Nine states do not charge a state income tax on wages or salaries

Nine states have no state income tax: 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. These states fund government operations through sales tax, property tax, excise taxes on specific goods, and other revenue sources instead of taking a cut of paychecks.

If you move to one of these states or work remotely for an employer based there, you will not owe state income tax on your earnings. However, you may still owe federal income tax, and you will likely pay higher sales or property taxes than in states that do tax income. The trade-off varies by state and by your personal 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 but not wages, making it a partial exception.
  • States without income tax typically charge higher sales tax or property tax to fund schools, roads, and services.
  • Moving to a no-income-tax state does not reduce your federal income tax obligation.
  • Your tax burden depends on your income type, spending habits, and property ownership, not just whether your state has income tax.

How states without income tax replace that revenue

A state income tax is one revenue stream. When a state does not collect it, it must fund schools, highways, police, and courts through other means. The most common replacement is a higher sales tax. Texas, Washington, and Tennessee all have sales tax rates above 8 percent. Alaska has no sales tax at all but charges high excise taxes on fuel and alcohol.

Property tax is another major source. Florida and Texas have no income tax but charge property tax on homes and land. Wyoming has low property tax overall but makes up revenue through mineral extraction taxes and tourism-related fees. New Hampshire relies heavily on property tax—among the highest in the nation—to fund local schools and services.

Some states use a combination. Nevada has no income tax and a moderate sales tax (around 8.2 percent) but also taxes casino and gaming revenue heavily. South Dakota has no income tax and a moderate sales tax but generates revenue from tourism and agricultural licensing.

Which states tax investment income differently

New Hampshire stands apart because it taxes interest, dividends, and capital gains but not wages or salaries. If you live in New Hampshire and earn $60,000 in salary, you owe no state tax on that income. If you earn $10,000 in dividend income from stocks, you owe state tax on that $10,000. The rate is 5 percent on interest and dividends.

The other eight states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming—tax neither wages nor investment income. If you have significant investment income and live in one of these states, you avoid state tax on that income entirely.

This matters if you are retired and living on investment income, or if you own a business that generates capital gains. A person with $100,000 in annual dividend income pays no state tax in Florida but would owe state income tax in most other states.

What happens if you move to a no-income-tax state

Moving to a no-income-tax state does not automatically change your tax status. Your state of residence for tax purposes is usually the state where you live for more than half the year. If you move to Texas on January 1 and stay there through December 31, Texas is your state of residence, and you owe no Texas state income tax on your 2024 earnings.

However, your old state may still claim you owe taxes if you left partway through the year. Some states tax you on income earned while you were a resident, even if you moved away. You may need to file a part-year return in your former state and a full-year return in your new state. The rules vary by state.

You will still owe federal income tax no matter where you live. Moving to Florida does not reduce your federal tax bill. Your federal return is the same whether you live in a no-income-tax state or a high-income-tax state.

How to calculate your actual tax burden in a no-income-tax state

The absence of state income tax does not automatically mean lower total taxes. You need to compare your full tax picture: income tax, sales tax, property tax, and any other state or local taxes.

A person earning $80,000 in salary and owning a $300,000 home will pay differently in Texas (no income tax, moderate sales tax, moderate property tax) than in Florida (no income tax, moderate sales tax, lower property tax) than in Wyoming (no income tax, low sales tax, low property tax). The math depends on how much you spend, how much property you own, and what types of income you have.

If you spend very little and own no property, a no-income-tax state saves you money. If you spend heavily and own expensive property, the higher sales and property taxes may offset the income tax savings. Use a tax calculator or speak with a tax professional in the state you are considering to estimate your actual liability.

States that recently changed their income tax status

Tennessee eliminated its state income tax on wages in 2021, phasing it out over several years. Before that, Tennessee taxed interest and dividend income but not wages. As of 2022, Tennessee has no state income tax on any income type.

No other state has eliminated income tax recently, and no state has added one. The nine states listed above have maintained their no-income-tax status for decades. However, state tax law changes, and you should verify current rates and rules before making a move or filing a return.

Remote work and state income tax when you move

If you work remotely for an employer in a high-income-tax state but move to a no-income-tax state, you generally owe tax to the state where you live, not where your employer is based. If you move to Texas and work remotely for a New York company, you owe no Texas income tax on your salary. You also do not owe New York income tax on that salary, because you are not a New York resident.

However, some states have tried to tax remote workers who moved away. This is an unsettled area of tax law. If you are considering a move and work remotely, ask your employer's payroll department and a tax professional in your new state whether your employer will need to adjust your withholding.

Frequently Asked Questions

Do I still owe federal income tax if I live in a no-income-tax state?

Yes. Federal income tax is separate from state income tax. Everyone in the United States owes federal tax on income, regardless of which state they live in. Living in Alaska, Texas, or any other no-income-tax state does not reduce your federal obligation.

Is New Hampshire's lack of income tax on wages the same as the other nine states?

No. New Hampshire taxes interest and dividend income at 5 percent but does not tax wages or salaries. The other eight states tax neither wages nor investment income. If your income is mostly from a job, New Hampshire and the other eight states are equivalent. If your income is mostly from investments, the other eight states save you more money.

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

That depends on your situation. Wyoming has low sales tax and low property tax, making it attractive if you earn wages and own property. Alaska has no sales tax, making it good if you spend a lot. Florida has no income tax and lower property tax than some other states. Compare your specific income, spending, and property ownership to the tax rates in each state.

Can my old state tax me after I move to a no-income-tax state?

Your old state can tax you on income you earned while you were a resident there. If you moved to Florida on July 1, your former state may tax you on income earned January through June. You file a part-year return in your old state and a full-year return in Florida. After you move, your old state has no claim on future income.

If I retire and move to a no-income-tax state, do I owe less tax on my retirement income?

It depends on the type of retirement income. Social Security is not taxed by any state. Distributions from a 401(k) or traditional IRA are taxed as ordinary income in most states, but not in the nine no-income-tax states. Distributions from a Roth IRA are not taxed anywhere. If your retirement income is mostly from a 401(k), moving to a no-income-tax state saves you money. If it is mostly Social Security, the move makes no difference to your state tax bill.