Which states do not tax wages
Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception — it taxes investment income and interest but not wages or salaries. The other eight tax neither wages nor investment income.
These states fund government operations through other revenue sources: sales tax, property tax, excise tax on fuel or alcohol, and business taxes. The mix varies by state. Alaska, for instance, relies heavily on oil revenue and has no sales tax. Tennessee and Washington have high sales taxes but no income tax on any source.
If you work in one of these states or are considering a move, the absence of state income tax affects your take-home pay but does not change federal income tax, Social Security tax, or Medicare tax — those apply everywhere.
Key Takeaways
- Nine states have no tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income but not wages).
- These states replace income tax revenue with sales tax, property tax, excise taxes, and business taxes, so your total tax burden depends on your spending and property ownership, not just income.
- Working in a no-income-tax state saves you state tax on wages but does not reduce federal income tax, Social Security tax, or Medicare tax.
- If you live in one state and work in another, you typically pay income tax to the state where you work, not where you live — with limited exceptions for residents of bordering states.
How no-income-tax states replace that revenue
States without income tax must fund schools, roads, courts, and other services through different sources. The revenue mix tells you what you will pay instead.
Alaska has no sales tax and no income tax. It funds government primarily through oil and gas revenue and a sovereign wealth fund. Residents pay property tax and local sales taxes in some municipalities, but the state itself does not impose either.
Florida, Nevada, South Dakota, Tennessee, Texas, and Washington all use sales tax as a major revenue source. Sales tax rates in these states range from 5.45% (Washington) to 7.25% (Tennessee and Texas). They also tax property, businesses, and specific goods like fuel and alcohol. If you spend heavily, you will pay more in sales tax than you would have paid in income tax elsewhere.
Wyoming has no sales tax but funds itself through property tax, excise taxes on fuel and alcohol, and business taxes. New Hampshire has no sales tax and no income tax on wages, but taxes investment income, interest, and dividends at 5%.
What happens if you work across state lines
If you live in one state and work in another, the state where you work usually gets to tax your wages. This is called the work-state rule. If you live in New York and work in Florida, you pay no Florida income tax (because Florida has none), and you typically do not owe New York income tax on that income either — New York does not tax wages earned outside the state.
The exception is reciprocal tax agreements. A handful of states have agreements that let residents of bordering states avoid taxation in the work state. For example, Pennsylvania residents who work in New Jersey can claim an exemption from New Jersey income tax. These agreements are rare and apply only to specific state pairs. Check your state's tax department website to see if you may have access to.
If you are self-employed or own a business, the rules are different and depend on where your business is located and where you conduct it. Consult a tax professional for your specific situation.
State income tax versus federal income tax
Living or working in a no-income-tax state does not reduce your federal income tax. The IRS taxes all U.S. citizens and residents on worldwide income regardless of state. You will still file a federal return and pay federal tax at the same rate as someone in California or New York.
You will also still pay Social Security tax (6.2% of wages) and Medicare tax (1.45% of wages) to the federal government. These are separate from income tax and apply everywhere.
The only tax you avoid is state income tax. For someone earning $60,000 a year, that might mean saving $3,000 to $5,000 annually compared to a high-tax state, depending on the state's income tax rate. But if you move to a no-income-tax state with high sales tax, you may pay more in sales tax than you saved in income tax.
Retirement income and no-income-tax states
Many people move to no-income-tax states after retirement to reduce taxes on pensions and investment income. The benefit depends on what type of retirement income you have.
In most no-income-tax states, pensions and 401(k) withdrawals are not taxed. Social Security benefits are also not taxed by these states. If your retirement income comes primarily from a pension or Social Security, moving to Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, or Wyoming can save you significant money.
New Hampshire is different: it taxes investment income and interest at 5%, so retirement income from bonds, dividends, or interest-bearing accounts is taxed there. Pensions and Social Security are exempt.
Before moving for tax reasons, calculate your total tax burden in both states — income tax, sales tax, property tax, and any local taxes. A state with no income tax but high property tax may not save you money.
How to verify your state's tax status
Tax law changes, and states sometimes add new taxes or modify existing ones. To confirm the current status of your state or a state you are considering, check the official state tax department website. Each state maintains a page listing income tax rates and rules.
If you are moving or changing jobs, contact the tax department of both your current state and the new state. They can tell you what you owe and whether any reciprocal agreements apply. Many state tax departments have phone lines and email support for these questions.
If you are self-employed, own a business, or have complex income (rental property, investments, side income), consult a tax professional who works in your state. They can model your tax liability and help you plan.
Frequently Asked Questions
Do I have to move to a no-income-tax state to benefit from no income tax?
No. If you work in a no-income-tax state but live in a state that does tax income, you typically do not owe state income tax on wages earned in the no-tax state. However, you may owe income tax to your home state on other income (investment income, rental income, self-employment income). Check your home state's rules.
If I retire and move to Florida, will my 401(k) withdrawals be taxed?
No. Florida has no state income tax, so 401(k) withdrawals, pensions, and Social Security are not taxed by the state. You will still owe federal income tax on the 401(k) withdrawal. New Hampshire is the only no-income-tax state that taxes investment income, so 401(k) withdrawals there would be subject to state tax.
Are property taxes higher in no-income-tax states?
It varies. Some no-income-tax states have moderate property taxes (Florida, Nevada), while others are higher (New Jersey, which does have income tax, has the highest property taxes in the nation). Do not assume no income tax means low overall taxes. Compare your total tax bill — income, sales, and property — in both states before deciding.
What if I work remotely for a company in a high-tax state but live in a no-income-tax state?
You typically owe income tax to the state where you work, not where you live. If your employer is in New York and you work remotely from Florida, you may owe New York income tax. However, some states have changed this rule during and after the pandemic. Check with both your state and your employer's state tax department, as the rules are still evolving in some places.
Does New Hampshire really have no income tax?
New Hampshire has no tax on wages or salaries, but it taxes investment income (interest, dividends, capital gains) at 5%. If your retirement income comes from a pension or Social Security, it is not taxed. If it comes from investments or interest, it is. This makes New Hampshire different from the other eight no-income-tax states.