Nine states collect no state income tax on wages or salaries

Nine U.S. states have no income tax on 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 interest and dividend income but not wages. If you live or work in one of these states, you will not owe state income tax on your paycheck, though you will still owe federal income tax and may owe local taxes depending on your city or county.

The absence of state income tax does not mean these states collect no revenue. Most fund their budgets through sales tax, property tax, corporate tax, or some combination. The tax burden you actually face depends on where you spend money and own property, not just where you earn it.

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.
  • States without income tax typically rely on sales tax, property tax, or corporate tax to fund services.
  • Moving to a no-income-tax state does not reduce your federal tax burden or change what you owe on investments.
  • Some no-income-tax states have higher sales or property taxes that may offset the savings from no income tax.

How the nine no-income-tax states fund their budgets

Alaska funds state operations primarily through oil revenue and corporate taxes. The state also collects sales tax in some municipalities, though not statewide. Because Alaska's oil wealth is substantial, the state has historically been able to operate with lower overall tax rates than many other states.

Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming all rely heavily on sales tax. Florida's sales tax starts at 6 percent and can reach 7.5 percent depending on the county. Washington has one of the highest sales tax rates in the nation at 6.5 percent statewide, with some counties adding local tax that pushes the total above 10 percent. These states also collect property tax, though rates vary by county and municipality.

Tennessee and Texas also tax corporate income, which helps offset the lack of personal income tax. Wyoming has no corporate income tax either, making it one of the lowest-tax states overall, though it compensates through property tax and excise taxes on specific goods.

New Hampshire's partial income tax — interest and dividends only

New Hampshire taxes interest income and dividend income at 5 percent but does not tax wages or salaries. This distinction matters if you receive investment income from stocks, bonds, or savings accounts. If your income comes entirely from employment, you owe no New Hampshire state tax.

New Hampshire funds its budget through sales tax (6 percent), property tax, and business taxes. The state has no general sales tax on most goods, which is unusual among states that lack income tax. Instead, it taxes meals and lodging at 9 percent and collects revenue from business-related taxes and licensing fees.

What moving to a no-income-tax state actually saves you

The savings depend on your income level and what you spend. If you earn $60,000 per year and live in a state with a 5 percent income tax, you would owe $3,000 in state income tax. Moving to Texas or Florida would eliminate that $3,000 obligation. However, if you then spend $40,000 per year on taxable goods in a state with 7 percent sales tax, you would pay $2,800 in sales tax instead — nearly offsetting the income tax savings.

Property owners in no-income-tax states often face higher property tax rates. Texas property tax averages around 1.6 percent of home value annually, which is above the national average. Florida's property tax averages around 0.8 percent but varies significantly by county. If you own a $300,000 home in Texas, you might pay $4,800 per year in property tax alone.

The real savings appear most clearly for high-income earners who spend less than they make. Someone earning $200,000 per year who saves half of it will see substantial benefit from no income tax, because the sales tax and property tax they pay will be a smaller percentage of their total income.

Federal income tax still applies in all states

State income tax and federal income tax are separate obligations. Living in Alaska, Texas, or any other no-income-tax state does not reduce what you owe the federal government. You will still file a federal return and pay federal tax based on your income level, filing status, and deductions.

The federal tax code is the same everywhere. Your federal tax bracket, standard deduction, and tax credits do not change because you live in a state without income tax. The only difference is that you will not also owe a state return to your state government.

Local taxes in no-income-tax states

Some cities and counties in no-income-tax states collect local income tax or local payroll taxes. This is less common than state income tax but does exist. For example, some municipalities in Ohio and Pennsylvania collect local income tax, though those states do have state income tax. In no-income-tax states, local income tax is rare but worth checking if you are moving to a specific city.

More common are local sales taxes and property taxes that vary by municipality. A county in Florida might add 1 percent to the state sales tax, bringing the total to 7.5 percent. A city in Washington might add local property tax on top of the county rate. Always check the specific city and county tax rates where you plan to live, not just the state rate.

States with low income tax (but not zero)

If you are considering a move partly for tax reasons, a few other states have very low income tax rates worth knowing about. Montana has no tax on retirement income and a top income tax rate of 6.9 percent. Mississippi's top rate is 5 percent. Louisiana offers tax breaks on certain types of income that can lower your effective rate significantly.

These states still require you to file a state return and pay income tax, but the rates are lower than high-tax states like California (13.3 percent top rate) or New York (10.9 percent top rate). The difference between a 5 percent state tax and zero can be meaningful, but it is smaller than the difference between zero and 10 percent.

Frequently Asked Questions

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

You must be a resident of the state to avoid its income tax. Most states define residency as living there for more than half the year or having a permanent home there. straightforward working in a no-income-tax state while living elsewhere usually means you still owe income tax to your home state. Some states tax nonresidents on income earned within their borders, though no-income-tax states do not.

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

Yes, if you actually live in that state. Your employer's location does not determine which state taxes your income — your state of residency does. If you move to Texas and establish residency there, Texas will not tax your income even if your employer is in New York. However, your former state may still try to tax you if you have not clearly established residency elsewhere, so keep records of your move.

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

That depends on your spending and property ownership. Wyoming has no income tax, no corporate tax, and relatively low sales tax (4 percent), making it competitive for high earners. Alaska has no sales tax statewide and no income tax, but property tax varies. Florida has no income tax and moderate property tax, but higher sales tax. Compare the specific rates for your city and county.

Does New Hampshire's lack of wage tax make it better than other no-income-tax states?

Not necessarily. New Hampshire taxes investment income at 5 percent, which other no-income-tax states do not. If you earn income from stocks or bonds, you would owe tax in New Hampshire but not in Texas or Florida. New Hampshire is better only if your income comes entirely from wages and you do not have significant investment income.

If I retire to a no-income-tax state, do I owe less tax on my pension or Social Security?

You will owe no state income tax on any income in a no-income-tax state, including pensions and Social Security. However, you will still owe federal income tax on these sources if your total income exceeds the federal threshold. Some states with income tax exempt retirement income entirely, so compare both state and federal tax before deciding to move based on retirement income alone.