Nine states collect no income tax on wages or salaries
Nine states do not tax wages, salaries, or other earned income: 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 taxes on fuel and alcohol, and business taxes instead. The absence of income tax does not mean lower overall tax burden; some no-income-tax states have higher sales or property taxes to compensate.
If you are considering a move or managing income across state lines, understanding which states tax what matters for your actual take-home pay and long-term finances.
Key Takeaways
- Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire have no state income tax on wages.
- New Hampshire taxes investment income but not wages, making it a partial exception among no-income-tax states.
- States without income tax typically rely on sales tax, property tax, and business taxes, which may be higher than in income-tax states.
- Your actual tax burden depends on where you spend money and own property, not just whether the state taxes wages.
The eight states with no income or investment tax
Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming tax neither wages nor investment income. If you earn a salary, receive dividends, or collect capital gains in any of these states, the state government takes no cut.
These states are spread across regions — Alaska and Washington on the west coast, Texas in the south, Florida in the southeast, and Nevada, South Dakota, Tennessee, and Wyoming in between. They are not clustered in one region, so geography alone does not determine tax policy.
Each state still collects revenue. Texas and Washington rely heavily on sales tax. Alaska has oil revenue and a smaller population to fund. Florida depends on sales tax and tourism-related revenue. The mix varies, but none of these nine states use income tax as a revenue source.
New Hampshire: wages untaxed, investment income taxed
New Hampshire does not tax wages or salaries, but it does tax interest and dividend income at 5 percent. This makes it neither fully a no-income-tax state nor a traditional income-tax state.
If you work in New Hampshire and earn a paycheck, that income is not taxed by the state. If you own stocks, bonds, or mutual funds and receive dividends or interest, New Hampshire taxes that income. This distinction matters if you are retired and living on investment income, or if you have significant savings generating returns.
New Hampshire also does not tax capital gains — profit from selling stocks or property — so the tax applies only to ongoing investment income, not to one-time sales.
How no-income-tax states fund government services
States without income tax must raise revenue elsewhere. The most common sources are sales tax, property tax, excise taxes on specific goods, and business taxes.
Florida and Washington have high sales taxes — around 6 to 10 percent depending on the county — to offset the lack of income tax. Tennessee also relies on sales tax. Texas uses sales tax and business taxes. Alaska has lower sales tax but benefits from oil revenue and a smaller population. Nevada has sales tax and gaming taxes.
Property taxes vary widely within these states. Some counties in Florida and Texas have lower property taxes than northern states, while others are comparable. Wyoming and South Dakota have lower property taxes overall, which is one reason they attract residents.
The total tax burden — income, sales, and property combined — is not automatically lower in no-income-tax states. A person who earns $60,000 and spends most of it locally may pay more in sales tax in Florida than in income tax in a neighboring state.
When moving to a no-income-tax state affects your taxes
If you move to one of these states, your state income tax obligation changes based on where you work and where you are considered a resident. Most states tax income earned within their borders, regardless of where you live. If you move to Florida but work remotely for a company in New York, you may still owe New York income tax on that salary.
Residency is determined by factors like where you spend most of the year, where you own a home, and where you maintain a driver's license. Moving your residence to a no-income-tax state and changing your driver's license usually establishes residency there, but the rules vary by state and by the state you are leaving.
If you are retiring and moving to a no-income-tax state, the impact depends on your income sources. Pension income, Social Security, and retirement account withdrawals may be taxed differently in your new state. Some no-income-tax states exempt retirement income entirely, while others do not. Tennessee, for example, taxes retirement income but not wages — the opposite of most states.
States that tax only specific types of income
Beyond the nine no-income-tax states, a few others tax only certain income types. Tennessee taxes interest and dividend income but not wages — similar to New Hampshire but reversed. Illinois exempts retirement income and does not tax wages from pensions or retirement accounts, though it does tax other earned income.
These partial-tax states create situations where your tax bill depends entirely on what kind of money you earn. A retiree in Tennessee pays no state tax on a pension but would pay tax on investment income. A wage earner in Tennessee pays no state tax at all.
If you are considering a move or managing income across states, the type of income you receive matters as much as the state you choose.
How to verify your state's tax status
Your state's tax department website lists what income is taxed and at what rate. The IRS does not manage state taxes, so you cannot find this information on IRS.gov. Each state maintains its own revenue or taxation department.
If you are moving or working across state lines, contact the tax department of both your current state and the state you are moving to. They can tell you whether you owe tax on your specific income type and what documentation you need to file.
If you work remotely, ask your employer which state they withhold taxes for. Some employers withhold based on where the employee lives; others withhold based on where the company is located. Knowing this before you move prevents surprises at tax time.
Frequently Asked Questions
If I move to Texas, do I stop paying income tax when ready?
You stop owing Texas income tax once you establish residency there, usually by moving your residence and updating your driver's license. However, you may still owe income tax to your previous state for the portion of the year you lived there. If you worked remotely for an out-of-state employer, that employer's state may also tax your income depending on their rules.
Does New Hampshire tax retirement income?
New Hampshire does not tax wages or pensions, but it does tax interest and dividend income at 5 percent. If you are retired and living on pension payments, you owe no state tax. If you are living on investment income from stocks or bonds, you owe the 5 percent tax on that income.
Are property taxes lower in no-income-tax states?
Not necessarily. Property taxes vary by county within each state and are not directly tied to whether the state has income tax. Some counties in Texas and Florida have low property taxes, while others are comparable to northern states. Wyoming and South Dakota tend to have lower property taxes overall, but this varies by location.
If I work in a no-income-tax state but live in another state, which state taxes my income?
Most states tax income earned within their borders. If you work in Texas but live in Oklahoma, Texas does not tax your income because you do not live there, but Oklahoma may tax it because you do. The rules vary by state, so contact both state tax departments to confirm your obligation.
Does moving to a no-income-tax state save money on taxes?
Not automatically. Your total tax burden includes income, sales, and property taxes. A state without income tax may have higher sales or property taxes. Whether you save money depends on your income type, how much you spend locally, and what property you own. Compare your specific situation in both states before moving.