Nine states collect no income tax on wages or salaries

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire do not tax income from wages or salaries. New Hampshire also taxes interest and dividend income, but not wages. These nine states fund government services through sales tax, property tax, corporate tax, and other revenue sources instead.

The absence of income tax does not mean these states are cheaper overall. Many have higher sales taxes or property taxes to compensate. A state with no income tax but 9% sales tax may cost more than a state with 5% income tax and 6% sales tax, depending on what you buy and own.

If you are considering a move for tax reasons, compare your total tax burden in both states — not just income tax. The calculation changes based on your income level, whether you own property, and how much you spend on taxable goods.

Key Takeaways

  • Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire.
  • New Hampshire taxes interest and dividends but not wages, making it a partial exception.
  • States without income tax typically rely on sales tax, property tax, and corporate tax instead, so your total tax bill depends on all three.
  • Moving to a no-income-tax state saves money only if your new state's other taxes are lower than your old state's combined tax burden.

How no-income-tax states replace that revenue

States without income tax use other sources to fund schools, roads, and public services. Sales tax is the most common replacement. Texas has no income tax but charges 6.25% state sales tax (plus local additions that can reach 8.25% total). Florida has no income tax and a 6% state sales tax. Washington has no income tax and a 6.5% state sales tax.

Property tax is another major source. New Hampshire has no income tax but charges one of the highest property tax rates in the country — roughly 2% of home value annually. Wyoming has no income tax but also charges property tax. Alaska has no income tax and relatively low property tax, which is one reason it attracts residents despite high costs of living.

Corporate tax and excise taxes (taxes on specific goods like fuel or alcohol) fill the remaining gap. Some states also tax business income or capital gains. Tennessee, for example, has no income tax on wages but taxes investment income at 3.75%.

What counts as income in no-income-tax states

The definition of income matters. In the nine no-income-tax states, you do not pay state tax on wages from a job. But investment income, business income, and retirement income may be taxed differently depending on the state.

New Hampshire taxes interest and dividend income at 5% but not wages. Tennessee taxes investment income at 3.75% but not wages. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming tax neither wages nor investment income. Wyoming has no tax on any type of income.

If you receive Social Security, military pensions, or retirement distributions, check the specific state rules. Some no-income-tax states exempt retirement income entirely. Others tax it. This detail matters significantly if you are retired or plan to retire in a no-income-tax state.

Federal income tax still applies everywhere

State income tax and federal income tax are separate. Even if you live in Alaska or Texas, you still owe federal income tax to the IRS. The nine no-income-tax states simply do not add a state layer on top.

Your federal tax bracket, deductions, and filing requirements do not change based on your state. You file one federal return with the IRS and, if you live in a state with income tax, a separate state return. In a no-income-tax state, you file only the federal return (unless you have business income or other state-specific tax obligations).

How to calculate whether moving saves you money

To compare your tax burden between two states, gather these numbers: your annual wages, investment income, home value, and annual spending on taxable goods. Then calculate state income tax, state sales tax, and property tax in both states.

Example: You earn $75,000 per year and own a $300,000 home. In State A (with income tax), you pay 5% income tax ($3,750), 6% sales tax on $20,000 in annual purchases ($1,200), and 1% property tax ($3,000). Total: $7,950. In State B (no income tax), you pay 0% income tax, 8% sales tax on $20,000 ($1,600), and 1.5% property tax ($4,500). Total: $6,100. State B costs less in this scenario.

But if you own a $500,000 home, the property tax difference grows larger and may erase the savings from no income tax. Use your actual numbers, not averages. State tax websites and tax calculators can help, but a tax professional can give you the most accurate comparison for your situation.

No-income-tax states and remote workers

If you work remotely for a company in another state, your tax obligation depends on where you live, not where your employer is. If you move to Texas and work for a New York company, you pay Texas taxes, not New York taxes. This is one reason remote workers sometimes relocate to no-income-tax states.

However, some states tax remote workers differently. A few states have tried to tax residents who work remotely for out-of-state employers, though these laws are uncommon and often challenged. Before moving for remote work, confirm your new state's rules with a tax professional or the state revenue office.

Also check whether your employer has a tax withholding policy. Some companies withhold taxes based on the employee's work location; others withhold based on the company's location. Clarify this before you move to avoid underpaying or overpaying.

Frequently Asked Questions

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

Yes. State income tax applies to residents of that state. If you live in a state with income tax, you owe it regardless of where your income comes from. Moving is the only way to change your state tax obligation. Temporary travel or work does not change your residency for tax purposes.

Is New Hampshire really a no-income-tax state?

New Hampshire has no tax on wages but does tax interest and dividend income at 5%. If your income comes entirely from wages, you pay no state income tax. If you have investment income, you owe the 5% tax on that portion. It is a partial exception to the nine fully no-income-tax states.

What if I retire in a no-income-tax state — do I pay state tax on my pension?

It depends on the state. Some no-income-tax states exempt all retirement income. Others tax pensions or retirement account withdrawals. Tennessee and New Hampshire, for example, tax investment income but not wages. Check your specific state's rules before retiring there, especially if pensions or retirement distributions are your main income source.

Can I claim residency in a no-income-tax state if I only visit there?

No. Residency for tax purposes is based on where you actually live, not where you own property or visit. You must establish a permanent home, register to vote, get a driver's license, and show other signs of intent to live there. Simply owning a vacation home does not change your tax residency.

Do no-income-tax states have lower overall costs of living?

Not necessarily. Housing, food, and utilities vary widely within and between states. Some no-income-tax states like Alaska and Wyoming have high costs of living despite lower taxes. Others like Florida and Texas have lower overall costs. Compare the full cost of living, not just taxes, before deciding to move.