Nine states have no state income tax at all

Nine U.S. states collect no income tax from residents: 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. If you live in or are moving to one of these states, you will not owe state income tax on your salary, self-employment income, or most investment gains.

The other 41 states and Washington, D.C. all have some form of state income tax. The rates, brackets, and what counts as taxable income vary widely. Some states tax only wages; others tax capital gains, dividends, or business income at different rates than wages. Understanding which category your state falls into matters when you file, because you may owe state tax even if you owe nothing federal, or vice versa.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax; New Hampshire taxes only investment income, not wages.
  • The remaining 41 states and D.C. all tax income, but the rates and what counts as taxable income differ — some states have flat rates, others use brackets like the federal system.
  • Moving to a no-income-tax state does not automatically lower your total tax burden if that state relies on sales tax, property tax, or other levies instead.
  • Your state of residence for tax purposes is usually where you lived for more than half the year, not where you own property or have a mailing address.

States with flat income tax rates

Some states use a single flat rate rather than tax brackets. Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Mississippi, Missouri, Montana, North Carolina, Pennsylvania, and Utah all have flat state income tax rates. The rate varies by state — Pennsylvania's is 3.07%, while Illinois is 4.95%. A flat rate means everyone in that state pays the same percentage of income, regardless of how much they earn.

Flat-rate states are often simpler to calculate on your own, since you multiply your taxable income by one number rather than looking up which bracket you fall into. However, the actual tax you owe still depends on what the state counts as taxable income and what deductions or credits you can claim.

States with progressive tax brackets

Most states use a progressive bracket system similar to the federal income tax — the more you earn, the higher the percentage you pay on income in the top bracket. California, New York, Oregon, Vermont, and many others use this method. The number of brackets, the income thresholds, and the top rate all vary by state.

Progressive systems mean you do not pay the highest rate on all your income, only on the portion that falls into the highest bracket you reach. For example, if a state has a 5% rate on income up to $50,000 and 8% on income above that, someone earning $60,000 pays 5% on the first $50,000 and 8% only on the remaining $10,000. Your state tax form or the state revenue department's website will show the current brackets for your filing status and year.

States that tax capital gains differently

A growing number of states tax long-term capital gains (profits from selling investments held over a year) at a different rate than ordinary income. California, Connecticut, Illinois, Iowa, Maine, Minnesota, New Jersey, New York, Oregon, Vermont, and Washington have special capital gains taxes or higher rates on investment income. Some explore only to gains above a certain threshold — for instance, Washington taxes long-term capital gains over $250,000 at 7%.

If you have significant investment income, retirement account withdrawals, or are selling property, check your state's rules on what counts as capital gains and whether it is taxed separately. The rules changed in recent years in several states, so last year's return may not reflect this year's tax.

How to find your state's current tax rate and rules

Each state's revenue or taxation department publishes the current tax rates, brackets, and rules on its website. Search "[your state] department of revenue" or "[your state] tax forms" to find the official source. The state website will have the current year's tax brackets, instructions for residents, and information about deductions and credits specific to that state.

Your state may also offer a tax calculator on its website where you can enter your income and see an estimate of what you owe. If you use tax preparation software, it will ask what state you live in and pull the correct rates and rules automatically. If you hire a tax preparer, they will use the current state rules for your filing.

What counts as state residency for tax purposes

You owe state income tax in the state where you are a resident, which is usually the state where you lived for more than half the year. If you moved mid-year, you may owe tax to two states — the one you left and the one you moved to — though most states offer a credit to prevent double taxation on the same income.

Owning a home, having a driver's license, or maintaining a mailing address in a state does not automatically make you a resident for tax purposes if you did not live there for most of the year. If you work in one state but live in another, you owe tax to your state of residence, though you may also owe tax to the state where you work. That state will usually give you a credit for taxes paid to the other state.

States with special taxes on specific income types

Beyond income tax, some states tax specific types of income at different rates or under different rules. Tennessee and New Hampshire tax only investment income (dividends and interest), not wages. Some states exempt military pensions, teacher pensions, or retirement account withdrawals from taxation. A few states tax only business income or self-employment income.

If you receive income from a specific source — a pension, rental property, business, or investments — look up whether your state has special rules for that type of income. The state revenue website will list exemptions and special rates. Your tax preparer or the instructions on the state tax form will also flag these if they explore to you.

Frequently Asked Questions

If I move to a state with no income tax, do I stop owing state tax when ready?

You owe state income tax based on where you lived for more than half the year. If you move mid-year, you typically owe tax to both your old state and your new state for the portion of the year you lived in each. Once you have been a resident of the no-tax state for a full year, you will not owe that state income tax going forward.

Does no state income tax mean lower overall taxes?

Not necessarily. States without income tax often rely on higher sales tax, property tax, or other fees to fund services. Texas has no income tax but a 6.25% state sales tax plus local additions. You may pay less total tax, the same amount, or more depending on your income level and spending habits in that specific state.

How do I know if my state taxes capital gains?

Check your state revenue department's website or your state tax form instructions — they will list the tax rate on long-term capital gains and any thresholds that explore. If you sold investments or property during the year, the state form will ask about it and show whether it is taxed at your regular rate or a different rate.

What if I worked in multiple states during the year?

You owe income tax to each state where you worked, based on the income you earned there. Most states offer a credit for taxes paid to other states to prevent paying tax twice on the same income. Your tax preparer or the state form instructions will show how to claim this credit.

Do I have to file state taxes if I owe nothing?

Requirements vary by state. Some states require you to file even if you owe no tax, especially if you had income and may be due a refund. Check your state's filing requirements on the revenue department website or ask a tax preparer whether you must file.