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 wages or salaries. This means if you work in one of these states, your paycheck is not subject to state income tax. However, these states still collect revenue through other taxes — property tax, sales tax, corporate tax, or a combination of these — so "no income tax" does not mean no state taxes at all.

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, making them the broadest no-income-tax states.

Whether moving to a no-income-tax state saves you money depends on your total tax picture. A state with no income tax but high property or sales tax may cost you more than a state with moderate income tax and lower property tax. Your retirement income source also matters — some no-income-tax states tax retirement pensions while others do not.

Key Takeaways

  • Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income but not wages).
  • No-income-tax states fund government through sales tax, property tax, corporate tax, or excise taxes, so your total state tax burden depends on how you spend and own property.
  • Retirement income treatment varies by state — some no-income-tax states tax pensions or Social Security while others do not.
  • Moving to a no-income-tax state may increase your taxes overall if that state has significantly higher property or sales tax than your current state.

How each no-income-tax state funds government

Alaska relies heavily on oil revenue and corporate taxes. It has no state sales tax, though some municipalities charge local sales tax. Property taxes are low to moderate.

Florida funds government through sales tax (currently 6 percent statewide, higher in some counties), corporate income tax, and property tax. It has no tax on intangible personal property like stocks or bonds.

Nevada uses sales tax (currently 6.85 percent statewide, higher in some counties), gaming taxes, and property tax. It also taxes business income.

South Dakota has no sales tax on groceries but charges sales tax on other goods (currently 4.5 percent statewide, higher in some counties). It funds schools and services through property tax and corporate taxes.

Tennessee taxes sales (currently 9.55 percent statewide, among the highest in the nation) and has a Hall Income Tax on investment income only — not wages. Property taxes are relatively low.

Texas has no sales tax on groceries but charges sales tax on other purchases (currently 6.25 percent statewide, higher in some counties). It funds schools through property tax and has no corporate income tax.

Washington has no sales tax on groceries but charges sales tax on other goods (currently 6.5 percent statewide, higher in some counties). It also taxes capital gains on long-term investments above a certain threshold and relies on property tax.

Wyoming has no sales tax on groceries and a low statewide sales tax (4 percent, higher in some counties). It funds government through property tax, excise taxes, and mineral extraction taxes.

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

If you receive a pension, Social Security, or distributions from retirement accounts, the tax treatment varies significantly across no-income-tax states.

Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not tax any form of retirement income, including pensions, Social Security, and IRA or 401(k) withdrawals. These states are often attractive to retirees for this reason.

Tennessee taxes neither wages nor pensions, but it does tax investment income through its Hall Income Tax. Social Security is not taxed.

New Hampshire does not tax wages or Social Security, but it taxes interest and dividend income. It does not tax pensions or retirement account withdrawals.

Comparing total tax burden across states

A state with no income tax can still have a higher overall tax burden than a state with income tax, depending on property values, spending habits, and family size.

If you own a home, property tax is often the largest state and local tax you pay. New Jersey, Illinois, and Connecticut have high property taxes but also have income tax. Texas and Florida have no income tax but moderate to high property taxes. Wyoming and Alaska have lower property taxes overall.

Sales tax hits differently depending on what you buy. A family that spends heavily on taxable goods (clothing, electronics, furniture) pays more in sales tax than a family that spends on groceries, rent, and services. Tennessee and Washington have the highest sales taxes among no-income-tax states. Alaska and Wyoming have the lowest.

To estimate your actual tax burden in a potential state, calculate property tax on a home you might buy, add the sales tax on your typical annual spending, and compare that total to what you currently pay in income tax plus property and sales tax combined.

Moving to a no-income-tax state: what to consider

Relocating for tax reasons makes sense only if you have done the math on your specific situation. A high-income earner in California (13.3 percent top income tax rate) might save substantially by moving to Texas. A retiree on a fixed pension in New York (6.85 percent income tax) might pay more in property tax in Florida, even with no income tax.

State residency for tax purposes is determined by where you spend the majority of your time and where you maintain a permanent home. If you move to a no-income-tax state, you must establish residency there — typically by obtaining a driver's license, registering to vote, and establishing a permanent address. Some states that tax income will still try to tax you if you maintain ties there, so documenting your move is important.

You should also consider non-tax factors: job market, cost of living, climate, proximity to family, and quality of schools or healthcare. A lower tax bill does not offset a poor job market or a cost of living that has risen faster than taxes fell.

States with low income tax (not zero)

If you cannot move to a no-income-tax state but want to minimize income tax, several states have rates below 5 percent. Colorado, Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, North Carolina, and Pennsylvania all have flat income tax rates between 3.1 and 4.95 percent. These states may offer a middle ground if you want lower income tax without relocating to one of the nine no-income-tax states.

Some of these low-tax states also offer tax breaks for retirees, military income, or specific types of investment income, so the effective rate you pay may be lower than the stated rate.

Frequently Asked Questions

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

Texas does not tax your income. California may try to tax you if you are still considered a California resident for tax purposes, but once you establish Texas residency (driver's license, voter registration, permanent home), California generally cannot tax you. Document your move carefully and notify your employer of your new address so your W-2 reflects your correct state of residence.

Do no-income-tax states tax Social Security?

Most do not. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax Social Security. New Hampshire does not tax Social Security either. If you are retired and considering a move, this is a significant advantage in these states.

Is property tax higher in no-income-tax states?

It varies. Wyoming and Alaska have relatively low property taxes, while Florida and Texas have moderate property taxes. You must compare the specific county or city where you plan to live, not just the state average. A home worth $300,000 in one county may have a property tax bill thousands of dollars higher than the same home in another county within the same state.

Can I claim residency in a no-income-tax state if I only own a vacation home there?

No. Tax residency requires that you spend the majority of your time in that state and maintain it as your permanent home. Owning a vacation property does not establish residency. If you split time between two states, the state where you spend more than half the year can claim you as a resident and tax your income accordingly.

What is the highest sales tax among no-income-tax states?

Tennessee has the highest combined state and average local sales tax at 9.55 percent. Washington is second at around 8.9 percent when local taxes are included. If you spend heavily on taxable goods, this can offset the savings from no income tax, especially compared to states with lower sales tax and moderate income tax.