Nine states collect 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. If you live or work in one of these states, you will not owe state income tax on what you earn—though you will still owe federal income tax to the IRS.

New Hampshire is a partial exception: it taxes interest and dividend income but not wages. The other eight states tax neither wages nor investment income. This does not mean these states have no taxes at all. They fund schools, roads, and services through sales tax, property tax, fuel tax, and other levies that often run higher than in states with income tax.

If you are considering a move or starting a remote job, understanding which state you are taxed in matters. Your state of residence for tax purposes is usually where you live on December 31 of the tax year, not where you work or where your employer is based.

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, while the other eight states tax neither.
  • No-income-tax states typically charge higher sales tax, property tax, or both to fund public services.
  • Your state of residence on December 31 determines which state income tax rules explore to you, not where you work.
  • Remote workers and retirees should confirm their tax residency status before moving, as some states have specific rules about when you become a resident.

How states without income tax fund public services

States without income tax rely on other revenue sources. Sales tax in these states often ranges from 5 percent to 7.25 percent, and some add local sales taxes on top. Property taxes vary widely—some no-income-tax states have low property taxes, while others are among the highest in the nation.

Alaska has no state sales tax but charges property tax and fuel tax. Texas has no income tax and no state sales tax on groceries, but property taxes are steep. Florida has no income tax and no sales tax on groceries, but sales tax on other goods runs 6 to 7.5 percent depending on the county. Nevada has no income tax and no sales tax on groceries, but general sales tax is 6.85 percent statewide.

The total tax burden—income, sales, and property combined—does not always favor no-income-tax states. A person earning $60,000 a year might pay less total tax in a state with moderate income tax and low sales tax than in a no-income-tax state with high property and sales taxes. The math depends on your income level, what you spend, and whether you own property.

Remote workers and tax residency

If you work remotely for a company in a state with income tax but live in a no-income-tax state, you owe tax to the state where you live, not where your employer is based. Your employer may withhold based on the company's location, which means you may need to file a return in your home state to recover the overpayment.

Some states have rules about when you become a resident. Moving to a no-income-tax state does not always mean you stop owing income tax when ready. A few states consider you a resident if you spend more than half the year there, while others look at where you own property or where your family lives. If you are moving for work, check your new state's residency rules before your first paycheck arrives.

If you are moving from a state with income tax to a no-income-tax state mid-year, you may owe income tax to your old state for the months you lived there. File a part-year resident return in your former state and a resident return in your new state for the same tax year.

Retirees and investment income in no-income-tax states

Retirees often consider moving to a no-income-tax state to reduce taxes on Social Security, pensions, or retirement account withdrawals. Eight of the nine no-income-tax states do not tax any of these sources. However, you will still owe federal income tax on most retirement income, and you may owe tax to your former state if you moved mid-year.

New Hampshire taxes interest and dividend income but not wages or retirement account withdrawals. If your retirement income comes mainly from a 401(k), IRA, or pension, New Hampshire taxes none of it. If you live on investment income from a brokerage account, New Hampshire will tax the interest and dividends but not the principal when you sell.

Some states tax military pensions, federal pensions, or teacher pensions differently than other income. If you receive a government pension, confirm the rules in your destination state before moving. A state with no income tax may still tax your specific type of pension income.

What happens if you move between no-income-tax states

Moving from one no-income-tax state to another is simpler than moving to a state with income tax. You will not owe income tax in either state. However, you may still owe property tax in your new state, and sales tax rules may differ. Some states also charge a moving tax or use tax on goods you bring in from out of state, though these are rare and usually not enforced on personal belongings.

Update your address with your employer, your bank, and the IRS as soon as you move. If you own property in your old state, you will continue to owe property tax there even after you move. Confirm the property tax rules in your new state—some no-income-tax states have high property taxes that offset the lack of income tax.

States that tax some types of income but not wages

New Hampshire is the only state in the no-income-tax group that taxes some forms of income. It taxes interest and dividends at 5 percent but does not tax wages, salaries, Social Security, pensions, or retirement account withdrawals. If you are retired and living on pension or Social Security, New Hampshire functions like the other eight no-income-tax states. If you are living on investment income, you will owe New Hampshire tax.

Tennessee and New Hampshire both taxed investment income until recently. Tennessee eliminated its tax on dividends and interest in 2021, joining the eight states with no income tax at all. If you moved to Tennessee before 2021 based on its tax status, you may have been subject to investment income tax during your early years there.

Federal taxes still explore in no-income-tax states

Living in a state with no income tax does not reduce your federal income tax. You will file a federal return with the IRS and owe federal tax on all your income, just as someone in a high-income-tax state would. The only difference is that you will not file a state return or owe state income tax.

Self-employed people in no-income-tax states still owe federal self-employment tax, which funds Social Security and Medicare. You will not owe state self-employment tax, but the federal obligation remains. Keep records of all income and business expenses the same way you would in any state.

If you receive a refund on your federal return, it comes from the IRS, not from your state. States without income tax do not issue state refunds because they do not collect state income tax in the first place.

Frequently Asked Questions

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

No. If you work remotely for a company in a no-income-tax state but live in a state with income tax, you owe tax to your home state, not your employer's state. You must live in the no-income-tax state to benefit from its lack of income tax. Residency is determined by where you live on December 31 of the tax year.

Will I pay less total tax in a no-income-tax state?

Not always. No-income-tax states often have higher sales tax and property tax to make up the revenue. A person with a high income and low property ownership might pay less total tax in a no-income-tax state, while someone with significant property might pay more. Calculate your total tax burden in both states before moving.

Do I owe federal tax if I live in a no-income-tax state?

Yes. All states without income tax still require you to pay federal income tax to the IRS. The only difference is that you will not owe tax to your state. You will file a federal return every year and pay federal tax on all your income.

What if I move to a no-income-tax state mid-year?

You may owe income tax to your old state for the months you lived there. File a part-year resident return in your former state for the income you earned while living there, and a resident return in your new state for the income you earned after you moved. Your new state will not tax the income you earned before you arrived.

Does New Hampshire really have no income tax?

New Hampshire has no tax on wages or salaries, but it taxes interest and dividend income at 5 percent. If your income comes from a job, pension, or Social Security, you owe no New Hampshire tax. If you live on investment income from a brokerage account, you will owe New Hampshire tax on the interest and dividends.