Which states do not tax income

Nine states have no state income tax on wages, salaries, or other earned income. They are 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 other revenue sources: sales tax, property tax, corporate tax, excise tax on specific goods, and fees. The absence of state income tax does not mean lower total tax burden. Some of these states have higher sales taxes or property taxes that offset the savings from no income tax.

If you work in one of these states or are considering moving to one, understanding how the tax structure works matters for your actual take-home pay and cost of living.

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.
  • States without income tax often have higher sales taxes or property taxes to fund schools and services.
  • Your total state tax burden depends on where you spend money and own property, not just whether income tax exists.

How these states replace income tax revenue

States without income tax rely on sales tax as their primary revenue source. Florida, Tennessee, Texas, and Washington all have sales tax rates between 5.5% and 10%, depending on the county. Every purchase you make — groceries, clothing, gas — is taxed at the point of sale.

Property tax is another major source. Alaska and Wyoming have low property taxes, which is one reason residents there see real savings. Texas has moderate property taxes. New Hampshire and Tennessee have higher property taxes than many income-tax states, which means homeowners pay more annually.

Corporate income tax, excise taxes on fuel and alcohol, and licensing fees make up the remainder. These are less visible than income tax but still reduce the money available to households and businesses.

States where you pay less in total taxes

Alaska and Wyoming stand out because they have low sales tax and low property tax. If you earn a high income and own property, these two states often result in the lowest total state tax burden in the country. Alaska has no sales tax in most areas and low property tax. Wyoming has a 4% sales tax and low property tax.

Florida and Texas attract residents partly because they have no income tax and moderate property taxes, though sales taxes are higher. If you rent rather than own, the lack of income tax provides real savings because you avoid property tax entirely.

Tennessee and Washington have higher sales taxes (9.5% and 10.25% respectively) that offset much of the income tax savings, especially for lower-income households that spend a larger share of earnings on taxed goods.

How income tax absence affects your paycheck

If you earn $50,000 per year in a no-income-tax state, you keep the full amount (before federal tax). In a state with 5% income tax, you would owe $2,500 to the state. That difference is real and immediate.

The catch is that you will pay more at the register and possibly more in property tax. A family that spends $30,000 per year on taxed goods in a state with 8% sales tax pays $2,400 in sales tax. Over time, the math depends on your income level, spending habits, and whether you own property.

High earners benefit most from no income tax because they pay less on large incomes and can absorb higher sales and property taxes. Lower-income households may pay roughly the same total tax or more, because sales tax takes a larger percentage of their earnings.

New Hampshire's partial income tax

New Hampshire taxes interest income and dividend income at 5%, but has no tax on wages or salaries. This matters if you live on investment returns rather than a paycheck. If your income comes entirely from a job, you owe no state income tax in New Hampshire.

New Hampshire has a 6% sales tax and moderate property taxes. The state markets itself as having no income tax on wages, which is technically accurate but incomplete if you have significant investment income.

Moving to a no-income-tax state for tax reasons

Relocating solely to reduce taxes is a major decision that involves more than state income tax. You must consider the cost of living in the specific city or region, job market, housing costs, and climate. Some no-income-tax states have high housing costs that erase tax savings.

If you are retired and living on Social Security or a pension, state income tax rules matter less because many states do not tax retirement income regardless of whether they tax wages. If you are self-employed or have investment income, the state's treatment of business income and capital gains becomes important.

The federal government taxes your income the same way regardless of which state you live in. State income tax is only one piece of your total tax picture.

Frequently Asked Questions

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

Yes. Federal income tax applies everywhere in the United States. State income tax is separate. Living in Alaska, Florida, or any other no-income-tax state means you owe no state income tax, but you still file a federal return and pay federal tax based on your income.

Is it cheaper to live in a no-income-tax state?

Not always. Sales tax and property tax can offset income tax savings. Alaska and Wyoming tend to have lower total tax burdens. Tennessee and Washington have high sales taxes that reduce the benefit. Housing costs, job availability, and cost of living vary widely within each state.

Can I claim residency in a no-income-tax state to avoid taxes?

No. Your state of residency is determined by where you actually live and maintain a permanent home, not by where you claim to live. If you work in a state with income tax but live in a no-income-tax state, you typically owe income tax to the state where you work.

Do these states tax retirement income?

Most do not tax Social Security, pensions, or 401(k) withdrawals, but rules vary. Tennessee taxes some retirement income. Check the specific state's rules if retirement income is your primary source of money.

What if I work remotely for a company in a high-tax state but live in a no-income-tax state?

You generally owe income tax to the state where you live, not where your employer is located. If you live in Florida and work remotely for a New York company, you owe Florida tax (which is zero) and federal tax, but not New York state tax. Some states have different rules, so verify with your state's tax authority.