Nine states have no state income tax on wages or salaries

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire do not tax wages or salaries. New Hampshire taxes only interest and dividend income, not wages. The other eight tax neither wages nor investment income.

These states fund government services through other means: sales tax, property tax, fuel tax, and business taxes. The absence of income tax does not mean lower overall tax burden — some of these states have higher sales or property taxes to compensate. Whether moving to a no-income-tax state saves you money depends on your income level, what you own, and how much you spend.

Key Takeaways

  • Eight states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — tax neither wages nor investment income.
  • New Hampshire has no wage tax but does tax interest and dividend income at 5 percent.
  • No-income-tax states often rely on sales tax, property tax, and business taxes instead, so your total tax bill may not be lower.
  • The tax savings from moving depend on your income, property ownership, and spending habits in your current state.
  • Residency rules vary by state — some require you to live there for a full year before you are treated as a resident for tax purposes.

How these states replace income tax revenue

Alaska funds state government largely through oil revenue and a sovereign wealth fund, not through broad taxes on residents. This gives Alaska the lowest overall tax burden of the nine states.

Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming rely on sales tax, which ranges from 5.5 percent in South Dakota to 7.25 percent in Tennessee and Texas. Property tax varies widely within each state. Washington and Tennessee also tax business income. These states typically have higher sales tax rates than states with income tax, because they need the revenue.

New Hampshire uses a 5 percent tax on interest and dividend income, plus property tax and sales tax, to fund schools and services. This makes New Hampshire different from the other eight — you will still owe tax on investment income if you live there.

What you actually pay in a no-income-tax state

A person earning $60,000 in wages pays zero state income tax in any of the nine states. But if you own a home, you pay property tax. If you buy goods, you pay sales tax. If you have investment income, you may pay tax on it — except in the eight states with no tax on investments.

A retiree living on $40,000 in Social Security and $20,000 in investment income pays no state tax in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, or Wyoming. In New Hampshire, that same person pays 5 percent on the $20,000 in investment income, or $1,000 per year. In a state with income tax, they might pay nothing if income is low enough, or they might pay state income tax depending on the state's rates and brackets.

Sales tax adds up quickly. A person who spends $30,000 per year on taxable goods in a state with 7 percent sales tax pays $2,100 per year in sales tax alone. Over time, this can exceed what you would pay in state income tax in a lower-tax state with income tax.

States with the lowest overall tax burden

Alaska ranks lowest because it has no income tax, no sales tax in most of the state, and low property tax rates. A high-income earner or a retiree with investment income saves the most by living in Alaska.

Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming all have no income tax, but sales tax and property tax vary. Texas has a 6.25 percent state sales tax plus local sales tax that can reach 8.25 percent, and property tax rates are moderate to high. Washington has no sales tax on groceries, which helps lower-income households. Tennessee taxes groceries at a reduced rate.

For someone earning $100,000 in wages, moving to one of these states saves income tax but not necessarily total tax. The savings depend on whether you own property, how much you spend, and what your current state's tax rates are.

Residency requirements and when the tax break starts

Moving to a no-income-tax state does not when ready free you from your old state's taxes. Most states tax you as a resident for the full year you move, even if you leave on January 2. Some states have a 183-day rule: if you spend more than half the year there, you are a resident for tax purposes.

You become a resident of your new state on the date you establish residency — usually the date you move into a home, get a driver's license, or register to vote. From that date forward, you owe tax to the new state, not the old one. But you may owe tax to both states for the year you move, depending on when you left and your old state's rules.

If you own a home in a state with income tax and move to a no-income-tax state, you do not owe income tax on the sale of that home to the state you moved to. Your old state may tax the gain, depending on its rules. Consult a tax professional before selling property in a state you are leaving.

Retirement income and investment income in no-tax states

Social Security is not taxed by any state, including the nine with no income tax. This is a federal rule, not a state choice. Pension income, 401(k) withdrawals, and IRA distributions are taxed as income in states with income tax, but not in the nine no-income-tax states — except New Hampshire, which taxes investment income.

If you have a pension from a government job, some states exempt military pensions or teacher pensions from income tax even if they tax other income. No-income-tax states do not need to offer these exemptions because they tax nothing.

Dividend and interest income is taxed in New Hampshire at 5 percent. In the other eight states, it is not taxed. This matters if you live on investment income or have a large portfolio. A retiree with $50,000 in annual dividend income pays $2,500 per year in New Hampshire state tax, but zero in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, or Wyoming.

How to verify residency and file taxes after moving

After you move to a no-income-tax state, you will file a resident return with that state if it requires any state tax filing at all. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not require income tax returns because they do not tax income. You may still need to file a return with your old state for the portion of the year you lived there.

Keep records of your move: the date you left your old state, the date you arrived in the new state, your lease or deed, your driver's license, and voter registration. If your old state audits you, these documents prove when you became a resident elsewhere.

New Hampshire requires you to file a return if you have interest or dividend income above a threshold. Check the New Hampshire Department of Revenue Administration website for current filing requirements.

Frequently Asked Questions

Do I save money by moving to a no-income-tax state?

It depends on your income, property ownership, and spending. A high-income earner saves the most. A person who owns a home may pay more in property tax than they save on income tax. Compare your current state's total tax burden — income, sales, and property — with the no-income-tax state you are considering.

Can my old state tax me after I move?

Yes, for the year you move. Most states tax residents for the full calendar year. If you move on June 15, you may owe income tax to both states for that year. After you establish residency in the new state, you owe tax only to the new state. Some states have reciprocal agreements that reduce double taxation.

Is Social Security taxed in no-income-tax states?

No. No state taxes Social Security, including the nine with no income tax. This is a federal rule. Pensions, 401(k) withdrawals, and IRA distributions are not taxed in the eight states with no investment income tax, but are taxed in New Hampshire.

What if I own property in two states?

You pay property tax to the state where the property is located, regardless of where you live. If you own a home in a state with income tax and move to a no-income-tax state, you still pay property tax on that home to your old state. You do not owe income tax on the property to your new state.

Does New Hampshire tax wages?

No. New Hampshire taxes only interest and dividend income, not wages or salaries. If you earn $80,000 in wages, you pay zero state income tax. If you earn $20,000 in dividends, you pay 5 percent, or $1,000.