Nine states collect 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. New Hampshire also taxes interest and dividend income but not wages. The other eight states tax neither wages nor investment income.

These states fund government services through other revenue sources: sales tax, property tax, excise taxes on fuel and alcohol, and business taxes. The absence of income tax does not mean lower overall taxes—some of these states have higher sales or property taxes than states with income tax.

If you work remotely for a company in another state, you typically owe income tax to the state where you live and work, not where your employer is based. Moving to a no-income-tax state can reduce your tax burden if you have significant wage or investment income, but the savings depend on your total tax picture across all tax types.

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 but not wages, making it different from the other eight states.
  • No-income-tax states use sales tax, property tax, and business taxes to fund services, so your total state tax burden depends on how much you spend and own property.
  • If you move to a no-income-tax state, you owe tax to your new state of residence, not your former state or your employer's state.

States with no income tax on wages

Eight states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming—tax neither wages nor investment income. This means residents pay no state income tax on salary, wages, interest, dividends, or capital gains.

Alaska is the only state that also pays residents an annual dividend from oil revenue (the Alaska Permanent Fund Dividend). This payment is not income tax; it is a distribution of state investment earnings. Residents still owe federal income tax and may owe local taxes depending on their municipality.

The other seven states function like any other state for tax purposes except for the absence of income tax. You still file federal returns, and you may owe property tax, sales tax, and local taxes depending on where you live within the state.

New Hampshire's partial exemption

New Hampshire does not tax wages or salaries, but it does tax interest and dividend income at 5 percent. This makes it a middle ground: workers keep all their paychecks, but people living on investment income pay a state tax that other no-income-tax states do not collect.

New Hampshire also does not tax capital gains on the sale of stocks or other investments, only the ongoing interest and dividends. If you have a pension or retirement account distributions, those are also subject to the 5 percent tax unless they come from a may have access to retirement plan (such as a 401(k) or IRA), which are exempt.

How no-income-tax states fund services

States without income tax rely on sales tax, property tax, excise taxes, and business taxes to pay for schools, roads, and public services. The mix varies by state.

Washington and Tennessee have no income tax but relatively high sales taxes (around 9 percent combined state and local). Alaska has no sales tax in the state itself, though some municipalities charge local sales tax. Florida has a 6 percent state sales tax plus local additions. Nevada has no income tax and a 6.85 percent state sales tax. Wyoming has no income tax and a 4 percent state sales tax, the lowest among no-income-tax states.

Property taxes also vary widely. New Hampshire and Texas have no income tax but higher property taxes than many income-tax states. Alaska has lower property taxes overall. If you spend heavily or own valuable property, your total state tax bill in a no-income-tax state may exceed what you would pay in an income-tax state with lower sales and property taxes.

How state residency affects your tax obligation

Your state of residence determines which state income tax you owe, not where your employer is located or where you work. If you live in Florida and work for a company headquartered in New York, you owe Florida state tax (none) and federal tax, not New York state tax.

If you work remotely and move from an income-tax state to a no-income-tax state, you stop owing income tax to your old state once you establish residency in the new state. Residency is usually established by obtaining a driver's license, registering to vote, or leasing or buying a home in the new state. Some states require you to file a final return for the year you move.

If you split time between two states, the state where you spend the majority of the year or maintain your permanent home may claim you as a resident. Some states have specific rules about what counts as residency; if you are in this situation, contact both state tax agencies for clarity before moving.

Comparing total tax burden across states

A no-income-tax state is not automatically cheaper. Someone earning $75,000 in wages might pay less total state tax in a no-income-tax state, but someone earning $30,000 with a mortgage and property might pay more in property and sales taxes than they would in an income-tax state.

The comparison depends on your personal situation: how much you earn, whether that income is wages or investment income, how much you spend on taxable goods, and whether you own property. A financial advisor or tax professional in your target state can model your specific numbers.

If you are considering a move primarily for tax reasons, calculate your estimated taxes in both your current state and your target state using your actual income, spending, and property values. Many state tax agencies publish tax calculators or worksheets on their websites.

Frequently Asked Questions

Do I have to pay federal income tax if I live in a no-income-tax state?

Yes. State income tax and federal income tax are separate. All U.S. residents owe federal income tax on wages, investment income, and other taxable income. Living in a no-income-tax state reduces your total tax burden but does not eliminate federal tax.

If I move to a no-income-tax state, do I owe my old state any income tax?

You owe income tax to your old state only for the portion of the year you lived there. If you moved on June 30, you would file a part-year return for January through June in your old state and establish residency in your new state for July onward. Some states have specific rules about part-year residents; check with your old state's tax agency.

Does New Hampshire's tax on dividends explore to retirement accounts?

No. Distributions from may have access to retirement plans such as 401(k)s, IRAs, and pensions are exempt from New Hampshire's 5 percent tax on interest and dividends. Only interest and dividends earned outside retirement accounts are taxed.

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

That depends on your situation. Wyoming has the lowest sales tax among no-income-tax states. Alaska has no state sales tax but higher property taxes in some areas. Compare your specific income, spending, and property situation in each state to find the lowest total tax burden for you.

Can I claim residency in a no-income-tax state if I only visit there part of the year?

Residency requires more than visiting. You must establish a permanent home, obtain a driver's license, register to vote, or meet other criteria set by the state. If you maintain a home in an income-tax state and only visit a no-income-tax state seasonally, you likely remain a resident of your primary state for tax purposes. Check the specific state's residency rules.