Which states don't tax your wages
Nine states have no state income tax on wages: 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 or salaries. The other eight tax neither wages nor investment income.
These states fund their operations through other revenue sources: sales tax, property tax, excise taxes on fuel and alcohol, and business taxes. Some have higher sales taxes to compensate. The absence of state income tax does not mean lower overall tax burden — it depends on what you spend, own, and earn from investments.
If you work remotely for an out-of-state employer while living in one of these states, you typically owe no state income tax on that wage income. However, if you live in a state with income tax and work remotely for an employer in a no-tax state, your home state usually taxes your wages regardless of where your employer is located.
Key Takeaways
- Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no income tax on wages or investment income.
- New Hampshire taxes investment income but not wages, making it a partial exception to the no-income-tax group.
- States without income tax often rely on higher sales taxes, property taxes, and business taxes to fund services.
- Your state of residence determines which income tax you owe, not the location of your employer or where you work remotely.
How the nine no-tax states fund government services
States without income tax must generate revenue from other sources. Most rely heavily on sales tax, which applies to purchases of goods and some services. Texas has a sales tax of 6.25 percent at the state level, plus local additions that can bring it to 8.25 percent or higher. Washington's state sales tax is 6.5 percent before local taxes. Florida's is 6 percent. These rates are higher than the national average, partly because they replace income tax revenue.
Property tax is another major source. Alaska, despite having no income tax, collects property tax at the local level. Tennessee and Texas also use property tax significantly. Some states tax specific goods more heavily — Alaska taxes fuel and alcohol at higher rates than most states.
Business taxes and corporate income taxes also fund these states. Washington has a capital gains tax on the sale of long-term investments, which took effect in 2022. This creates a partial income tax on investment profits, though not on wages. Understanding what you will pay in other taxes is important if you are considering a move to one of these states.
New Hampshire's partial income tax structure
New Hampshire stands apart because it taxes investment income but not wages. Specifically, it taxes interest income and dividend income at 5 percent, but has no tax on salaries, wages, or self-employment income. This makes it attractive to wage earners but not to retirees living on investment income or people with significant dividend portfolios.
New Hampshire funds state operations through property tax, sales tax, and business taxes. Its property tax rate is among the highest in the nation, so the tax savings from no wage tax may be offset by property tax costs if you own a home there. The state also taxes meals and lodging at 9 percent, higher than the general sales tax rate of 6 percent.
Remote work and state income tax obligations
If you live in a no-income-tax state and work remotely for an employer anywhere in the country, you owe no state income tax on your wages to your home state. This is one reason remote workers sometimes relocate to these states. However, the employer's state of incorporation or location does not matter — your residence does.
If you live in a state with income tax and work remotely for a company in Alaska or Texas, your home state still taxes your wages. Some states have reciprocal agreements that reduce or eliminate this tax, but most do not. You would owe income tax to your state of residence, not to the state where your employer operates.
If you move during the year, you may owe income tax to both your old state and your new state for the portions of the year you lived in each. States define residency differently — some use the number of days you spent there, others use where you maintain a permanent home. If you are planning a move, contact your current state's tax authority to understand your obligations for the transition year.
Comparison of tax burden across no-income-tax states
The total tax burden varies significantly among these nine states because they compensate for lost income tax revenue in different ways. The following table shows the primary tax sources and rates:
| State | State Sales Tax | Property Tax (Typical) | Other Major Taxes |
|---|---|---|---|
| Alaska | 0% (local only) | 1.1% | High fuel and alcohol excise taxes |
| Florida | 6% | 0.83% | Tourism development tax |
| Nevada | 6.85% | 0.6% | Gaming taxes, business taxes |
| South Dakota | 4.5% | 0.31% | Low overall tax burden |
| Tennessee | 9.55% | 0.71% | Highest sales tax in nation |
| Texas | 6.25% | 1.8% | Franchise tax on businesses |
| Washington | 6.5% | 0.94% | Capital gains tax on investments |
| Wyoming | 4% | 0.61% | Low overall tax burden |
| New Hampshire | 0% (meals 9%) | 2.18% | 5% tax on interest and dividends |
South Dakota and Wyoming have the lowest overall tax burdens among these states, with low sales taxes and low property taxes. Tennessee has the highest sales tax in the nation at 9.55 percent. New Hampshire has the highest property tax rate. Your actual tax burden depends on whether you spend more, own property, or earn investment income.
Moving to a no-income-tax state: what to consider
Before relocating for tax reasons, research the full picture. A state with no income tax might have higher sales tax, property tax, or both. If you are retired and living on investment income, New Hampshire's dividend tax might cost you more than income tax in another state. If you own a home, property tax differences can be substantial — New Hampshire's average property tax is roughly double that of South Dakota.
Some no-income-tax states offer tax breaks for specific groups. Florida exempts retirees' retirement income from state tax in some cases. Texas has no tax on any income. Alaska pays residents an annual dividend from oil revenues, though the amount varies yearly. These factors may influence your decision depending on your income sources.
You should also consider non-tax factors: cost of living, job market, climate, and proximity to family. A lower tax burden does not offset a higher cost of living or lack of job opportunities in your field. Many people move to these states for reasons beyond taxes and find the tax savings a secondary benefit.
Frequently Asked Questions
Do I have to move to a no-income-tax state to avoid state income tax?
No. You avoid state income tax by establishing residency in a state without it. Residency typically means living there for more than half the year or maintaining a permanent home there. Simply working remotely for an employer in a no-tax state while living elsewhere does not protect you from your home state's income tax.
Will I owe federal income tax if I live in a no-income-tax state?
Yes. Federal income tax is separate from state income tax. All states, including those without state income tax, are subject to federal tax. Living in Alaska, Texas, or any other no-income-tax state does not reduce your federal tax obligation.
What happens to my taxes if I move mid-year?
You typically owe income tax to both your old state and your new state for the portions of the year you lived in each. Some states offer credits to avoid double taxation, but not all. Contact both your old and new state tax authorities to understand your obligations for the transition year.
Does New Hampshire's lack of wage tax mean I pay less overall?
Not necessarily. New Hampshire has the highest property tax rate among no-income-tax states and taxes investment income at 5 percent. If you own a home or live on investment income, your total tax burden might be higher than in a state with moderate income tax and lower property tax.
Can my employer force me to pay income tax to their state?
No. Your tax obligation is determined by where you live, not where your employer is located. If you live in a no-income-tax state, you owe that state no income tax on your wages, regardless of your employer's location or state of incorporation.