Nine states collect no income tax on wages or salaries

Nine U.S. states do not tax wages, salaries, or investment income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception—it taxes only interest and dividend income, not wages. If you live or work in one of these states, you keep more of your paycheck than residents of states with income tax.

This does not mean these states have no taxes at all. They fund schools, roads, and services through sales tax, property tax, corporate tax, and other fees. The difference is where the money comes from. A state without income tax shifts the tax burden to consumption and property ownership instead of earnings.

Whether living in a no-income-tax state saves you money depends on your total tax picture—what you spend, what you own, and what you earn. A state with no income tax but high sales tax may cost you more than a state with both. Understanding how each state funds itself helps you see the real difference.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire have no state income tax on wages.
  • New Hampshire taxes only interest and dividends, not wages, making it effectively no-income-tax for most workers.
  • States without income tax typically rely on sales tax, property tax, and corporate tax to fund services.
  • Your actual tax burden depends on what you earn, spend, and own—not income tax alone.
  • Moving to a no-income-tax state does not automatically reduce your total taxes if that state has higher sales or property taxes.

The nine states with no income tax and how they work

Alaska has no income tax and no statewide sales tax, though some cities add local sales tax. It funds government through oil revenue and corporate taxes. Property tax varies by borough.

Florida has no income tax and a 6% statewide sales tax (some counties add more). It relies on sales tax, corporate tax, and property tax. Retirees often move here specifically to avoid income tax.

Nevada has no income tax and a 6.85% statewide sales tax. It funds schools and services through sales tax, gaming taxes, and property tax. Property tax rates are relatively low compared to other states.

South Dakota has no income tax and a 4.5% statewide sales tax (counties may add more). It uses sales tax, property tax, and corporate tax. Property tax is moderate.

Tennessee has no income tax and a 9.55% statewide sales tax—one of the highest in the nation. It also taxes interest and dividends at 1% (though this is scheduled to phase out). Property tax is low.

Texas has no income tax and a 6.25% statewide sales tax (cities and counties add more, often reaching 8% or higher). It funds schools through property tax, which is substantial in most areas.

Washington has no income tax and a 6.5% statewide sales tax (local additions common). It relies heavily on sales tax and property tax. It also has a capital gains tax on certain investment sales.

Wyoming has no income tax and a 4% statewide sales tax (counties may add more). It funds government through mineral extraction taxes, property tax, and sales tax. Property tax is low.

New Hampshire has no tax on wages but taxes interest and dividend income at 5%. It has no statewide sales tax but does tax meals and rooms at 9%. Property tax is relatively high.

How no-income-tax states pay for schools and roads

States without income tax do not have fewer services—they fund them differently. The main sources are sales tax, property tax, and corporate taxes. Some states, like Alaska and Wyoming, also benefit from natural resource extraction (oil, minerals) that generates significant revenue.

Sales tax is the most visible replacement. When you buy something in Florida or Texas, you pay a higher sales tax than you would in a state with income tax. Over a year, a family that spends heavily may pay more in sales tax than they would have paid in income tax elsewhere.

Property tax is another major source. Texas and Washington have no income tax but substantial property taxes. If you own a home, you pay this tax every year regardless of income. Renters do not pay property tax directly, but landlords pass the cost along in rent.

Corporate taxes and business taxes make up the remainder. These states tax businesses that operate within their borders, which indirectly affects workers through lower business expansion or wage growth—though this effect is debated among economists.

Comparing total tax burden across states

The real question is not whether a state has income tax, but what you pay in total. A state with no income tax but 9% sales tax and high property tax may cost more than a state with 5% income tax and lower sales and property taxes.

Consider your situation. If you earn $60,000 and spend $40,000 per year, you pay income tax on $60,000 in a high-income-tax state but sales tax only on $40,000 in a no-income-tax state. If you own a home worth $300,000, property tax matters more than income tax in some cases.

The Tax Foundation and state revenue departments publish tax burden comparisons, though they vary depending on assumptions about income, spending, and property value. No single number works for everyone. A high earner with little property and low spending may benefit most from no income tax. A retiree living on investment income and owning a home may benefit less.

How income tax works if you move to or from a no-income-tax state

If you move to a no-income-tax state, you 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, others look at where you spend most of your time or where you own property. Check your new state's tax authority website for the exact rule.

If you move away from a no-income-tax state, you do not owe that state income tax on future earnings. You may owe tax to your new state starting the day you move, depending on when you establish residency there.

Remote workers face a more complex situation. If you live in a no-income-tax state but work for a company in a state with income tax, you typically owe tax to the state where you live, not where your employer is based. However, some states have tried to tax remote workers who moved away—this is an active area of tax law, and rules change. If you work remotely across state lines, consult a tax professional in your state.

Retirement income and no-income-tax states

Many people move to no-income-tax states after retirement because they live on Social Security, pensions, and investment income. Social Security is not taxed by any state. Pensions and retirement account withdrawals are taxed as income in most states, but not in the nine no-income-tax states (with New Hampshire's exception for dividends and interest).

This can make a real difference. A retiree with a $40,000 pension and $20,000 in investment income would owe state income tax in most states but not in Florida, Texas, or Nevada. Over 20 years of retirement, this adds up.

However, property tax and sales tax still explore. Florida has no income tax but charges property tax. Texas has no income tax but high property tax. Compare the full picture before moving based on tax status alone.

States that tax only certain types of income

A few states fall between the extremes. New Hampshire taxes interest and dividends at 5% but not wages. Tennessee taxes interest and dividends at 1% (phasing out) but not wages. These states are often grouped with no-income-tax states because most workers pay no state income tax on their salary.

If you live on investment income rather than wages, these states are not truly no-income-tax. A retiree drawing from a brokerage account in New Hampshire pays 5% state tax on the gains and dividends, which is lower than many states but not zero.

Frequently Asked Questions

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

No. You benefit only if you establish residency there. Residency typically means living in the state for a full calendar year and meeting other requirements like having a driver's license or registering to vote. Moving for a few months does not count. Check your target state's tax authority for exact rules.

If I work remotely for a company in California but live in Texas, which state taxes me?

You owe tax to Texas, where you live, not California. Most states tax based on residency, not where your employer is located. However, tax law on remote work is still evolving in some states. If you work across state lines, a tax professional in your state can give you a definitive answer.

Are there hidden taxes in no-income-tax states I should know about?

No hidden taxes, but less visible ones. Sales tax is straightforward to see at checkout. Property tax is billed annually. Some states also tax specific things—Washington taxes capital gains on certain stock sales, Tennessee taxes interest and dividends. Read your state's tax authority website or ask a local accountant about what applies to your situation.

Will moving to a no-income-tax state reduce my federal taxes?

No. Federal income tax is the same everywhere. State income tax and federal income tax are separate. Moving to a no-income-tax state reduces only your state taxes, not what you owe the federal government.

What if I own property in multiple states?

You pay property tax to each state where you own property. You pay income tax to the state where you live. If you own a vacation home in a no-income-tax state but live in a state with income tax, you pay income tax to your home state and property tax to both states. A tax professional can help you understand your obligations.