Which states do not tax income
Nine states impose no income tax on wages, salaries, or other earned income: 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. The other eight tax neither wages nor investment income.
No state has zero taxes overall. States without income tax typically rely on sales tax, property tax, fuel tax, and other levies to fund schools, roads, and services. A state with no income tax may still have a higher total tax burden than a state with income tax, depending on how much you spend and own property.
If you are considering a move or planning where to work, understanding which states tax income and which do not can affect your take-home pay. The difference compounds over years, especially for higher earners or those with investment income.
Key Takeaways
- Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming tax neither wages nor investment income; New Hampshire taxes investment income but not wages.
- States without income tax fund services through sales tax, property tax, and excise taxes, which may offset the income tax savings depending on your spending and property ownership.
- Moving to a no-income-tax state does not automatically lower your total tax burden — compare sales tax rates, property tax rates, and your expected spending before deciding.
- If you work remotely for an out-of-state employer, your home state's tax rules usually apply to your wages, not your employer's state.
The nine states and what they tax instead
Alaska has no income tax and no statewide sales tax, though some municipalities charge local sales tax. It funds state operations partly through oil revenue and partly through property tax and other levies. Residents pay federal income tax but not state income tax on any source.
Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming all impose no income tax on wages or investment income. Each funds schools and infrastructure through a combination of sales tax (ranging from 4% to 7.25% statewide, with local additions), property tax, and excise taxes on fuel, alcohol, and tobacco.
New Hampshire stands apart: it taxes interest and dividend income at 5% but does not tax wages, salaries, or self-employment income. This makes it attractive to wage earners but not to retirees living on investment income.
The remaining 41 states and Washington, D.C., all tax income on wages. Tax rates and brackets vary widely — from 1% in Colorado to over 13% in California and New York.
How remote work and state residency affect your taxes
If you live in a no-income-tax state and work remotely for a company based elsewhere, you pay tax to your home state (none) and federal tax, not to your employer's state. Your employer's state has no claim on your wages because you do not work there.
If you live in a state with income tax and work remotely for a company in a no-income-tax state, you still owe income tax to your home state. The company's location does not matter — your residence does.
The exception is if you travel to your employer's state to work in person for part of the year. Some states tax you on the portion of income earned within their borders. This is rare for fully remote workers but common for those who spend significant time in an office.
Sales tax and property tax in no-income-tax states
States without income tax typically charge higher sales tax to replace that revenue. Florida's statewide sales tax is 6%, plus local additions that can reach 7.5% total. Washington's is 6.5% statewide, plus local tax up to 10.9%. Texas is 6.25% statewide, plus local tax up to 8.25%.
Property tax rates also vary. Texas has a relatively high effective property tax rate of around 1.6% of home value. Florida averages around 0.8%. Alaska has no statewide property tax but some municipalities charge it. New Hampshire has no sales tax but property tax averages around 1.1% of home value.
If you spend little and own no property, a no-income-tax state saves you money. If you spend heavily or own valuable real estate, the sales and property taxes may offset or exceed the income tax you would pay elsewhere.
Retirement income and investment income in no-income-tax states
Retirees drawing Social Security, pensions, or retirement account withdrawals benefit from no income tax in eight of the nine states. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax retirement income of any kind.
New Hampshire taxes interest and dividend income at 5%, so retirees living on investment returns pay state tax there. Those drawing only Social Security or pensions pay nothing.
If you are planning retirement and considering a move, the state's treatment of your specific income source matters more than the headline "no income tax." Verify how your pension, IRA withdrawals, or investment income will be taxed before relocating.
Federal tax still applies everywhere
No state can exempt you from federal income tax. All nine no-income-tax states are still subject to federal tax on wages, self-employment income, capital gains, and other sources. Federal tax rates and brackets are the same regardless of where you live.
The federal standard deduction for 2024 is $14,600 for single filers and $29,200 for married filing jointly. Most people with income below these thresholds owe no federal tax. Above these amounts, federal tax applies in every state.
Moving to a no-income-tax state reduces your total tax burden only if the state and local taxes you pay there are lower than the state income tax you would pay elsewhere, plus any difference in sales or property tax.
How to calculate your actual tax savings
To compare the real cost of living in a no-income-tax state versus your current state, gather these numbers: your annual wages or income, your expected annual spending, your home value or expected rent, and your state's income tax rate and brackets.
Calculate your state income tax in your current state using your income and that state's tax tables. Then calculate what you would pay in sales tax and property tax in the no-income-tax state you are considering, based on your expected spending and property value.
The difference between these two totals is your rough tax savings or cost. This is not exact — deductions, credits, and local taxes vary — but it shows whether a move makes financial sense before you contact a tax professional.
Frequently Asked Questions
Do I have to move to a no-income-tax state to benefit from it?
Yes. You owe income tax to the state where you are a resident, usually defined as where you live for more than half the year or where you have a permanent home. Establishing residency in a no-income-tax state typically requires moving there and obtaining a driver's license, voter registration, or other proof of residence.
If I move to a no-income-tax state mid-year, do I owe tax to both states?
You owe income tax to each state for the portion of the year you were a resident there. If you moved from California to Texas on July 1, you owe California tax on income earned January through June and Texas tax on income earned July through December (though Texas owes nothing). File part-year resident returns in both states.
Does New Hampshire's lack of wage tax mean I pay nothing on my salary?
Correct. New Hampshire does not tax wages, salaries, or self-employment income. You pay federal tax and New Hampshire property tax (if you own), but no state income tax on earned income. If you also have interest or dividend income, that portion is taxed at 5%.
Can I claim residency in a no-income-tax state if I own a vacation home there?
Owning property alone does not establish residency for tax purposes. You must live there for more than half the year, register to vote, obtain a driver's license, and have no permanent home in another state. Claiming false residency to avoid income tax is tax fraud and subject to penalties and interest.
What happens to my state tax if I retire and move to a no-income-tax state?
Once you establish residency in a no-income-tax state, you owe no state income tax on retirement income, pensions, or Social Security (in the eight states that tax neither). You still owe federal tax and any local property or sales tax. File your final return in your old state for the year you moved, then file only federal returns going forward.