Nine states currently collect no state income tax on wages or salaries

Nine states do not tax wages, salaries, or other earned income: 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. If you work in one of these states or are considering a move, your take-home pay will be higher than in states with income tax, though these states often fund services through other taxes like sales tax or property tax.

The list has remained stable for decades. No state has added or removed income tax in recent years, though some states periodically debate the question. Your actual tax burden depends on where you live and work, not just whether state income tax exists — a person in Texas might pay more in property tax than someone in a state with income tax.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax on wages; New Hampshire taxes investment income but not wages.
  • States without income tax typically fund government through higher sales tax, property tax, or business taxes instead.
  • Your total state tax burden depends on all taxes combined, not income tax alone — a no-income-tax state may have higher property or sales taxes.
  • If you move to a no-income-tax state, you still owe federal income tax to the IRS.

How these nine states fund government without income tax

States without income tax replace that revenue through other sources. Texas and Washington rely heavily on sales tax — both have rates above 8 percent. Alaska funds much of its budget through oil revenue and has no state sales tax. Florida, Nevada, South Dakota, Tennessee, and Wyoming use combinations of sales tax, property tax, and business taxes.

The trade-off is real. A family in Texas pays no income tax but may pay 8.25 percent sales tax on purchases and property tax on a home. Someone in Tennessee pays no income tax but faces a 9.55 percent sales tax. The total amount you pay in state taxes depends on how much you earn, how much you spend, and whether you own property — not just whether income tax exists.

New Hampshire's partial income tax

New Hampshire does not tax wages or salaries, but it does tax interest, dividends, and capital gains at a rate of 5 percent. This makes it different from the other eight states. If you work in New Hampshire and earn only wages, you pay no state income tax. If you have investment income, you will owe tax on that.

New Hampshire also has no sales tax, which is unusual among no-income-tax states. It funds government primarily through property tax and business taxes. The state has the highest property tax rate in the nation as a percentage of home value.

Federal income tax still applies in all states

Living or working in a state without income tax does not change your federal tax obligation. You still file a federal return with the IRS and pay federal income tax based on your income. The IRS collects the same rate regardless of which state you live in. State income tax and federal income tax are separate — one does not replace the other.

If you move to a no-income-tax state for work, your federal withholding should remain the same unless your income changes. Your W-4 form controls federal withholding, not your state of residence.

Remote work and state income tax

If you work remotely for a company in a state with income tax but live in a state without it, the rules depend on where your employer is located and where you perform the work. Most states tax income based on where the work is performed, not where the company is based. If you live in Florida and work remotely for a New York employer, you typically owe Florida tax (none) rather than New York tax.

Some states have reciprocal agreements that affect this. A few states do not tax residents who work in neighboring states. The safest approach is to tell your employer where you live and ask which state tax forms you need to file. Your employer's payroll department usually handles this and adjusts your withholding accordingly.

Retirement income and no-income-tax states

Several no-income-tax states offer additional tax breaks for retirement income. Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax Social Security, pensions, or retirement account withdrawals. This makes them popular destinations for retirees. Alaska and New Hampshire also do not tax these income sources.

If you are retired or planning retirement, moving to one of these states can reduce your total tax burden significantly. A person receiving $40,000 per year in pension income pays no state tax in Florida but would owe state income tax in most other states. This benefit applies only to retirement income, not to wages if you continue working.

Frequently Asked Questions

Do I still pay federal taxes if I live in a no-income-tax state?

Yes. Federal income tax is separate from state income tax. The IRS collects federal tax from residents of all states at the same rates. Living in Alaska, Florida, Texas, or any other no-income-tax state does not reduce your federal obligation.

Which no-income-tax state has the lowest overall taxes?

That depends on your situation. Alaska has no state income tax and no sales tax, making it low-tax overall, but has high property taxes in some areas. Texas has no income tax but an 8.25 percent sales tax. Tennessee has no income tax but a 9.55 percent sales tax. Compare all taxes — income, sales, and property — for your specific circumstances.

Can I move to a no-income-tax state to avoid taxes?

You must actually move and establish residency. You cannot claim to live in Florida while working in New York and living in New York. States verify residency through driver's licenses, voter registration, and other documents. If you move, your new state becomes your tax home, and you follow that state's rules.

Does New Hampshire tax retirement income?

New Hampshire does not tax wages or retirement income like Social Security and pensions. It does tax interest and dividend income at 5 percent. Retirees living on pensions and Social Security owe no New Hampshire state tax.

What if my employer is in a state with income tax but I live in a no-income-tax state?

Most states tax based on where work is performed. If you live in Nevada and work remotely for a California employer, you typically owe Nevada tax (none) rather than California tax. Confirm with your employer's payroll department, as some states have different rules for residents working out of state.