Nine states have no state income tax at all
Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire do not tax wages or salaries. These nine states fund their operations through sales tax, property tax, corporate tax, and other revenue sources instead.
New Hampshire is a partial exception: it taxes interest and dividend income but not wages. So if you earn money from a job, you pay nothing to New Hampshire. If you earn money from investments, you do.
The other eight states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — tax neither wages nor investment income.
Key Takeaways
- Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income but not wages).
- The remaining 41 states and Washington, D.C. all tax wage income, though the rates and brackets vary widely.
- Moving to a no-income-tax state does not automatically exempt you from federal income tax, which applies everywhere.
- Some no-income-tax states have higher sales taxes or property taxes to compensate for lost wage tax revenue.
The 41 states that do tax income
Every other state — 41 in total, plus Washington, D.C. — collects income tax on wages. The tax rates range from less than 1 percent to over 13 percent, depending on the state and your income level.
States with the lowest top income tax rates include Colorado, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, North Carolina, and Pennsylvania. Most of these cap out between 3 and 5.5 percent.
States with the highest top rates include California (13.3 percent), Hawaii (11 percent), New York (10.9 percent), Vermont (8.75 percent), and Oregon (9.9 percent). These rates apply only to the highest income brackets, not to all income.
How income tax brackets work in your state
Most states that tax income use a progressive bracket system. This means different portions of your income are taxed at different rates. You do not pay the top rate on all your money — only on the income that falls into the highest bracket you reach.
For example, if a state has a 3 percent rate on income up to $50,000 and a 5 percent rate on income above that, and you earn $60,000, you pay 3 percent on the first $50,000 and 5 percent only on the remaining $10,000. Your overall tax rate is lower than 5 percent.
A few states use a flat tax instead. Colorado, Illinois, Indiana, Michigan, Mississippi, Missouri, North Carolina, and Pennsylvania all have single tax rates that apply to all income levels. This means your tax rate does not change based on how much you earn.
State income tax versus federal income tax
State income tax is separate from federal income tax. Even if you live in Alaska or Texas and pay zero state income tax, you still owe federal income tax to the U.S. government. Federal tax rates and brackets apply to everyone, regardless of where you live.
Some people confuse the two because they file both on the same tax return. Your federal return goes to the IRS. Your state return (if your state has income tax) goes to your state's revenue department. They are two different taxes on the same income.
Why some states have no income tax
States without income tax rely on other revenue sources. Alaska uses oil revenue and a permanent fund dividend. Florida, Nevada, Texas, and Washington depend heavily on sales tax. Tennessee and South Dakota also use sales tax, along with corporate taxes and fees.
This does not mean these states are cheaper overall. A state with no income tax often has a higher sales tax to make up the difference. When you buy something in Washington or Nevada, you pay more at the register than you would in many income-tax states. Over time, the total tax burden can be similar or even higher.
Moving to a no-income-tax state for tax reasons
If you are considering a move to avoid state income tax, understand that most states have residency rules. You cannot simply declare yourself a resident of Alaska or Florida to escape your current state's taxes. You must actually move there, establish a home, and show genuine intent to stay.
States can challenge your residency claim if you still own property, work, or maintain a home in your old state. If you are retired or work remotely, document your move carefully: update your driver's license, voter registration, and mailing address. Keep records showing where you actually live.
Federal tax law also has rules about residency for military members, students, and people with specific work situations. If you fall into one of these categories, moving to a no-income-tax state may not change your federal tax obligations.
Frequently Asked Questions
Do I have to pay state income tax if I work remotely for a company in a different state?
Usually you pay 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 not New York tax. However, some states have exceptions for certain professions or situations, so check your state's rules.
If I move from a high-tax state to a no-income-tax state mid-year, do I owe tax to both states?
Yes, typically. You owe tax to your old state for the months you lived there and to your new state for the months you lived there. Both states will want a part-year return showing your income for each period. Keep documentation of your move date to support your filing.
Does New Hampshire really not tax wages?
Correct. New Hampshire taxes interest, dividends, and capital gains, but not wages or salaries. If your income comes from a job, you owe nothing to New Hampshire. If it comes from investments or savings accounts, you do.
Are property taxes higher in no-income-tax states?
It varies. Some no-income-tax states have high property taxes (like New Hampshire and Texas), while others have moderate ones (like Alaska and Florida). Compare the total tax burden — income tax plus sales tax plus property tax — before deciding to move based on taxes alone.