Nine states don't collect income tax on wages or salaries

Nine states have no income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception—it taxes only dividend and interest income, not wages. If you live in or move to one of these states, you won't owe state income tax on your paycheck, though you may still owe federal income tax.

The absence of state income tax doesn't mean these states collect no revenue. Most make up the difference through sales tax, property tax, corporate tax, or other levies. Alaska, for example, has no sales tax but funds itself partly through oil revenues. Understanding how your state funds itself matters because it affects what you pay overall, not just on wages.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have zero income tax on wages; New Hampshire taxes only investment income.
  • States without income tax typically rely on sales tax, property tax, or other revenue sources, so your total tax burden depends on all three.
  • Moving to a no-income-tax state can lower your tax bill if you earn wages, but may raise it if you spend heavily or own property.
  • Federal income tax still applies in all states, so living in a no-income-tax state does not eliminate your federal filing requirement.

The nine states with no income tax and how they differ

Alaska has no state income tax and no sales tax. It funds government largely through oil revenues and a sovereign wealth fund. Property taxes vary by municipality but are generally moderate. If you own a home or business, you'll pay property tax; if you rent and don't own, your tax burden is among the lowest in the nation.

Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming all have no income tax but do collect sales tax. Sales tax rates range from 4% (Wyoming) to 7.25% (Florida, Tennessee, Washington). These states also allow local jurisdictions to add their own sales tax, so the total can reach 9% or higher depending on your city. Property taxes vary widely within each state.

New Hampshire is the outlier. It has no tax on wages or salaries, but it does tax interest and dividend income at 5%. If you work for a paycheck, you owe nothing to New Hampshire; if you live on investment returns, you'll owe state tax. New Hampshire also has no sales tax, which offsets the investment income tax for many residents.

How no-income-tax states make up the revenue

States without income tax rely on other sources. Sales tax is the most common replacement. When you buy goods or services, you pay a percentage to the state. In Texas, that's 6.25% before local additions; in Washington, it's 6.5%. Over a year, a household that spends $50,000 on taxable goods pays $3,000 to $3,250 in state sales tax alone.

Property tax is the second major source. States without income tax often have higher property tax rates to compensate. Texas and Florida have moderate property taxes, but New Jersey and Illinois—which do have income tax—often have lower property taxes. If you plan to buy a home, compare property tax rates in your target state, not just income tax.

Some states use corporate tax, excise tax (on specific goods like fuel or alcohol), or licensing fees. Alaska's oil revenues are unique. Washington taxes capital gains on the sale of stocks and bonds above a certain threshold. Understanding your state's full tax picture requires looking beyond income tax alone.

Comparing total tax burden: income tax versus sales and property tax

A state with no income tax is not automatically cheaper. A family earning $100,000 per year in Texas pays zero state income tax but may pay $8,000 to $12,000 annually in sales tax and property tax combined. The same family in a state with 5% income tax but lower sales and property taxes might pay $5,000 to $7,000 total.

Your personal situation determines whether a no-income-tax state saves you money. If you earn high wages and spend little, moving to Texas or Florida saves you thousands. If you spend most of your income on taxable goods or own an expensive home, the sales and property taxes may offset the income tax savings. Renters in no-income-tax states with low property tax (like Nevada) often come out ahead; homeowners in high-property-tax areas may not.

Federal income tax still applies everywhere

Living in Alaska, Florida, or any other no-income-tax state does not change your federal tax obligation. You still file a federal return with the IRS and pay federal income tax based on your income level and filing status. The federal tax rate ranges from 10% to 37% depending on your bracket. State income tax and federal income tax are separate; one does not replace the other.

If you work remotely for a company in a high-tax state but live in a no-income-tax state, you typically owe tax only to your state of residence, not your employer's state. However, some states have reciprocal agreements or special rules for certain workers. If your situation is complex—you work in multiple states or are self-employed—consult a tax professional to understand your filing obligations.

How to verify your state's tax status

Each state publishes its tax code and rates on its department of revenue website. The IRS also maintains a list of state tax agencies. If you're considering a move, contact the revenue department of your target state directly and ask about income tax, sales tax, and property tax. Many states offer free tax guides for residents.

Your employer's payroll department can also tell you whether your state collects income tax. If you see no state tax withheld from your paycheck, your state likely has no income tax—but verify this before assuming you owe nothing, because some states have special rules for certain types of income.

Frequently Asked Questions

If I move to a no-income-tax state, do I stop paying state tax when ready?

You stop owing income tax to your old state once you establish residency in the new state, typically by getting a driver's license, registering to vote, or signing a lease. Some states require you to file a part-year return for the year you move. Your new state's income tax status takes effect the same day you become a resident.

Does New Hampshire really have no income tax?

New Hampshire has no tax on wages or salaries, but it taxes interest and dividend income at 5%. If all your income comes from a job, you owe nothing to New Hampshire. If you have investment accounts or retirement accounts that generate interest, you may owe state tax on that income.

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

That depends on your spending and property ownership. Alaska has the lowest sales tax (zero) but moderate property taxes. Wyoming has the lowest sales tax among states that collect it (4%) and low property taxes. Nevada has no income tax and moderate sales and property taxes. Compare all three for your situation.

Can I claim residency in a no-income-tax state if I work remotely in another state?

Yes. You owe income tax to your state of residence, not your employer's state. If you live in Texas and work remotely for a New York company, you owe Texas tax (none) and federal tax, not New York tax. However, if you work in-person in another state part of the year, that state may claim you owe tax there too.

Do I still file a federal return if my state has no income tax?

Yes. Federal income tax is separate from state income tax. You file a federal return with the IRS regardless of your state's tax status. Your federal tax obligation depends on your income level and filing status, not on whether your state collects income tax.