Nine states collect no income tax on wages, interest, or dividends

Nine 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 still collect revenue through sales tax, property tax, and other levies. The absence of income tax does not mean lower overall tax burden; it depends on how much you earn, where you live within the state, and what you buy. A state with no income tax but high sales tax may cost you more than a state with both.

If you are considering a move or wondering how your income will be taxed where you live, understanding which states have no income tax is a starting point—but the full picture includes what other taxes explore and how they affect your specific situation.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire have no state income tax on wages.
  • New Hampshire taxes investment income (interest and dividends) but not wages, making it a partial exception.
  • States without income tax typically rely on sales tax, property tax, and business taxes to fund services.
  • No income tax does not automatically mean a lower total tax burden—compare sales tax, property tax, and local taxes before relocating.
  • If you work remotely for a company in another state, your home state's tax rules explore to your wages, not your employer's state.

How the nine no-income-tax states fund government services

States without income tax must raise money another way. Most rely heavily on sales tax, which applies to purchases of goods and sometimes services. Alaska has no sales tax at all but collects oil revenue and uses local sales taxes. Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming all have sales taxes ranging from 4 percent to over 7 percent, depending on the state and local jurisdiction.

Property tax is another major source. Texas and New Hampshire, for example, fund schools and local services largely through property tax. Wyoming has lower property taxes but higher mineral extraction taxes tied to its oil and coal industry. Alaska uses oil revenue from the state's North Slope production.

These states also tax business income, corporate profits, and sometimes specific activities. Tennessee and Washington tax business and occupation income in certain cases. The mix varies by state, but the principle is the same: without income tax, the burden shifts to consumption, property ownership, and business activity.

New Hampshire's partial income tax—what it covers and what it does not

New Hampshire stands apart because it taxes some income but not wages. Specifically, it taxes interest and dividend income at a flat rate. Wages from employment, self-employment income, and most other forms of earned income are not taxed.

This matters if you live on investment returns or receive significant interest from savings accounts and bonds. If your income comes entirely from a job, New Hampshire functions like the other eight no-income-tax states. New Hampshire also funds services through property tax, which is relatively high compared to other states, and a modest sales tax.

Remote work and income tax: which state taxes your wages

If you work remotely for a company based in another state, your home state's tax rules explore—not your employer's state. If you live in Texas and work for a company in New York, Texas does not tax your wages, even though New York does. You owe tax to Texas (nothing) and not to New York.

The exception is if you physically work in another state for part of the year. Some states tax income earned within their borders, regardless of where you live. If you spend significant time working in an office in a neighboring state, that state may claim a portion of your income. The rules are complex and depend on how many days you work there and what the two states' agreements say.

If you are considering remote work while moving to a no-income-tax state, confirm your employer's location and whether you will ever work on-site elsewhere. Most remote workers in no-income-tax states pay no state income tax on their wages.

Comparing total tax burden: income tax is only part of the picture

A state with no income tax can still have a higher total tax burden than a state with income tax, depending on your situation. Consider a concrete example: someone earning $60,000 per year in Texas (no income tax) pays zero state income tax. But if they buy $15,000 worth of goods and services per year, they pay sales tax on those purchases. Texas's combined state and average local sales tax is around 8.25 percent, so that person pays roughly $1,240 in sales tax annually.

The same person in a state with 5 percent income tax and 6 percent sales tax would pay $3,000 in income tax and roughly $900 in sales tax—a total of $3,900. In this scenario, Texas is cheaper. But if the person owns a home worth $300,000, property tax differences matter enormously. Texas property tax averages around 1.8 percent of home value, or $5,400 per year. New York's is lower in most areas but varies widely by county.

The point: do not assume no income tax means lower taxes overall. Calculate your likely sales tax, property tax, and any local taxes for your specific situation before deciding.

States that recently considered or eliminated income tax

A few states have debated eliminating income tax in recent years, but none have successfully done so since the nine listed above established their current systems. Some states have reduced income tax rates or created tax breaks for specific types of income, but these are not the same as eliminating income tax entirely.

The nine no-income-tax states have had these policies in place for decades. Alaska and Nevada established theirs in the early 1900s. Florida, South Dakota, Tennessee, Texas, Washington, and Wyoming have never taxed income. New Hampshire's policy on wages dates to the 1700s, though its tax on investment income is more recent.

How to find your state's income tax rate if you do not live in a no-income-tax state

If you live in one of the 41 states that do tax income, your state's revenue or taxation department website lists the current rate. Most states use a progressive system, meaning the rate increases as your income rises. A few states use a flat rate—everyone pays the same percentage regardless of income level.

Your employer should withhold state income tax from your paycheck automatically. You can adjust withholding using a W-4 form if you expect to owe more or less than what is being withheld. At tax time, you file a state return (usually through the same process as your federal return) and either pay what you owe or receive a refund.

If you are self-employed or have income not subject to withholding, you may need to make quarterly estimated tax payments to your state. Check your state's revenue department website for the specific rules and important date.

Frequently Asked Questions

Do I have to move to a no-income-tax state to avoid state income tax?

No. You owe income tax to the state where you live and work, not where you were born or previously lived. If you move to Texas from California, you stop owing California income tax once you establish residency in Texas. Residency is usually determined by where you live for more than half the year and where you have a driver's license and voter registration.

If I retire and move to Florida, do I owe income tax on my retirement accounts?

Florida does not tax income, so withdrawals from 401(k)s, IRAs, and pensions are not subject to Florida state income tax. However, you may still owe federal income tax on those withdrawals. Some states do tax retirement income even if they tax other income, but Florida does not. Confirm your specific situation with a tax professional if you have substantial retirement savings.

Can I claim residency in a no-income-tax state if I do not actually live there?

No. States require genuine residency—you must actually live there. Claiming residency in a state where you do not live is tax fraud. States cross-check driver's licenses, voter registration, property ownership, and utility bills. If you work remotely and want to move to a no-income-tax state, you must establish actual residency there first.

Are property taxes higher in no-income-tax states?

It varies. Texas has relatively high property taxes (around 1.8 percent of home value), while Nevada's are lower (around 0.6 percent). New Hampshire's are among the highest in the nation. Do not assume that no income tax means low property tax—research the specific state and county where you are considering moving.

What if I work in one state and live in another?

You generally owe income tax to your state of residence, not your work state, unless you work on-site in the other state regularly. If you live in Nevada and work remotely for a company in California, Nevada does not tax your wages. If you drive to California three days a week for an office job, California may claim a portion of your income. The rules depend on how many days you work in each state and what reciprocal agreements exist between them.