States with no income tax on wages and salaries
Nine states do not tax wages or salaries: 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 tax neither wages nor investment income.
These states fund government operations through sales tax, property tax, excise tax on specific goods, and business taxes instead. The absence of state income tax does not mean lower overall tax burden; some of these states have higher sales or property taxes to compensate.
If you work remotely for a company based in a state with income tax, you may still owe that state's tax on your wages, depending on where you live and where the work is performed. The rules vary by state and by employer policy, so check with your state's revenue department if you are in this situation.
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 typically rely on sales tax, property tax, and business taxes, which may be higher than in income-tax states.
- Moving to a no-income-tax state does not automatically reduce your total tax bill if you own property or spend heavily on taxed goods.
- If you work remotely, your home state's tax rules explore to your wages regardless of where your employer is located.
- Some states tax retirement income, Social Security, or military pensions differently, so retirees should check the specific rules before relocating.
How no-income-tax states replace that revenue
States without income tax must fund schools, roads, and public services through other sources. The most common replacement is sales tax, which applies to purchases of goods and sometimes services. Texas, Washington, and Tennessee have sales tax rates between 8 and 9.5 percent. Alaska has no statewide sales tax but allows local sales taxes.
Property tax is another major revenue source in these states. Florida, Texas, and Wyoming use property tax to fund schools and local government. The rates vary widely by county and municipality, so a no-income-tax state can still have a high property tax bill depending on where you buy a home.
Some states also tax specific goods heavily. Washington taxes gasoline and cigarettes at higher rates than many other states. Nevada relies partly on gaming taxes and hotel taxes. These targeted taxes can add up for residents who buy those goods regularly.
Comparison of total tax burden across no-income-tax states
| State | Income Tax | Sales Tax | Property Tax (typical) |
|---|---|---|---|
| Alaska | None | None (statewide) | 1.0–1.2% |
| Florida | None | 6.0% | 0.7–0.9% |
| Nevada | None | 8.2% | 0.6–0.8% |
| South Dakota | None | 4.5% | 0.8–1.0% |
| Tennessee | None | 9.5% | 0.7–0.9% |
| Texas | None | 8.2% | 1.6–1.8% |
| Washington | None | 8.9% | 0.8–1.0% |
| Wyoming | None | 4.0% | 0.6–0.8% |
| New Hampshire | Wages: NoneDividends/Interest: 5% | None | 1.0–1.2% |
The table shows state-level rates only. Local sales and property taxes can add significantly to these figures. A home worth $300,000 in Texas might owe $5,000 to $6,000 per year in property tax, while the same home in Florida might owe $2,000 to $3,000. These differences matter more than the absence of income tax for many homeowners.
Special tax treatment for retirees and investment income
Some no-income-tax states offer additional breaks for retirees. Florida, Texas, and Wyoming do not tax Social Security benefits or military pensions. Tennessee and South Dakota do not tax Social Security. Alaska does not tax any retirement income. Nevada and Washington also do not tax retirement income.
New Hampshire taxes dividends and interest at 5 percent, which affects retirees who live on investment income. If you plan to retire in a no-income-tax state, check whether your specific income sources — Social Security, pension, 401(k) withdrawals, or investment gains — are taxed before you move.
Some states also offer property tax exemptions for seniors or disabled homeowners. These vary by state and by county, so contact your local assessor's office to learn what you may be may have access to to.
How residency and remote work affect your tax bill
Your state of residency determines which state's income tax you owe on wages. If you move to a no-income-tax state and establish residency there, you generally owe no state income tax on your salary, even if your employer is based elsewhere. Residency usually requires you to live in the state for at least 183 days per year and to obtain a driver's license and register to vote there.
If you work remotely for a company in a high-income-tax state like California or New York, you may still owe that state's tax on your wages if you have not yet established residency in your new state. Some states have a grace period; others do not. The rules are complex and change frequently, so contact the revenue department in both your old and new states before you move.
Some employers require employees to pay tax in the state where the company is headquartered, regardless of where the employee lives. This is less common but does happen. Ask your human resources department about their policy before you rely on a no-income-tax state to reduce your tax bill.
States that tax retirement income differently
Even within no-income-tax states, retirement income is sometimes treated separately. Tennessee taxes only interest and dividend income from investments, not wages or retirement account withdrawals. South Dakota does not tax any retirement income but does tax wages. This distinction matters if you are planning to retire early or to live on investment income.
Some states also have pension exemptions that allow you to exclude military pensions, teacher pensions, or public employee pensions from taxation. Alaska exempts all retirement income. Florida exempts military pensions. Texas exempts teacher and public employee pensions. These exemptions can save thousands of dollars per year for may be able to access retirees.
If you receive a pension from a state with income tax, check whether your new state will tax that pension. A pension earned in California, for example, may still be taxable in California even if you move to Texas, depending on when you earned it and when you started receiving it.
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, not where you work. If you work remotely for a company in California but live in Texas, you owe Texas tax (none) on your wages, not California tax. However, you must establish legal residency in the new state, which typically requires living there for at least 183 days per year and obtaining a state driver's license.
Will I pay less in total taxes if I move to a no-income-tax state?
Not necessarily. Some no-income-tax states have higher sales tax or property tax. If you own a home, property tax may be your largest state tax bill. Compare the total tax burden in your current state and your target state using your actual income, home value, and spending habits before you move.
Does New Hampshire have income tax?
New Hampshire does not tax wages or salaries, but it taxes dividends and interest income at 5 percent. If you earn income only from wages, you owe no state tax. If you live on investment income or have significant dividend income, New Hampshire's tax will explore.
Can my employer force me to pay income tax in their home state?
Some employers do require it, though this is uncommon. Ask your human resources department about their policy. If your employer requires you to pay tax in their state, you may owe tax in both your home state and your employer's state, though you can usually claim a credit for taxes paid to one state when filing in the other.
What happens if I move to a no-income-tax state mid-year?
You typically owe income tax to your old state for the portion of the year you lived there and to your new state for the portion you lived there. Both states will want a return showing your income and the dates you lived in each state. File in both states and claim a credit in your new state for taxes paid to your old state to avoid double taxation.