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 work. New Hampshire taxes only investment income and retirement distributions, not wages, so it functions like a no-income-tax state for most workers. 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. Many charge higher sales taxes to compensate — Texas and Washington both have sales taxes above 8 percent. Property taxes vary widely within no-income-tax states; Wyoming and South Dakota have low property taxes, while New Hampshire's are among the highest in the nation. A state without income tax can still be expensive depending on where you live within it and what you buy.
Key Takeaways
- Nine states impose no tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income only).
- No-income-tax states fund services through sales tax, property tax, and corporate tax, so your total tax burden depends on what you spend and own, not just what you earn.
- Moving to a no-income-tax state saves money only if your income is high enough that state income tax would have been substantial in your previous state.
- If you work remotely for a company in a state with income tax, you may still owe that state's income tax on your wages regardless of where you live.
How income tax works in states that have it
States with income tax withhold a percentage of your paycheck and you file a state return each year, similar to federal taxes. The rate varies by state and often by income level — some states have a flat rate (the same percentage for everyone), while others use brackets where higher earners pay a higher percentage. States like California, New York, and Oregon have top rates above 10 percent.
If you move from a state with income tax to one without, you stop paying that tax on new income earned after you relocate. However, you may owe taxes on income earned before the move, and your previous state may require you to file a final return. The timing of your move within the tax year matters; moving in January is different from moving in November.
Why someone might move to a no-income-tax state
The financial benefit depends on your income level. If you earn $30,000 per year, state income tax in most states is under $2,000 annually — meaningful but not life-changing. If you earn $150,000 per year, state income tax could be $10,000 to $15,000 per year depending on the state, making the move more financially significant. Someone with very low income may see little difference.
People also move for reasons unrelated to taxes: job opportunities, family, climate, or cost of living. If taxes are your main reason, calculate what you actually pay in your current state and compare it to the total tax burden (sales, property, and other taxes) in the state you are considering. A spreadsheet comparing your specific situation is more useful than general statements about which state is "cheaper."
Remote work and state income tax obligations
If you work remotely for a company based in a state with income tax, the rules depend on where you live and where your employer is located. Most states tax income based on where the work is performed or where the employee lives. If you live in Texas (no income tax) and work remotely for a New York company, you typically owe no New York state income tax because you performed the work in Texas.
However, some states have different rules, and a few states still try to tax residents on income earned anywhere. The safest approach is to contact your state's tax department or a tax professional before relocating for remote work. Your employer's payroll department may also know the rule, though they are not always accurate on state-specific questions.
How no-income-tax states fund schools and services
States without income tax rely on sales tax, which is a tax on purchases. Texas has a state sales tax of 6.25 percent (plus local additions that can bring it to 8.25 percent or higher). Washington has 6.5 percent state sales tax plus local options. Sales tax is regressive, meaning lower-income people pay a higher percentage of their income in sales tax because they spend more of what they earn on taxable goods.
These states also collect corporate income tax, property tax, and fees (vehicle registration, business licenses, gambling taxes in Nevada). Alaska has no sales tax but funds itself through oil revenue and other taxes. The mix varies by state, which is why two no-income-tax states can have very different total tax burdens depending on your personal situation.
Tax residency and moving between states
When you move, you establish residency in your new state for tax purposes. Most states define residency as living there for more than half the year or having a permanent home there. Once you are a resident, you owe that state's taxes on income earned anywhere (with some exceptions for military and certain other groups). If you split time between two states, you may owe taxes in both, though you can usually claim a credit to avoid double taxation.
Keep documentation of your move: a lease or deed dated before the move, utility bills showing your new address, and a driver's license or state ID from your new state. If you are audited, the state will want proof of when you actually moved, not just when you say you did. Moving your physical possessions and changing your address on official documents matters more than your stated intent.
Retirement income and no-income-tax states
Some no-income-tax states have special rules for retirement income. Tennessee and New Hampshire tax retirement distributions from IRAs and 401(k)s, though they do not tax wages. Florida, Texas, and Washington tax neither wages nor retirement income. Alaska, Nevada, South Dakota, and Wyoming also tax neither. If you are planning retirement and considering a move, check whether your specific type of retirement income (Social Security, pension, IRA withdrawal, investment gains) is taxed in your target state.
Social Security is not taxed by any state, so that income is the same everywhere. Pension income varies — some states exempt military pensions, teacher pensions, or all pensions. The rules are specific enough that a general statement about "no income tax" can be misleading for retirees. A tax professional can model your retirement income in your current state versus a potential new state and show you the actual difference.
Frequently Asked Questions
If I move to a no-income-tax state, do I owe taxes on income I earned before moving?
Yes, you owe income tax to your previous state on income earned while you were a resident there. You typically file a part-year resident return for the year you moved. The amount depends on when during the year you moved and how much you earned before the move. Your previous state's tax department can tell you the exact filing requirement.
Can I claim I live in a no-income-tax state if I only spend part of the year there?
No. States define residency based on where you spend the majority of the year or where you maintain a permanent home. If you spend six months in Florida and six months in New York, you are likely a resident of both and owe taxes to both (though you can claim a credit). Some states have specific day-count rules, so check your situation with a tax professional.
Is Social Security taxed differently in no-income-tax states?
No. Social Security is not taxed by any state, regardless of whether the state has income tax. This is one of the few income sources that is truly the same everywhere. However, other retirement income like pensions and IRA withdrawals may be taxed in some no-income-tax states, so do not assume all retirement income is untaxed.
Do I have to pay sales tax in a no-income-tax state if I buy something online?
Yes. Most states, including no-income-tax states, now collect sales tax on online purchases. The tax rate is the same as in-store purchases. A few states have no sales tax at all (like Alaska and Oregon), but if a state has sales tax, it applies to online orders shipped to addresses in that state.
What if my job is in a state with income tax but I live in a no-income-tax state?
You typically owe no income tax to the state where your job is located if you live and work in a no-income-tax state. However, if you work in an office in a high-tax state and commute there, you may owe that state's income tax. The rule is usually based on where the work is performed. Confirm this with your employer's payroll department or a tax professional before relocating.