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 wages or salaries. New Hampshire taxes only interest and dividend income, not wages. The other eight tax neither wages nor investment income. If you live or work in one of these states, you keep more of your paycheck than residents of states with income tax.

The trade-off varies by state. Some make up the lost tax revenue through higher sales taxes, property taxes, or business taxes. Others rely more heavily on tourism, natural resources, or gambling revenue. A state with no income tax is not necessarily cheaper overall — your total tax burden depends on what you buy, where you own property, and what you earn.

Moving to a no-income-tax state for tax reasons only makes sense if you have substantial wage income or investment returns. If you earn $30,000 a year, the difference between a 5% state income tax and zero is $1,500 annually — real money, but not enough to offset moving costs and higher housing prices in states like Florida or Nevada. If you earn $150,000, the difference is $7,500 a year, which changes the math.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming tax neither wages nor investment income; New Hampshire taxes investment income but not wages.
  • No-income-tax states often charge higher sales tax, property tax, or business tax to fund schools and services.
  • Moving to save on income tax makes financial sense only if you earn enough that the annual savings exceed moving costs and any higher cost of living.
  • Your state of residence for tax purposes is usually where you live for more than half the year, not where you work.

Alaska: No income tax, high cost of living

Alaska taxes neither wages nor investment income. The state funds itself partly through oil revenue and the Alaska Permanent Fund, which pays residents an annual dividend (typically $1,000 to $2,000 per person, varying by year and fund performance). This dividend is not taxable income.

Alaska has no state sales tax, but many municipalities charge local sales tax ranging from 0% to 7.5%. Property taxes are low to moderate. The real cost of living comes from shipping — groceries, fuel, and goods cost significantly more in Alaska than in the lower 48 states because nearly everything arrives by plane or boat. Housing in Anchorage and Juneau is expensive.

Florida: No income tax, moderate sales tax

Florida taxes neither wages nor investment income. The state charges a 6% sales tax, and counties can add up to 1.5%, bringing the total to as high as 7.5%. Property taxes are moderate, averaging around 0.7% of home value statewide, though they vary by county.

Florida attracts retirees and high-income earners partly because of the income tax advantage. Housing costs vary widely — Miami and Tampa are expensive, while inland and northern areas are cheaper. If you own rental property or a business, Florida's lack of income tax means you keep more profit, which is why many entrepreneurs and investors establish residency there.

Nevada: No income tax, high sales tax

Nevada taxes neither wages nor investment income. The state charges 6.85% sales tax statewide, and counties add local sales tax, bringing totals to 7.375% to 8.375% depending on location. Property taxes are low, around 0.6% of home value.

Nevada's economy depends heavily on Las Vegas and Reno tourism and gambling revenue. Housing in Las Vegas is relatively affordable compared to California or Florida, which is why some people relocate for both the tax advantage and lower housing costs. If you spend little and invest most of your income, Nevada's lack of income tax saves you more than the sales tax costs.

South Dakota, Tennessee, Texas, Washington, and Wyoming: No income or sales tax variations

South Dakota taxes neither wages nor investment income. Sales tax is 4.5% statewide, plus local options up to 2%, for a total of 4.5% to 6.5%. Property taxes are moderate. The state has no major city comparable to Miami or Las Vegas, so cost of living is generally lower.

Tennessee taxes neither wages nor investment income but does tax interest and dividend income at 1% to 2% (though this is being phased out). Sales tax is 7% statewide, plus local options up to 2.75%, for a total of 7% to 9.55%. Property taxes are low. Nashville and Memphis have lower housing costs than major Florida or Nevada cities.

Texas taxes neither wages nor investment income. Sales tax is 6.25% statewide, plus local options up to 2%, for a total of 6.25% to 8.25%. Property taxes are high, averaging around 1.6% of home value — among the highest in the nation. This is the trade-off: no income tax, but substantial property tax if you own a home.

Washington taxes neither wages nor investment income. Sales tax is 6.5% statewide, plus local options up to 3.9%, for a total of 6.5% to 10.25% in some areas. Property taxes are low to moderate. Seattle and the Puget Sound region have high housing costs, but eastern Washington is cheaper.

Wyoming taxes neither wages nor investment income. Sales tax is 4% statewide, plus local options up to 2%, for a total of 4% to 6%. Property taxes are low. Wyoming has no major metropolitan area, so overall cost of living is low, but job opportunities outside energy, agriculture, and tourism are limited.

New Hampshire: Wages untaxed, investment income taxed

New Hampshire does not tax wages or salaries. It does tax interest and dividend income at 5%. Sales tax does not exist — New Hampshire has no state sales tax. Property taxes are high, averaging around 2.1% of home value, among the highest in the nation.

New Hampshire's advantage applies only to wage earners. If you live on investment income, dividends, or retirement account withdrawals, you pay tax in New Hampshire. If you work and earn a salary, you pay no state income tax, but you offset that with high property tax if you own a home.

How state residency for taxes is determined

Your state of residence for tax purposes is generally the state where you live for more than half the year. If you own a home in Florida but work in New York for nine months, you are a New York resident for tax purposes and owe New York income tax. straightforward owning property in a no-income-tax state does not make you a resident there.

If you move to a no-income-tax state, you need to establish residency by living there for more than half the year, registering to vote, getting a driver's license, and registering your vehicle. Keep records — pay stubs, utility bills, lease or deed, and voter registration — to prove residency if your previous state challenges the move.

Some high-income earners have attempted to claim residency in multiple states or to move to a no-income-tax state while maintaining a home elsewhere. Tax authorities scrutinize these cases. If you spend significant time in a high-tax state for work, you may owe tax there regardless of where you claim residency.

Frequently Asked Questions

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

Yes. You must live in the state for more than half the year and establish residency there. straightforward owning property or having a mailing address does not count. If you work in a high-tax state but live in a no-income-tax state, you typically owe tax only to the state where you work, not to the no-income-tax state.

Which no-income-tax state has the lowest overall taxes?

That depends on your situation. Wyoming and South Dakota have low sales tax and low property tax, making them cheapest for most people. Texas has high property tax, which offsets the income tax savings for homeowners. Florida and Nevada have moderate property tax but higher sales tax. Compare your specific spending and housing plans against each state's tax rates.

Can I claim residency in a no-income-tax state if I work remotely for a company in a high-tax state?

Usually yes, if you live in the no-income-tax state for more than half the year and establish residency there. Some states tax remote workers based on where the company is located, not where the worker lives, but most do not. Check the specific rules of both your work state and your home state, or consult a tax professional if you earn a high income.

If I retire and move to a no-income-tax state, do I owe tax on my retirement income?

It depends on the state and the type of income. Most no-income-tax states do not tax Social Security, pensions, or 401(k) withdrawals. New Hampshire taxes interest and dividends but not wages or retirement account withdrawals. Tennessee taxes interest and dividends but is phasing out that tax. Confirm the rules for the specific state and income type before you move.

What if my employer requires me to work in a high-tax state part of the year?

You owe income tax to the state where you work, regardless of where you live. If you live in Florida but work in New York for four months a year, you owe New York tax on income earned in New York. Some states offer credits for taxes paid to other states, but you cannot avoid tax in your work state by living elsewhere.