States with no income tax on wages and salaries

Nine states collect no income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception—it taxes interest and dividend income but not wages. If you live or work in any of these nine states, you pay no state income tax on the money you earn.

This does not mean these states have no taxes. They fund schools, roads, and services through other sources: sales tax, property tax, fuel tax, and business taxes. The mix varies by state. Nevada and Washington have high sales taxes to compensate. New Hampshire relies heavily on property tax. Understanding what you do pay matters as much as knowing what you do not.

Moving to a no-income-tax state can shift your overall tax burden, but the direction depends on your situation. A high earner in a high-tax state might save thousands. A retiree on a fixed income might pay more in property or sales tax than they saved on income tax. The math is personal.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax on any income; New Hampshire taxes investment income but not wages.
  • States without income tax fund services through sales tax, property tax, and business taxes, which may be higher than in income-tax states.
  • Moving for tax reasons requires comparing your total state tax burden—income, sales, property, and any other taxes—not just income tax alone.
  • Retirement income treatment varies: some no-income-tax states exempt pensions and Social Security, while others tax business income differently than wages.
  • Your residency status for tax purposes depends on where you live and work, not where you own property or have a mailing address.

How state income tax works in these nine states

In Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming, the state government straightforward does not tax your paycheck, investment returns, or business profits. You file a federal return to the IRS as usual, but you file nothing to the state on income. This applies whether you are a resident, work there, or both.

New Hampshire is different. It taxes interest income and dividend income at 5 percent, but wages and salaries are untaxed. If you live on investment returns or rental income, New Hampshire taxes that. If you work for a paycheck, you do not pay state income tax on it.

The absence of income tax does not mean the state ignores your finances. Some states track business income for licensing or regulatory purposes. Others tax specific types of income—capital gains, for example—differently. Check your state's rules if you have income beyond a regular paycheck.

What taxes you pay instead in no-income-tax states

States without income tax collect revenue through sales tax, property tax, fuel tax, and business taxes. The burden falls differently depending on how you spend and own.

Sales tax in no-income-tax states ranges widely. Washington and Tennessee have sales taxes above 9 percent. Nevada is around 8 percent. Alaska has no statewide sales tax, though some municipalities add local sales tax. If you buy a lot, you feel this tax. If you spend little, you feel it less.

Property tax also varies. New Hampshire, despite no income tax, has one of the highest property tax rates in the nation. Texas property tax is moderate to high. Alaska property tax is low. If you own a home, property tax matters to your total bill. If you rent, you do not pay it directly, though landlords pass some of it along in rent.

Fuel tax, vehicle registration, and business taxes round out the picture. A state with no income tax but high fuel tax hits commuters harder. A state with no income tax but high business taxes hits self-employed people harder. Your situation determines which taxes touch you most.

How retirement income is treated in these states

Retirees often move to no-income-tax states expecting to pay less. The reality depends on what kind of retirement income you have.

In most no-income-tax states, pensions and Social Security are not taxed—because there is no income tax to begin with. Tennessee and New Hampshire tax some types of retirement income. Tennessee taxes interest and dividend income but not pensions or Social Security. New Hampshire taxes interest and dividends but not pensions or Social Security. Check the specific state if you live on investment returns.

Military pensions, federal pensions, and private pensions are generally untaxed in these states. Withdrawals from retirement accounts like IRAs and 401(k)s are also untaxed at the state level. The federal government still taxes these withdrawals, but the state does not add a second layer.

A retiree with a pension and Social Security in Florida or Texas pays no state income tax on either. The same retiree in a high-income-tax state like California or New York would owe state tax on both. Over decades, the difference is substantial.

Establishing residency for tax purposes

Moving to a no-income-tax state only saves you taxes if you actually become a resident there for tax purposes. Residency is not about owning a vacation home or keeping a mailing address. It is about where you live and where you work.

Most states define residency as living there for more than half the year, or having a permanent home there and spending significant time there. If you move to Florida but spend eight months a year in New York, you may still owe New York income tax. If you move to Texas and work there full-time, you are a Texas resident for tax purposes, even if you own a house in another state.

Some states are aggressive about tracking residency. If you claim to have moved but still work in your old state, that state may challenge your residency claim. Keep records: a lease or deed, utility bills, driver's license, voter registration, and bank statements all show where you actually live. If you are serious about the move, make it real.

Military members and their families have special rules. Active-duty service members can often claim residency in their home state regardless of where they are stationed. Check with your branch's tax office if you are military.

Comparing total tax burden across states

Deciding whether to move for taxes requires adding up all the taxes you actually pay, not just income tax.

A single person earning $75,000 in California pays roughly 9.3 percent state income tax, plus sales tax on purchases. The same person in Texas pays no income tax but pays sales tax on everything. If they spend half their income, the sales tax burden is lower. If they spend most of it, the sales tax burden is higher.

A retiree with $40,000 in pension income and $20,000 in investment income in New York pays state income tax on all of it. In Florida, they pay nothing. In New Hampshire, they pay tax on the $20,000 in investment income but nothing on the pension. The savings depend on the mix of income.

A homeowner in a high-property-tax state like New Hampshire may pay more in property tax than they save in income tax. A renter in Washington may pay more in sales tax than they save in income tax. There is no universal answer. Calculate your own situation using your actual income, spending, and property ownership.

States with partial income tax breaks

Some states do not appear on the no-income-tax list but offer significant breaks on certain income types. These are not the same as having no income tax, but they matter if you have specific income sources.

Mississippi, Louisiana, and Illinois exempt military pensions from state income tax. South Carolina exempts some retirement income. These states still tax wages and most other income, so they are not true no-income-tax states. But if you are military or retired, the break can be substantial.

A few states exempt certain types of business income or capital gains. These breaks are narrower and more complex. If your income comes from a specific source—farming, fishing, or a particular business type—research whether your state offers a break. Your state's revenue department website lists these exemptions.

Frequently Asked Questions

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

You must establish residency there for tax purposes, which typically means living there more than half the year and having your permanent home there. straightforward owning property or keeping a mailing address in a no-income-tax state does not count. If you work remotely for a company in a high-tax state, your old state may still claim you owe taxes until you prove you have moved.

Will I save money by moving to a no-income-tax state?

It depends on your total tax picture. Compare your current income tax, sales tax, and property tax with what you would pay in the new state. A high earner with low spending and no property may save thousands. A retiree with a home may pay more in property tax than they save on income tax. Calculate your specific situation before moving.

Do no-income-tax states tax capital gains?

Most do not, because capital gains are a form of income. However, a few states like Tennessee and New Hampshire tax investment income including capital gains. Check the specific state. Federal capital gains tax still applies regardless of where you live.

Can I claim residency in a no-income-tax state if I own a vacation home there?

No. Owning property does not establish residency for tax purposes. You must live there as your primary home and spend significant time there. If you own a vacation home in Florida but live in New York most of the year, you are a New York resident for taxes and owe New York income tax.

What happens to my old state taxes if I move?

Your old state may tax you for the part of the year you lived there before moving. You typically file a part-year resident return showing income earned while you were there. Once you establish residency in the new state, the old state stops taxing you. Keep documentation of your move date and new address.