Nine states charge no income tax on wages, retirement income, or investment gains

Nine U.S. states do not tax income at all: 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. The other eight tax neither wages nor investment income.

These states fund government services through sales tax, property tax, excise tax on fuel and alcohol, and business taxes instead. The trade-off varies by state. Some have higher sales taxes to compensate; others rely more heavily on property tax or tourism revenue. Moving to a no-income-tax state can lower your overall tax burden, but only if you understand what you pay instead.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no income tax on any income, and New Hampshire taxes only interest and dividends.
  • States without income tax typically charge higher sales tax, property tax, or both to fund schools, roads, and services.
  • Moving to a no-income-tax state saves money only if your new state's sales and property taxes are lower than your old state's combined income and property taxes.
  • Retirement income is taxed differently in each state — some no-income-tax states still tax pensions or Social Security, so check the rules for your specific income type.
  • Your employer's location, not your home state, determines federal income tax; moving states does not change what you owe the federal government.

The eight states with zero income tax on any income

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax wages, pensions, investment gains, or any other form of personal income. If you earn $100,000 in one of these states, you owe no state income tax on that $100,000.

Alaska is unique because it also pays residents an annual dividend from oil revenue — the Permanent Fund Dividend, which ranges from roughly $1,000 to $2,000 per person per year depending on fund performance. This is not a tax benefit but a direct payment funded by state oil reserves.

The remaining seven states — Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no income tax but no oil dividend either. They fund state operations through sales tax, property tax, and business taxes.

New Hampshire: income tax on investment income only

New Hampshire taxes interest income and dividend income at 5 percent but does not tax wages, salaries, or retirement income. If you earn $60,000 in wages and $5,000 in stock dividends, you owe New Hampshire tax only on the $5,000.

This structure makes New Hampshire attractive to wage earners and retirees but not to investors who live primarily on dividends and interest. The state is phasing out even this tax — the rate is scheduled to drop to 4 percent in 2024 and lower in subsequent years, though the timeline can change with legislative action.

What these states tax instead of income

No-income-tax states replace that revenue with sales tax, property tax, excise tax, and business taxes. The mix varies widely, which is why moving to a no-income-tax state does not automatically save you money.

Florida and Nevada have no state income tax and relatively low property taxes, but both charge 6 to 7 percent sales tax. Washington charges 6.5 to 10.25 percent sales tax depending on the county. Tennessee charges 9.55 percent sales tax, the highest in the nation. Texas charges 8.25 percent sales tax and also taxes business inventory.

Alaska has no sales tax statewide, though some municipalities charge local sales tax. Property taxes in Alaska are low. South Dakota has no sales tax on groceries and charges 4.5 to 6 percent on other goods. Wyoming charges 4 percent sales tax and has low property taxes.

The real comparison is not "does this state have income tax" but "what is my total tax burden here versus where I live now." A person earning $80,000 in wages might pay less total tax in Tennessee (9.55 percent sales tax, moderate property tax) than in a state with 5 percent income tax and 2 percent property tax, depending on how much they spend and what their home is worth.

How retirement income is treated in no-income-tax states

Most no-income-tax states do not tax Social Security, pensions, or retirement account withdrawals. However, the rules differ by state and by income type, so you must check the specific rules for your situation.

Tennessee and New Hampshire both tax some forms of retirement income. Tennessee taxes income from IRAs and 401(k)s but not Social Security or pensions. New Hampshire taxes interest and dividends from retirement accounts but not the principal withdrawal itself. Florida, Alaska, Nevada, South Dakota, Texas, Washington, and Wyoming do not tax any retirement income.

If you are planning to retire and move to a no-income-tax state, contact that state's Department of Revenue or tax office and ask about the specific income sources you will have — Social Security, a pension, IRA withdrawals, or investment income. The answer determines whether the move actually saves you money.

Federal income tax still applies everywhere

Moving to a state with no income tax does not change your federal income tax. You still owe federal tax on your wages, investment gains, and retirement income, regardless of which state you live in. The federal government taxes all U.S. residents and citizens the same way.

The only federal tax advantage to living in a no-income-tax state is that you avoid paying both federal and state income tax on the same income. In a state with income tax, you pay both. In a no-income-tax state, you pay only federal tax on that income — but you may pay more in sales tax or property tax instead.

Comparing your current tax burden to a no-income-tax state

To decide whether moving makes financial sense, calculate your total tax burden in both places. Add up state income tax, local income tax (if any), sales tax on what you typically spend, and property tax on a home at the price you would pay in the new state.

Example: You earn $75,000 in wages, spend $30,000 per year on taxable goods, and own a home worth $300,000. In your current state, you pay 5 percent income tax ($3,750), 7 percent sales tax on spending ($2,100), and 1.2 percent property tax ($3,600), for a total of $9,450. In a no-income-tax state with 8 percent sales tax and 0.8 percent property tax, you would pay $2,400 in sales tax and $2,400 in property tax, for a total of $4,800 — a savings of $4,650.

But if the no-income-tax state charges 9 percent sales tax and 1.5 percent property tax, you would pay $2,700 in sales tax and $4,500 in property tax, for a total of $7,200 — a savings of only $2,250. The difference between states is large enough that you cannot assume a no-income-tax state is cheaper without doing the math for your specific situation.

Other factors beyond taxes

Tax savings are one reason to move, but not the only one. Cost of living, job market, climate, and proximity to family matter too. Some no-income-tax states have high housing costs that offset tax savings. Others have lower wages for the same work.

If you are self-employed or run a business, check the business tax structure in the state you are considering. Some no-income-tax states tax business revenue, inventory, or corporate income at rates that may be higher than the income tax you would pay elsewhere.

Frequently Asked Questions

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

No. You benefit from a state's tax laws only if you are a resident of that state. Residency is usually determined by where you spend most of your time and where you maintain a permanent home. If you work remotely for a company in a high-tax state but live in a no-income-tax state, you owe tax to the state where you live, not where your employer is located.

Can I claim residency in two states at once?

No. You have one state of residency for tax purposes. If you split time between two states, the state where you spend more than half the year typically claims you as a resident. Some states have specific rules about what counts as residency — owning property, registering to vote, or getting a driver's license. Check both states' rules if you split time.

Does moving to a no-income-tax state affect my federal tax refund?

No. Your federal tax refund depends on your federal income tax withholding and your federal tax liability, not on your state. Moving states does not change your federal taxes. However, if you move mid-year, you may owe income tax to two states for that year, so file carefully.

What if I retire and move to a no-income-tax state mid-year?

You may owe income tax to both your old state and your new state for that year, depending on when you move and how each state defines residency. Some states tax you as a resident for the entire year if you are a resident on December 31. Others tax you only for the months you lived there. File in both states and claim a credit for taxes paid to one state on your return to the other.

Are there any hidden taxes in no-income-tax states?

No, but there are less visible ones. Sales tax is straightforward to see at checkout, but property tax bills arrive once or twice a year and can surprise people who move from low-property-tax states. Some no-income-tax states also charge excise tax on fuel, alcohol, or tobacco at higher rates than other states. Ask about all of these before you move.