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 wages or salaries. New Hampshire also taxes interest and dividend income but not wages. The other eight tax neither wages nor investment income.
This does not mean these states have no taxes at all. They fund schools, roads, and services through sales tax, property tax, corporate tax, and excise taxes on fuel and tobacco. The tax burden simply comes from different sources than in states with income tax.
If you live in one of these states, your paycheck is not reduced by state income tax withholding. If you move to one of these states from a state with income tax, you will not owe state income tax on your wages going forward — though you may still owe federal income tax to the IRS.
Key Takeaways
- Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income but not wages).
- States without income tax fund services through sales tax, property tax, and excise taxes, so the overall tax burden depends on your spending and property ownership, not just your income.
- Moving to a no-income-tax state means your paycheck is no longer reduced by state withholding, but you still owe federal income tax.
- If you work in one state and live in another, you typically owe income tax to the state where you work, not where you live — with some exceptions for residents of bordering states.
How no-income-tax states fund government services
States without income tax rely on sales tax as their primary revenue source. Most charge between 5 and 7 percent on retail purchases. Some exempt groceries or prescription drugs; others do not. Tennessee and Washington have among the highest sales tax rates in the nation at around 9 to 10 percent when local taxes are included.
Property tax is the second major source. Homeowners and landlords pay annual taxes based on property value. These rates vary widely within each state — a house worth $300,000 might cost $3,000 per year in property tax in one county and $6,000 in another, even within the same state.
States also collect corporate income tax, excise taxes on gasoline and cigarettes, hotel taxes, and licensing fees. Alaska receives significant revenue from oil production taxes. The mix differs by state, so the total tax burden on a household depends on how much you spend, what you own, and what you buy — not just what you earn.
What happens if you work in a state with income tax but live in a no-income-tax state
Most states tax income based on where you work, not where you live. If you live in Florida and work in Georgia, you owe Georgia state income tax on your wages. Your employer withholds it from your paycheck. You do not owe Florida income tax because Florida has none.
The exception is reciprocal agreements between neighboring states. A handful of state pairs — including Pennsylvania and New Jersey, Illinois and Iowa, and Maryland and Virginia — have agreements that let residents of one state who work in the other avoid double taxation. These are rare and apply only to specific state pairs. Check your state's tax authority website if you live near a border.
If you are self-employed or a contractor, you are responsible for tracking which state's tax you owe. The state where you perform the work is usually the one that taxes you, but the rules can be complex if you work across state lines. A tax professional can clarify your situation.
How moving to a no-income-tax state affects your taxes
When you move to a state without income tax, you stop owing that state income tax on future earnings. If you moved from California to Texas on June 1, you owe California income tax only on wages earned through May 31. Starting June 1, Texas does not tax your wages, and you owe no state income tax to Texas either.
You still owe federal income tax to the IRS no matter where you live. Federal tax is separate from state tax and applies in all 50 states. Your federal withholding does not change when you move states.
If you have income from investments, retirement accounts, or rental property, the rules vary. Some no-income-tax states still tax certain types of investment income. New Hampshire taxes interest and dividends but not wages. Others, like Texas and Florida, tax neither. If you have substantial investment income, research your new state's rules before moving.
Comparing total tax burden across states
A state with no income tax is not automatically cheaper to live in. A person earning $60,000 per year might pay less total tax in Texas than in California, but more in total tax in Texas than in a state with moderate income tax and low sales tax.
The comparison depends on three factors: how much you earn, how much you spend, and how much property you own. A high earner who spends little and owns no property may save money in a no-income-tax state. A low earner who spends most of their income on taxable goods may pay more in sales tax than they would have paid in income tax elsewhere.
Property owners should compare property tax rates carefully. New Jersey and Illinois have no state income tax in some analyses, but their property taxes are among the highest in the nation. Texas has no income tax and moderate property taxes. The overall picture requires looking at your specific situation, not just the income tax rate.
How to report income if you move during the year
If you move to a no-income-tax state partway through the year, you will file taxes in both your old state and your new state. Your old state taxes income earned while you lived there. Your new state (if it has no income tax) does not tax you at all.
You report the move on your federal return by listing your address on the date you filed. Some states require you to file a part-year resident return, which splits your income between the months you lived in each state. Check your old state's tax authority website for the form and deadline — usually 30 to 60 days after you move.
Keep documentation of your move: a lease or deed showing the new address and move-in date, utility bills, or a change-of-address confirmation from the post office. These prove to the tax authority when you left the state.
Frequently Asked Questions
Do I have to move to a no-income-tax state to avoid state income tax?
No. You owe state income tax only if you live or work in a state that has it. If you live in a state with income tax and work remotely for a company in a no-income-tax state, you still owe income tax to your home state. Your employer's location does not determine your tax obligation — your residence or workplace does.
Does New Hampshire really have no income tax?
New Hampshire has no tax on wages or salaries, but it does tax interest and dividend income at 5 percent. If your income comes entirely from wages, you owe no New Hampshire state income tax. If you have investment income, you owe tax on that portion.
If I retire to a no-income-tax state, do I owe tax on my pension or Social Security?
Most no-income-tax states do not tax pensions or Social Security because they tax no income at all. However, you still owe federal income tax on these sources. Some states with income tax exempt pensions or Social Security; no-income-tax states cannot because they have no income tax to exempt anything from. Check your new state's rules on retirement income before moving.
Can I claim residency in a no-income-tax state if I only visit there?
No. Residency requires establishing a permanent home in the state — typically a lease or deed, a driver's license, voter registration, and evidence that you spend most of your time there. Simply owning property or visiting frequently does not make you a resident for tax purposes. If you work in a state with income tax, you owe that state's tax regardless of where you claim residency.
What if I work for the federal government — do I still owe state income tax?
Yes. Federal employees owe state income tax to the state where they live or work, just like any other worker. The fact that your employer is the federal government does not exempt you from state tax. The exception is active-duty military members, who are taxed based on their state of legal residence, not where they are stationed.