Nine states do not tax wages or salaries
Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire do not impose a state income tax on wages. This means residents do not pay state tax on money earned from a job, self-employment, or most other sources of income.
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.
No state has zero taxes entirely. States without income tax typically fund government through sales tax, property tax, corporate tax, or some combination. Understanding how your state funds itself matters because it affects what you pay overall, not just on paychecks.
Key Takeaways
- Nine states have no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income but not wages).
- States without income tax usually charge higher sales tax or property tax to fund schools, roads, and services.
- Moving to a no-income-tax state saves money only if your total tax burden—sales, property, and other taxes combined—is lower than where you live now.
- Retirement income, Social Security, and pensions are treated differently in each state, so retirees should compare all tax types before relocating.
How no-income-tax states replace that revenue
A state cannot run schools, maintain roads, or fund law enforcement without money. States without income tax replace that revenue through other sources. The mix varies by state.
Alaska has no income tax and no statewide sales tax, but it taxes oil production heavily and uses that revenue for state operations and a yearly dividend to residents. Texas, Florida, and Nevada rely on sales tax, which can be 8 to 10 percent depending on the city. Washington and Tennessee use sales tax plus business taxes. South Dakota and Wyoming use sales tax and property tax. New Hampshire uses property tax and a tax on business income.
The practical effect: you may pay no income tax but pay more when you buy groceries, gas, or a house. A family that earns $80,000 in Texas pays no state income tax but pays sales tax on nearly everything they buy. A family earning the same amount in a state with 5 percent income tax but 6 percent sales tax may pay less overall.
Comparing total tax burden across states
Income tax is only one piece of what you pay to a state. To know whether moving to a no-income-tax state saves you money, you need to add up all state taxes: income, sales, property, and any others.
A homeowner in New York earning $100,000 might pay roughly $6,000 in state income tax, $1,500 in property tax, and $800 in sales tax—about $8,300 total. That same person in Florida earning $100,000 pays zero income tax but might pay $2,000 in property tax and $2,500 in sales tax—about $4,500 total. The Florida resident saves money. But a renter in New York paying $1,200 a month in rent (no property tax) and the same income might pay only $8,000 in state taxes, making the comparison closer.
Your actual savings depend on your income level, whether you own property, what you buy, and where in each state you live. A tax calculator specific to your situation is more reliable than a general comparison.
How retirement income is taxed in no-income-tax states
Retirees often move to no-income-tax states expecting to pay nothing on pensions or retirement account withdrawals. The reality is more complicated.
Most no-income-tax states do not tax traditional pensions or 401(k) withdrawals. Florida, Texas, Washington, and Nevada treat retirement income the same as wages—they do not tax it. Alaska, South Dakota, Tennessee, and Wyoming also do not tax retirement income. New Hampshire does not tax wages or retirement income but does tax interest and dividends.
However, some states that do have income tax exempt pensions or Social Security. A state with income tax might tax your 401(k) withdrawal but not your pension, while a no-income-tax state taxes neither but charges higher property tax. Before retiring to a new state, compare what you will actually owe on the income sources you will have—pensions, Social Security, investment withdrawals, part-time work.
What taxes you still pay in no-income-tax states
Moving to a state without income tax does not mean you avoid all state taxes. You will still pay:
- Sales tax on purchases. Rates range from 4 percent in Alaska to over 9 percent in some Tennessee cities. Groceries, medicine, and utilities are sometimes exempt.
- Property tax on real estate you own. Rates vary widely; New Jersey and Illinois have high property taxes even though they have income tax, while some no-income-tax states also have high property taxes.
- Excise tax on gasoline, cigarettes, and alcohol. These exist in most states.
- Corporate tax if you own a business. Most no-income-tax states tax business income.
- Estate tax in a few cases. Washington and Tennessee have estate taxes despite having no income tax.
The point: no income tax does not mean low taxes overall. It means the state funds itself differently.
Moving to a no-income-tax state for tax reasons
If you are considering a move primarily to reduce taxes, calculate your full tax bill in both states before deciding. Many people assume no income tax means lower overall taxes and are surprised to find property or sales tax higher than expected.
Some people benefit significantly. A high-income earner with little property and modest spending may save thousands by moving from a high-income-tax state to a no-income-tax state. A retiree living on a pension may pay far less in a state that does not tax pensions, even if sales tax is higher.
Others break even or pay more. A family that owns a home and buys a lot of goods may pay more in property and sales tax than they saved on income tax. A person with significant investment income may pay more in a state that taxes investment income than they would have paid in income tax elsewhere.
Tax residency also matters. If you move to a no-income-tax state but still work remotely for an employer in your old state, some states will still tax your income. You typically must establish residency—usually by moving your driver's license, registering to vote, and living there for at least part of the year—for the no-income-tax benefit to apply.
States that recently changed or considered changing income tax policy
Income tax policy is not fixed. Some states have discussed adding or removing income tax, and a few have made changes in recent years.
Tennessee eliminated its tax on investment income in 2021, joining the nine states with no income tax on any source. Other states have proposed income tax cuts or elimination but have not passed them. A few states have proposed adding income tax to fund schools or infrastructure but have faced voter opposition.
If you are planning a move based on tax policy, check the current rules in your target state. Tax laws change, and what is true this year may not be true in five years. Contact the state revenue department or a tax professional in the state you are considering for the most current information.
Frequently Asked Questions
Do I have to move to a no-income-tax state to benefit from no income tax?
No. If you work remotely for an employer in a no-income-tax state but live in a state with income tax, your home state typically taxes your income. You must establish residency in the no-income-tax state—usually by moving your driver's license, registering to vote, and spending significant time there—for the tax benefit to apply.
Is Social Security taxed in no-income-tax states?
No. None of the nine no-income-tax states tax Social Security benefits. However, some states with income tax also do not tax Social Security, so this is not unique to no-income-tax states. Check your specific state's rules.
Which no-income-tax state has the lowest overall taxes?
That depends on your income, property ownership, and spending. Alaska has no income tax and no statewide sales tax, making it low-tax for most people. Texas and Florida have no income tax and moderate sales tax. Compare your full tax bill in each state rather than looking at income tax alone.
Can I claim residency in a no-income-tax state if I only visit part of the year?
Residency rules vary by state. Most require you to spend more than half the year there, maintain a permanent home, register to vote, and update your driver's license. Some states challenge part-time residents who claim no-income-tax status while earning income elsewhere. Consult a tax professional in your target state before claiming residency.
Do no-income-tax states have lower cost of living overall?
Not necessarily. Housing, food, and services in some no-income-tax states are expensive. Florida and Texas have lower housing costs in many areas, but parts of Alaska and Nevada are costly. Cost of living depends on the specific city and region, not the state's tax policy.