Nine states have no income tax on wages or salaries

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire do not tax income earned from work. These nine states collect revenue instead through sales tax, property tax, corporate tax, or other sources. If you live or work in one of these states, you keep more of your paycheck than residents of states with income tax.

New Hampshire is a partial exception: it taxes interest and dividend income but not wages. The other eight states tax neither wages nor investment income. The amount you save depends on your income level and which state you're comparing it to—a person earning $75,000 in Florida saves thousands per year compared to someone in California or New York, where top income tax rates exceed 10 percent.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire have no income tax on wages.
  • New Hampshire taxes investment income but not wages, making it a partial exception to the no-income-tax group.
  • States without income tax often rely on higher sales taxes or property taxes to fund schools and services.
  • Moving to a no-income-tax state can reduce your annual tax burden, but the total tax you pay depends on your spending and property ownership.

How no-income-tax states fund schools and roads

States without income tax must raise money another way. Florida, Nevada, Texas, and Washington rely heavily on sales tax, which means you pay a percentage of the price when you buy goods. Sales tax rates in these states range from 5.5 percent to 10 percent depending on the county. If you buy a $100 item in a high-sales-tax county in Washington, you might pay $10 in tax instead of the $0 you'd pay in a no-sales-tax state.

Alaska and Wyoming use corporate tax and oil and gas revenue to fund state services. Tennessee and South Dakota rely on sales tax plus taxes on specific goods like gasoline and alcohol. New Hampshire funds schools through property tax and a tax on business profits. The point is that you will pay taxes somewhere—the question is whether you pay them on income, purchases, property, or some combination.

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

The savings depend on your income and how much you spend. A person earning $100,000 in California pays roughly $9,200 in state income tax. That same person in Texas pays zero income tax but will pay sales tax on purchases. If they spend $40,000 per year on taxable goods and services in Texas (where sales tax is 6.25 percent statewide), they pay $2,500 in sales tax—a net savings of about $6,700 per year.

However, if you own property, the calculation changes. Property taxes in Texas average 1.6 percent of home value per year. On a $400,000 home, that's $6,400 annually. In California, property tax is capped at 1 percent, so the same home costs $4,000 per year in property tax. The income tax savings shrink when you factor in property tax differences. Your actual savings depend on your specific income, spending habits, home value, and which state you're comparing to.

States with low income tax (not zero)

If you cannot move to a no-income-tax state, several states tax income at rates below 5 percent. Colorado, Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Mississippi, Missouri, and Pennsylvania all have flat income tax rates between 3.5 and 4.95 percent. These states are worth considering if you want lower income tax than high-tax states like California (13.3 percent), New York (10.9 percent), or Vermont (8.75 percent).

Some states also offer tax breaks for specific types of income. Tennessee and New Hampshire do not tax wages but do tax investment income. Other states exempt military pensions, teacher pensions, or retirement income from taxation. If you are retired or receiving pension income, research whether your state taxes that income—the rules vary widely.

How to verify your state's tax status before moving

Do not rely on outdated information. Tax laws change, and a state you read about online might have passed new legislation since the article was written. Visit your state's official tax authority website to confirm current rates. For example, the Texas Comptroller of Public Accounts, the Florida Department of Revenue, and the Washington Department of Revenue all publish current tax information.

If you are considering a move for tax reasons, also check whether your state taxes remote work income. Some states tax income earned by residents even if the work is done for an out-of-state employer. Others do not. A few states have reciprocal agreements with neighboring states, meaning you might not owe tax in your home state if you work across the border. These rules are specific to each state and sometimes to each county, so verify before you relocate.

The difference between state income tax and federal income tax

Federal income tax is collected by the U.S. government and applies to all Americans regardless of where they live. No state can eliminate federal income tax. When people say a state has "no income tax," they mean no state income tax. You will still owe federal income tax on your wages, and you will still file a federal return every year.

The nine no-income-tax states save you money on state taxes only. Your federal tax bill remains the same whether you live in Alaska or New York. However, if you earn $75,000 and live in a no-income-tax state, you keep more of that money than someone earning the same amount in a high-income-tax state, because you avoid the state portion of the tax.

Frequently Asked Questions

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

No. If you work in a no-income-tax state but live in a state that does tax income, you may owe tax to your home state on that income. However, some states have reciprocal agreements or allow you to claim a credit for taxes paid to another state. Check your home state's rules before assuming you owe nothing.

Is New Hampshire really a no-income-tax state?

Partially. New Hampshire does not tax wages or salaries, but it does tax interest, dividends, and capital gains at 5 percent. If your income comes from investments rather than work, you will owe New Hampshire tax. For wage earners, it functions like the other eight no-income-tax states.

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

That depends on your situation. Alaska has no state income tax and no sales tax, making it the lowest-tax option for high earners who spend little. However, Alaska's cost of living is high, and property taxes and utility costs offset some savings. Texas and Florida are popular for middle-income earners because they combine no income tax with moderate sales and property taxes.

Can I move to a no-income-tax state just for tax reasons?

Yes, but you must establish residency. Most states require you to live there for at least 183 days per year and show intent to stay. If you move to Florida but spend most of the year in New York, your home state may still claim you as a resident and tax your income. Document your move with a driver's license, voter registration, and lease or deed to prove residency.

Do no-income-tax states have higher sales taxes?

Usually, but not always. Alaska has no income tax and no state sales tax. Washington and Nevada have no income tax but sales taxes around 6.5 to 8.5 percent. Florida's sales tax reaches 7.5 percent in some counties. The relationship is not exact—some low-income-tax states also have moderate sales taxes, so compare the total tax burden rather than assuming one offsets the other.