Which states don't charge state income tax
Seven states have no state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. These states do not tax wages, salaries, or investment income at the state level. Two additional states — New Hampshire and Washington — tax only investment income and capital gains, not wages.
The absence of state income tax does not mean these states have no taxes. Most fund their operations through sales tax, property tax, excise tax, or some combination. The tax burden you actually pay depends on how much you earn, where you spend money, and what property you own — not just on whether your state has income tax.
If you are considering a move or trying to understand your tax situation, knowing which states have no income tax is a starting point. The real question is whether the total tax load in a no-income-tax state is lower than in your current state, which varies by individual circumstances.
Key Takeaways
- Seven states impose no tax on wages or investment income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming.
- New Hampshire and Washington tax investment income and capital gains but not wages, making them partial no-income-tax states.
- States without income tax typically rely on sales tax, property tax, and excise taxes instead, so your total tax bill depends on your spending and property ownership.
- Moving to a no-income-tax state saves money only if your new state's sales and property taxes are lower than your old state's income tax.
The nine states with no or limited income tax
The complete list of states that do not tax wages includes Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. New Hampshire and Washington round out the group of nine states with no tax on ordinary income, though both tax investment returns differently.
| State | Wages Taxed? | Investment Income Taxed? | Primary Revenue Sources |
|---|---|---|---|
| Alaska | No | No | Oil revenue, sales tax, property tax |
| Florida | No | No | Sales tax, property tax, tourism taxes |
| Nevada | No | No | Sales tax, gaming taxes, property tax |
| South Dakota | No | No | Sales tax, property tax, excise taxes |
| Tennessee | No | No | Sales tax, property tax, excise taxes |
| Texas | No | No | Sales tax, property tax, business taxes |
| Wyoming | No | No | Sales tax, property tax, mineral extraction taxes |
| New Hampshire | No | Yes (interest and dividends) | Sales tax, property tax, business taxes |
| Washington | No | Yes (capital gains) | Sales tax, property tax, business taxes |
New Hampshire taxes interest and dividend income but not wages or capital gains. Washington taxes long-term capital gains above a certain threshold but not wages or other investment income. Both states market themselves as having no income tax, though the distinction matters if you live primarily on investment returns.
How no-income-tax states replace that revenue
States without income tax must fund schools, roads, courts, and other services through other sources. The most common replacement is sales tax, which applies to purchases of goods and sometimes services. Sales tax rates in no-income-tax states range from around 4 percent to over 7 percent, depending on the state and local jurisdiction.
Property tax is the second major revenue source. Some no-income-tax states have high property tax rates to compensate. For example, Texas and Florida have relatively low property tax rates, while Wyoming and South Dakota rates vary by county. If you own a home, the property tax burden can exceed what you would pay in income tax in a high-income state.
Excise taxes on fuel, alcohol, and tobacco are also common. Alaska, Nevada, and Wyoming use revenue from natural resource extraction — oil, gaming, and minerals — to reduce reliance on sales and property taxes. This is why Alaska has no sales tax in most areas and does not tax investment income: oil dividends fund the state budget.
Whether a no-income-tax state saves you money
Moving to a no-income-tax state does not automatically lower your total taxes. The math depends on your income level, spending habits, and property ownership. A high earner who spends little and owns no property may save significantly. A retiree on a fixed income who owns a home may pay more in property tax than they saved on income tax.
Compare your current state's income tax rate against the no-income-tax state's sales and property tax rates. If you earn $100,000 in a state with 5 percent income tax, you pay $5,000 in state income tax. If you move to a state with 7 percent sales tax and spend $50,000 per year, you pay $3,500 in sales tax — a savings. But if you buy a $300,000 home and property tax is 1.2 percent, you pay $3,600 per year in property tax alone, erasing the sales tax savings.
The comparison is most favorable for high earners with low spending and renters. It is least favorable for people who own expensive homes or spend most of their income on taxable goods.
Federal taxes are the same everywhere
State income tax and federal income tax are separate. Eliminating state income tax does not change what you owe to the federal government. You will still file a federal return and pay federal tax on wages, self-employment income, and investment gains, regardless of which state you live in.
Some people confuse state and federal tax brackets or assume that moving to a no-income-tax state reduces their total federal burden. It does not. The only tax you avoid is the state portion. Your federal tax liability is determined by your income and filing status, not your state of residence.
Retirement income and no-income-tax states
Retirees often consider no-income-tax states because they may not owe state income tax on Social Security, pensions, or retirement account withdrawals. However, the rules vary. Some no-income-tax states still tax certain types of retirement income, and some high-income-tax states exempt Social Security or pensions.
Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming do not tax Social Security benefits or most retirement income. Alaska does not tax Social Security but may tax other retirement income depending on the source. New Hampshire does not tax Social Security but does tax interest and dividends. If retirement income is your primary concern, research the specific state's rules on pensions, IRAs, and 401(k) withdrawals before moving.
Frequently Asked Questions
Do I have to pay federal taxes if I live in a no-income-tax state?
Yes. Federal income tax is separate from state income tax. You owe federal tax on your income regardless of which state you live in. Moving to a no-income-tax state does not reduce your federal tax burden.
Which no-income-tax state has the lowest overall taxes?
That depends on your situation. Alaska has no sales tax in most areas and does not tax investment income, but property tax rates vary by borough. Nevada has no income tax and moderate sales tax but higher property taxes in some counties. Texas has no income tax and moderate property tax but higher sales tax. Compare all three taxes for your specific circumstances.
Can I claim a deduction for moving to a no-income-tax state?
Moving expenses are generally not deductible on your federal return unless the move is for work and meets specific IRS requirements. State income tax is not deductible on your federal return. Consult a tax professional about your particular move.
Do no-income-tax states tax remote workers?
If you live and work in a no-income-tax state, you owe no state income tax on your wages, even if your employer is in another state. If you live in a no-income-tax state but work remotely for an employer in a high-tax state, most states do not tax you — your state of residence determines your tax obligation. Verify the rules if you are moving while employed remotely.
Is New Hampshire really a no-income-tax state?
New Hampshire does not tax wages, which is why it markets itself as a no-income-tax state. However, it does tax interest and dividend income at 5 percent. If most of your income is from wages, New Hampshire functions like a no-income-tax state. If you live on investment income, you will owe state tax.