Nine states have no income tax at all
Nine U.S. states do not tax wages, salaries, or investment income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. If you live or work in one of these states, you keep more of what you earn because the state does not take a cut from your paycheck or investment returns.
This does not mean these states have no taxes. They fund schools, roads, and services through other sources — mainly sales tax, property tax, and business taxes. The mix varies by state. For example, Tennessee and Washington have high sales taxes to make up for lost income tax revenue. Alaska has oil revenue. New Hampshire taxes investment income but not wages, making it a partial exception.
If you are considering a move or wondering whether your state taxes your income, this guide explains which states have no income tax and how they fund government instead.
Key Takeaways
- Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire collect no state income tax on wages or salaries.
- New Hampshire taxes investment income and retirement distributions but not wages, so it is not a full no-income-tax state.
- States without income tax typically rely on sales tax, property tax, and business taxes to fund services, which can be higher than in income-tax states.
- Moving to a no-income-tax state can reduce your state tax burden, but the overall cost of living depends on property values, sales tax rates, and local fees.
The nine states with no income tax
Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax on wages, salaries, or investment income. New Hampshire also has no income tax on wages, but it does tax interest, dividends, and retirement distributions at a flat 5 percent rate, so it occupies a middle ground.
These nine states are spread across the country — not clustered in one region. Alaska and Washington are in the Pacific Northwest. Florida and Texas are in the South. Nevada and Wyoming are in the Mountain West. Tennessee is in the Southeast. South Dakota is in the Great Plains. This geographic spread means no-income-tax states are accessible to people in different parts of the country, though the cost of living and job market vary widely.
If you work remotely and can live anywhere, moving to one of these states could reduce your state tax liability. If you are self-employed or have significant investment income, the savings can be substantial. However, you should also compare property taxes, sales taxes, and the overall cost of living before deciding.
How no-income-tax states fund government services
States without income tax must raise revenue another way. The most common sources are sales tax, property tax, and business taxes. Some states lean heavily on one source; others spread the burden across several.
Washington and Tennessee have some of the highest sales tax rates in the country — around 9 to 9.5 percent — to compensate for lost income tax. Nevada also has a high sales tax. Alaska has the lowest sales tax among no-income-tax states but benefits from oil revenue and a permanent fund dividend paid to residents. Florida relies on sales tax and tourism-related taxes. Texas uses sales tax and business taxes. Wyoming and South Dakota have lower overall tax burdens because they have smaller populations and lower service demands.
Property taxes also vary. New Hampshire and Texas have relatively high property taxes. Florida has moderate property taxes. Wyoming and South Dakota have lower property taxes. When you compare states, add up income tax, sales tax, and property tax to see the true picture — a state with no income tax might still have a higher total tax burden than a state with income tax if sales and property taxes are steep.
How income tax works in the other 41 states
The remaining 41 states all collect some form of state income tax. Tax rates, brackets, and what counts as taxable income vary widely. Some states tax only wages; others tax wages, investment income, and retirement distributions. Some have a flat tax rate; others use progressive brackets where higher earners pay a higher percentage.
A few states have very low income tax rates — Louisiana, Mississippi, and Pennsylvania, for example, have flat or low-bracket rates. Others, like California and New York, have higher top rates that explore to high earners. If you are comparing states for tax purposes, look up the specific rate and brackets for your income level rather than assuming one state is always better than another.
If you move from a state with income tax to a no-income-tax state, you will stop paying that state's income tax once you establish residency. Residency rules vary — some states require you to live there for a full calendar year before you are considered a resident for tax purposes. Check your new state's rules before you move.
Tax implications of moving to a no-income-tax state
If you move to a no-income-tax state, you will owe no state income tax on wages earned after you become a resident. However, your old state may still claim you owe tax on income earned while you lived there. You will owe tax to your old state for the portion of the year you lived there, then switch to your new state's rules for the rest of the year.
Some states are aggressive about tracking people who move away. If you have a pension or retirement account, your old state may try to tax distributions even after you move. This is a gray area legally — some states have lost court cases over this — but it can create disputes. If you have a large pension or retirement account and are moving to a no-income-tax state, consider consulting a tax professional to understand your old state's rules.
Remote workers should also check whether their employer's state or their home state claims the right to tax their wages. Most states tax wages based on where the work is performed, but rules are still evolving for remote work. If you work for a company in a high-tax state but live in a no-income-tax state, you typically owe tax only to your home state, but confirm this with your employer's payroll department.
Comparing total tax burden across states
Income tax is only one piece of your tax bill. To compare states fairly, you need to look at the full picture: income tax, sales tax, property tax, and any local taxes. A state with no income tax but a 10 percent sales tax and high property taxes might cost you more overall than a state with a 5 percent income tax and lower sales and property taxes.
Your personal situation also matters. If you own a home, property tax is a big factor. If you spend a lot on goods and services, sales tax matters more. If you have investment income, you need to know how each state taxes it. If you are retired and live on a pension, you need to know whether the state taxes pensions. There is no one-size-fits-all answer — you have to run the numbers for your specific income and spending.
Online tax calculators can help, but they are rough estimates. For a serious move, a tax professional in your new state can give you a clearer picture of what you will actually owe.
States with special tax treatment for retirees
Some states without income tax have additional benefits for retirees. Alaska, for example, pays residents an annual dividend from oil revenue — the amount varies by year but is typically $1,000 to $2,000 per person. This is not a tax break, but it is money in your pocket.
Other no-income-tax states do not tax pensions or Social Security, which can be a major advantage if you are retired. Texas, for example, does not tax pensions or Social Security. Florida does not tax pensions. Tennessee taxes neither pensions nor Social Security. If you are planning retirement and considering a move, check whether your new state taxes the specific sources of income you will rely on.
States with income tax often have exemptions for retirees too — some do not tax pensions, others do not tax Social Security, and a few exempt retirement income entirely. Again, you have to compare the specific rules for your situation.
Frequently Asked Questions
Does moving to a no-income-tax state save me money?
It depends on your total tax burden. If you earn a high income, eliminating state income tax can save thousands per year. But if your new state has high sales tax or property tax, those savings may shrink. Calculate your total tax bill in both states before you move.
Can my old state still tax me after I move?
Your old state can tax income you earned while you lived there. For income earned after you move and become a resident of your new state, you typically owe tax only to your new state. However, some states dispute this for pensions and retirement accounts. If you have a large pension, consult a tax professional.
Does New Hampshire have no income tax?
New Hampshire has no tax on wages, but it does tax interest, dividends, and retirement distributions at 5 percent. So it is a partial no-income-tax state. If you earn wages and have little investment income, you will owe no state tax. If you have significant investment income or a pension, you will owe tax on those.
Which no-income-tax state has the lowest overall taxes?
Alaska and Wyoming generally have the lowest overall tax burdens because they have low sales tax and property tax. Alaska also pays residents an annual dividend. However, the cost of living in both states is high, which offsets some tax savings. Compare your specific situation rather than assuming one state is always cheapest.
Do I have to live in a no-income-tax state to benefit from it?
Yes, you must be a resident of the state to avoid its income tax. Residency rules vary, but most states require you to live there for a full calendar year. Some states also look at where you own property, where you are registered to vote, and where your driver's license is issued. Check your new state's residency rules before you move.