Federal income tax is separate from state income tax. Every state resident owes federal tax on income above the standard deduction, regardless of whether the state has income tax. A no-income-tax state saves you only on state and local taxes, not federal.
Do no-income-tax states tax retirement income?
Most do not tax pensions or Social Security, which is why they attract retirees. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax any retirement income. New Hampshire taxes interest and dividends from retirement accounts but not the withdrawals themselves. Check the specific state's rules if you receive military pensions, government pensions, or 401(k) distributions.
Can I claim a no-income-tax state as my home if I work remotely?
Yes, if you establish residency there. Most states require 183 days of physical presence or proof of intent to make it your permanent home (like a lease or mortgage). Your employer may still withhold taxes based on where you work, but you can file a return in your new state and claim a refund. Some states have reciprocal agreements with neighboring states that affect this; check your specific situation with a tax professional.
Which no-income-tax state has the lowest total tax burden?
That depends on your income, spending, and property ownership. Wyoming and South Dakota have low sales taxes (4 percent and 4.5 percent) and low property taxes, making them cheaper for high earners who spend little. Florida has low property tax and moderate sales tax, favoring retirees. Alaska has no sales tax in most areas and low property tax but high fuel and alcohol taxes. Nevada has moderate sales tax and low property tax. Compare your specific situation against each state's tax rates.