States with no income tax

Nine states do not charge income tax on wages or salaries: 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. These nine states fund government operations through sales tax, property tax, corporate tax, and other revenue sources instead.

The absence of state income tax does not mean these states are cheaper overall. A state with no income tax often has higher sales tax or property tax to compensate. For example, Washington and Tennessee have no income tax but charge sales tax rates above 9 percent. Alaska has no state sales tax but relies on oil revenue and property taxes. The total tax burden depends on your income level, where you spend money, and what property you own.

States with income tax

Forty-one states and the District of Columbia charge income tax on wages. Income tax rates and brackets vary widely. Some states tax income at a flat rate — Illinois charges 4.95 percent on all income, for example. Others use progressive brackets where the rate increases as income rises, similar to federal tax. The highest state income tax rates range from about 8 percent in states like Colorado and Georgia to over 13 percent in California and Hawaii.

State income tax brackets and rates change periodically, so the rate you pay this year may differ next year. Some states adjust brackets annually for inflation. Others hold rates steady for years. A few states, like Massachusetts, have a flat tax that rarely changes. You can find your state's current rates on your state's department of revenue website.

Key Takeaways

  • Nine states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire — do not tax wages, though New Hampshire taxes investment income.
  • Forty-one states and Washington, D.C. charge income tax on wages at rates ranging from under 3 percent to over 13 percent.
  • States without income tax typically rely on sales tax, property tax, and other sources, so the total tax burden is not necessarily lower.
  • State income tax rates and brackets change year to year, so you should check your state's department of revenue for current figures.

How state income tax works if you move

If you move from a state with no income tax to a state with income tax, you owe tax on income earned after you move. Your new state's tax year typically begins on January 1, so if you move mid-year, you may owe tax to both states for that year — your old state for income earned before you moved, and your new state for income earned after. Some states offer credits to prevent double taxation, but you have to claim them on your return.

If you work remotely for a company in a no-tax state but live in a state with income tax, you owe tax to the state where you live, not where your employer is located. A few states have tried to tax remote workers differently, but most follow the residency rule. Check with your state's department of revenue if your situation is unusual — for example, if you work part of the year in one state and part in another.

States that tax retirement income differently

Some states exempt or partially exempt retirement income — Social Security, pensions, 401(k) withdrawals, or IRA distributions — from state income tax even though they tax wages. Illinois, Mississippi, and Pennsylvania do not tax retirement income at all. Others, like Colorado and Missouri, exempt only certain types of retirement income or only for residents above a certain age.

If you are planning to retire and state income tax is a factor in your decision, research your target state's rules on pensions and withdrawals. A state with a high wage tax but low retirement tax may be cheaper for you after you stop working. The rules are specific and change occasionally, so contact your state's department of revenue or a tax professional for details about your situation.

States with special tax situations

A few states have unusual income tax structures. New Hampshire taxes only interest and dividend income, not wages. Tennessee recently repealed its tax on investment income but still has no wage tax. Some states tax capital gains at a different rate than wages — for example, Washington taxes capital gains at 7 percent but has no wage tax. These rules can change, so do not assume a state's tax structure is permanent.

A small number of states have local income taxes in addition to state income tax. Ohio, Pennsylvania, and a few others allow cities or counties to charge their own income tax on top of the state rate. If you live in a city that charges local income tax, your total tax burden is higher than the state rate alone. Local rates are usually 1 to 2 percent and vary by municipality.

Where to find your state's current tax rates

Each state's department of revenue publishes current income tax rates, brackets, and rules on its website. The site usually includes tax forms, instructions, and answers to common questions. You can search "[your state] department of revenue" to find the official site. Many states also offer phone support if you have questions about your specific situation.

If you are moving to a new state or your income situation has changed, review your new state's tax rules before the tax year ends. Some states allow you to adjust withholding mid-year if you realize you will owe more or less tax. Acting early can prevent a large bill or missed refund at tax time.

Frequently Asked Questions

Do I have to pay state income tax if I live in a no-tax state but work in a state with income tax?

Yes, you owe tax to the state where you work, not where you live. If you live in Nevada and work in California, you pay California income tax. Some states offer credits to prevent double taxation, but you must claim them on your return.

If I move mid-year, do I owe tax to both states?

Usually yes, for that year only. You owe tax to your old state on income earned before you moved and to your new state on income earned after. Some states offer credits to reduce double taxation. File returns in both states and claim any credits your new state offers.

Are Social Security benefits taxed by states?

Most states do not tax Social Security. However, a few states tax it under certain income thresholds. Check your state's department of revenue website or call their tax line to confirm whether your state taxes Social Security benefits.

Can a state tax me on income I earned in another state?

Generally no. You owe tax to the state where you earned the income or where you live, depending on the state's rules. However, if you are a resident of a state with income tax, that state may tax all your income regardless of where you earned it. Nonresidents typically owe tax only on income earned within that state.

What if my state changed its income tax rate this year?

Your withholding and tax bill are based on the rate in effect when you earned the income. If your state raised rates mid-year, you may owe more tax. If rates dropped, you may get a refund. Your employer should adjust withholding based on the new rate, but verify your pay stub to confirm.