Which states don't tax your wages

Nine states have no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire taxes only interest and dividend income, not wages, so residents who earn salary or hourly pay owe nothing to the state. The other eight states tax neither wages nor investment income.

This matters because your state income tax burden depends on where you live and work, not where you file federal taxes. If you move to one of these states or work remotely for an employer in one, you may owe less in state taxes than you did before. However, these states fund government services through other means — typically sales tax, property tax, or both — so your total tax picture may not change as much as it appears.

The list has remained stable for decades. No state has recently added or removed income tax on wages, though legislatures in other states occasionally propose it. Tennessee and New Hampshire both phased out income taxes gradually over several years, but both completed the transition before 2022.

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 functionally tax-free for salaried workers.
  • States without income tax typically rely on sales tax, property tax, or both to fund services, so your total tax burden may be similar to higher-income-tax states.
  • If you work remotely for an out-of-state employer, your state tax obligation is determined by where you live, not where your employer is located.

How these states fund services without income tax

States without income tax must raise revenue another way. Most rely heavily on sales tax, which is a percentage added to purchases at the register. Some of the highest state sales tax rates in the country are in no-income-tax states: Tennessee and Washington both have sales tax above 8 percent, and Louisiana (which does have income tax) is the only state higher.

Property tax is the second major funding source. Texas, for example, has no income tax but property tax rates that rank among the highest in the nation. If you own a home, you will pay this tax annually based on your property's assessed value. Renters do not pay property tax directly, but landlords pass the cost along through rent.

Some no-income-tax states also tax specific goods or activities: Alaska taxes oil extraction, Nevada taxes gambling revenue, and several states impose higher taxes on cigarettes or alcohol. These targeted taxes fund specific services or discourage certain behaviors, but they do not replace the broad revenue that income tax provides.

What happens if you move to a no-income-tax state

Your state tax obligation changes on the date you establish residency in the new state. Most states define residency as the place where you live for more than half the year, though some use additional factors like where you hold a driver's license or register a vehicle. Once you move, you stop owing income tax to your old state and start owing it (or not owing it) to your new state.

If you move mid-year, you may owe income tax to both states for the portion of the year you lived in each. Your old state taxes income earned while you lived there; your new state taxes income earned after you moved. You will file a part-year resident return in each state. The IRS allows a credit for taxes paid to one state to reduce what you owe to another, so you should not pay double tax on the same income.

Remote work complicates this. If you work for an employer in a high-income-tax state but live in a no-income-tax state, you owe tax to the state where you live, not where your employer is. However, some states have tried to tax remote workers who live out of state, so you should verify your specific situation with a tax professional if you are in this position.

Comparing total tax burden across states

The absence of income tax does not automatically mean lower taxes overall. A state without income tax may have higher sales tax, property tax, or both. A single person earning $50,000 per year will pay different total taxes in different no-income-tax states depending on how much they spend and whether they own property.

For example, someone who rents an apartment and spends modestly will pay mainly sales tax in a no-income-tax state. Someone who owns a home will pay significant property tax in addition to sales tax. A high earner who invests heavily may pay more in property tax than they would have paid in income tax in another state, or less — it depends on the specific state and the person's situation.

The Tax Foundation and other research organizations publish state tax burden comparisons, but these are estimates based on average spending and income patterns. Your actual burden depends on your income, spending, property ownership, and investments. If tax burden is a major factor in a move, it is worth calculating your specific situation in both states before deciding.

States that tax investment income but not wages

New Hampshire is the only state that taxes investment income but not wages. It imposes a 5 percent tax on interest and dividend income above $2,400 per person per year. This means a retiree living on Social Security and a small pension owes nothing, but a retiree with substantial investment accounts will owe state tax on the earnings.

New Hampshire phased out its income tax on wages over several years, completing the transition in 2024. The state still taxes interest and dividends because investment income is concentrated among higher-income residents, making it a politically easier revenue source than a broad wage tax.

If you are considering moving to New Hampshire specifically to avoid taxes, verify whether your income comes from wages or investments. Wage earners owe nothing; investors owe tax on earnings above the threshold.

Recent changes and proposals in other states

No state has eliminated income tax on wages in the past five years. However, several states have proposed it or reduced rates. Georgia, Iowa, and North Carolina have all cut income tax rates in recent years, but they still tax wages. These reductions were funded by raising sales tax, reducing spending, or both.

Some states have proposed eliminating income tax entirely, but these proposals have not passed. The barrier is usually revenue: income tax typically funds a large share of state spending on education, infrastructure, and services. Replacing that revenue with sales tax or property tax would require significant increases in those taxes, which are politically difficult.

The nine no-income-tax states have held their position for decades. While other states may adjust rates or propose changes, the list of states with no income tax on wages is unlikely to change in the near term.

Frequently Asked Questions

Do I have to move to a no-income-tax state to stop paying state income tax?

Yes. You owe state income tax based on where you live, not where you work or where your employer is located. Moving is the only way to change your state tax obligation. If you work remotely for an out-of-state employer, you still owe tax to your home state.

Does Social Security count as income in no-income-tax states?

No. Social Security is not taxed by any state, whether the state has income tax or not. This is a federal rule that applies everywhere. Pensions and retirement account withdrawals may be taxed depending on the state, so check the specific rules if you are planning a move in retirement.

If I move to a no-income-tax state mid-year, do I owe taxes to both states?

Yes, but only for the income earned in each state during the time you lived there. You file a part-year resident return in each state. The IRS allows a credit for taxes paid to one state to reduce what you owe to another, so you should not pay double tax on the same income.

Are property taxes higher in no-income-tax states?

Often, but not always. Texas and New Hampshire have high property taxes; Alaska has low property taxes. Compare the specific state and county you are considering to your current location. Property tax varies widely even within states, so location matters as much as state policy.

Can I claim a tax deduction for moving to a no-income-tax state?

No. The IRS does not allow a deduction for moving expenses for most people. Military members and some government employees have exceptions, but ordinary workers cannot deduct moving costs. This is true regardless of whether you move to a no-income-tax state or another state.