Which states don't charge state income tax
Seven states collect no state income tax on wages, salaries, or investment income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. Two additional states—New Hampshire and Washington—tax investment income but not wages, which makes them functionally similar for most workers.
These nine states fund government operations through other revenue sources: sales tax, property tax, excise taxes on fuel or alcohol, and business taxes. The absence of state income tax does not mean these states are cheaper overall. A state with no income tax may have higher sales tax, property tax, or both. Moving to one of these states for tax reasons requires comparing your total tax burden, not just income tax.
State income tax rules change slowly, but they do change. Before making a move based on tax status, verify the current rules with the state's department of revenue or a tax professional, since legislatures can modify tax law.
Key Takeaways
- Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming impose no state income tax on wages or investment income.
- New Hampshire and Washington tax investment income but not wages, making them no-income-tax states for most workers.
- States without income tax typically rely on sales tax, property tax, and business taxes instead, so your total tax bill may not be lower.
- Your actual savings depend on your income level, where you spend money, and whether you own property in the state.
The nine states and what they tax instead
The following table shows how each no-income-tax state funds government and what you will pay instead:
| State | Wages Taxed | Investment Income Taxed | Primary Revenue Sources |
|---|---|---|---|
| Alaska | No | No | Oil revenue, sales tax, property tax |
| Florida | No | No | Sales tax (7% state rate), property tax, tourism taxes |
| Nevada | No | No | Sales tax (8.23% state rate), gaming taxes, property tax |
| South Dakota | No | No | Sales tax (4.5% state rate), property tax, business taxes |
| Tennessee | No | No | Sales tax (9.55% state rate), property tax, excise taxes |
| Texas | No | No | Sales tax (6.25% state rate), property tax, business taxes |
| Wyoming | No | No | Sales tax (4% state rate), property tax, mineral extraction taxes |
| New Hampshire | No | Yes (3%) | Sales tax (none), property tax, business taxes |
| Washington | No | Yes (7%) | Sales tax (6.5% state rate), property tax, business taxes |
The state rates shown are the base rates set by the state legislature. Local counties and cities add their own sales tax and property tax on top of these numbers, so your actual rate will be higher depending on where in the state you live.
How moving to a no-income-tax state affects your taxes
If you move to one of these states, you stop paying state income tax on wages earned after you establish residency. Most states define residency as living there for the full tax year or having a permanent home there. You will owe income tax to your previous state on wages earned before you moved, and you may owe it on income from property or business you still own there.
Your federal income tax does not change. The IRS taxes all U.S. citizens and residents the same way regardless of which state they live in. Moving to Alaska or Texas does not reduce your federal tax bill.
If you work remotely for a company in a high-tax state but live in a no-income-tax state, you generally pay tax to the state where you live, not where your employer is based. Some states have tried to change this rule, so confirm the current law with your employer's payroll department and a tax professional before relying on this.
Sales tax and property tax in no-income-tax states
States without income tax typically make up the revenue through higher sales tax or property tax. Tennessee and Nevada have the highest combined state and local sales tax rates in the country, both above 9%. South Dakota and Wyoming have lower sales tax but higher property taxes. Alaska has no state sales tax in most areas, but local governments add their own.
If you spend most of your income on goods and services, a high sales tax state will cost you more than a high-income-tax state. If you own property, property tax matters more. A retiree living on investment income in a state with no income tax but high property tax may pay more total tax than in a state with income tax but lower property tax.
To estimate your actual tax burden, add up what you will pay in state income tax, local income tax (if any), sales tax on what you spend, and property tax on what you own. Compare that total to what you pay now. The state with the lowest income tax is not always the state where you pay the least tax overall.
Residency requirements and when the tax break starts
You must establish residency in the state to stop paying income tax to your previous state. Residency usually means you have a permanent home there and you spend more than half the year there, though the exact rules vary by state. Simply owning property or having a mailing address is not enough.
Your previous state may claim you are still a resident if you keep a home there, have family there, or maintain other ties. If two states both claim you as a resident, you may owe income tax to both until you can prove you left. This is rare but happens most often when someone moves for work and keeps a home in their old state.
The safest approach is to move all your belongings, change your driver's license and voter registration, close accounts in the old state, and keep records showing you are now a resident of the new state. If you are moving for a job, ask your new employer's tax department what documentation they need to process your paycheck correctly.
Remote workers and military personnel
Remote workers who move to a no-income-tax state may still owe income tax to their employer's home state, depending on that state's rules. Some states tax remote workers who work for in-state companies even if the worker lives out of state. Others do not. This is a common source of confusion and changes by state.
Military personnel stationed in a no-income-tax state may not owe that state's income tax on military pay, even if they are residents. Federal law exempts military pay from state income tax in some cases, but the rules are complex and depend on your home state of record. Active-duty service members should ask their finance office how their pay will be taxed.
Frequently Asked Questions
Do I have to move to a no-income-tax state to avoid state income tax?
Yes. You must establish legal residency in the state to stop paying income tax to your previous state. Simply working remotely for a company in a no-income-tax state while living elsewhere does not protect you from your home state's income tax.
Will I save money by moving to a no-income-tax state?
Not necessarily. Your total tax burden depends on sales tax, property tax, and other state and local taxes, not just income tax. Compare your full tax bill in the new state to what you pay now before deciding to move.
What if I own property in two states?
You will owe property tax to both states on the property you own in each. You will owe income tax to the state where you are a resident. If you keep a home in your old state, that state may claim you are still a resident and tax your income, even if you moved to a no-income-tax state.
Can I claim residency in a no-income-tax state if I only visit there?
No. You must have a permanent home there and spend the majority of the year there to establish residency. Owning a vacation home or visiting frequently is not enough. Your previous state can challenge your claim to residency if you keep significant ties there.
Do these states have any income tax at all?
New Hampshire and Washington tax investment income (capital gains, dividends, interest) but not wages. The other seven states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming—have no state income tax on any type of income.