Nine states have 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. This means if you work and live in one of these states, you do not pay state income tax on your paycheck.
The absence of income tax does not mean these states have no taxes at all. They fund schools, roads, and services through other sources: sales tax, property tax, corporate tax, excise tax on fuel or alcohol, or some combination. The tax burden simply falls differently than in states with income tax.
If you move to or from one of these states, or if you work in one but live in another, the tax treatment of your income changes. Understanding which state taxes your specific income matters for your take-home pay and your tax return.
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).
- These states fund government services through sales tax, property tax, and other levies instead, so your overall tax burden depends on how much you spend and own property.
- If you work in a no-income-tax state but live in a state that taxes income, you typically owe tax to your home state, not the work state.
- If you move to a no-income-tax state, you stop owing state income tax on wages once you establish residency, though the timing and rules for residency vary by state.
How residency determines which state taxes your income
Your state of residency — not where you work — determines whether you owe state income tax on wages. If you live in a state with income tax, you owe that state tax on all your income, even if you earn it in a no-income-tax state. If you live in a no-income-tax state, you owe nothing to that state on wages, regardless of where the money comes from.
Residency is not always obvious. Most states consider you a resident if you live there for more than half the year or if you have a permanent home there. Some states look at where you registered your car, where you hold a driver's license, or where you claim to be domiciled. If you split time between states, you may need to file returns in both and claim a credit in one to avoid double taxation.
Remote workers and retirees often face this issue. If you work for a company in California but live in Texas, you owe nothing to Texas on your wages. But if you live in California and work remotely for a Texas company, you owe California income tax. The work location does not matter — only where you live.
What happens if you move to a no-income-tax state
When you move to one of the nine no-income-tax states, you stop owing state income tax on wages once you establish residency there. The timing depends on the state's rules. Most require you to live there for the full tax year to claim no-income-tax status for that year. Some allow you to file as a resident partway through the year if you moved before a certain date.
You will still owe income tax to your previous state on income earned while you lived there. If you moved from New York to Florida in June, you owe New York tax on January through June income and Florida tax on nothing (since Florida has no income tax). You file a part-year return in New York and a full-year return in Florida showing no state income tax due.
Property tax, sales tax, and other state taxes in your new state still apply. Moving to a no-income-tax state does not eliminate all taxes — it shifts them. Research the full tax picture, including property tax rates and sales tax, before deciding whether the move makes financial sense for you.
States with income tax that border no-income-tax states
If you live near a state line, you may be tempted to claim residency in a no-income-tax state while actually living in a high-tax state. This does not work. States audit residency claims, especially for high earners. They check driver's license addresses, voter registration, property ownership, and where you actually spend time. Falsely claiming residency in a no-income-tax state can result in back taxes, penalties, and interest.
Some people legitimately split time between states. If you own a home in both places and spend significant time in each, you may be able to claim residency in the no-income-tax state if you spend more than half the year there and can document it. But this requires genuine residency, not just a mailing address.
How no-income-tax states fund services
States without income tax rely on other revenue sources. Alaska has oil revenue and a permanent fund dividend. Florida, Nevada, Tennessee, Texas, and Washington have high sales taxes — often 6% to 10% or higher when combined with local taxes. South Dakota and Wyoming have lower sales taxes but higher property taxes or excise taxes. New Hampshire has no sales tax but taxes interest and dividend income at 5%.
The total tax burden in a no-income-tax state is not necessarily lower than in an income-tax state. A person who earns $60,000 and spends most of it may pay less tax in a no-income-tax state with high sales tax. A person who earns $60,000 and saves most of it may pay more, because they avoid sales tax but face property tax or investment income tax. Compare the specific taxes that apply to your situation, not just the presence or absence of income tax.
Federal income tax still applies everywhere
No state income tax does not mean no federal income tax. The IRS taxes income the same way in all states. Whether you live in Texas or New York, you owe federal tax on wages, investment income, and other taxable income. The difference is only in state tax.
When you file your federal return, you report the same income regardless of state. Your state return (or lack of one, if you live in a no-income-tax state) is separate. Some people confuse the two and think living in a no-income-tax state means they owe no tax at all. That is not true. Federal tax is mandatory everywhere.
Frequently Asked Questions
If I work in Texas but live in California, which state taxes my income?
California taxes your income, not Texas. You owe California state income tax on all your wages, even though you earn them in Texas. Texas does not tax you because it has no income tax. File your return in California as your state of residence.
Can I claim residency in Florida to avoid income tax if I only visit a few months a year?
No. States require genuine residency, not just visits. Florida and other no-income-tax states audit residency claims. If you spend most of the year elsewhere, you cannot claim Florida residency. You must live there for the majority of the year and have your primary home there to establish residency.
Do I still pay federal income tax if I live in a no-income-tax state?
Yes. Federal income tax applies in all states. Living in Alaska, Texas, or any other no-income-tax state does not change your federal tax obligation. You file a federal return the same way as someone in New York or California.
Is the total tax burden lower in no-income-tax states?
Not always. No-income-tax states fund services through sales tax, property tax, and other levies. Your total tax burden depends on how much you earn, spend, and own property. A high-income earner who spends little may pay less in a no-income-tax state. A retiree living on savings may pay more due to property tax.
What if I move mid-year from a state with income tax to a no-income-tax state?
You file part-year returns in both states. You owe income tax to your old state only on income earned while you lived there. You owe nothing to your new state on any income, since it has no income tax. Each state's rules determine the exact filing deadline and form.