Nine states have no state income tax on wages
Nine states do not tax wages or salaries: 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 offset lost revenue through sales tax, property tax, or other fees.
The absence of state income tax does not mean these states have no taxes at all. Most fund schools, roads, and services through sales tax (which ranges from 0% to 10% depending on the state), property tax, corporate tax, or excise taxes on specific goods. The real financial difference depends on your income level, spending habits, and whether you own property.
Key Takeaways
- Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire have no state income tax on wages.
- New Hampshire taxes investment income but not wages, making it a partial exception.
- States without income tax typically rely on sales tax, property tax, or corporate tax to fund services.
- Your actual tax burden depends on how much you spend and whether you own property, not just on income tax rates.
How these states fund schools and services without income tax
States without income tax use different revenue sources. Texas, Washington, and Nevada rely heavily on sales tax — ranging from 8.25% to 10% depending on the city and what you buy. Alaska has no state sales tax but funds itself through oil revenue and corporate taxes. Florida uses sales tax (7% state rate) and property tax. Tennessee taxes sales but not income, making it one of the highest sales-tax states at 9.55% combined state and local rates.
Property tax is another major source. Texas homeowners pay an average effective property tax of 1.8% of home value annually. New Hampshire, despite having no income tax, has one of the highest property tax rates in the nation at around 2.1% of home value. Wyoming and South Dakota have lower property taxes but higher sales taxes. The trade-off is real: a high earner who rents may save money in a no-income-tax state, while a homeowner might pay more in property tax than they would have in income tax elsewhere.
Income tax rates in neighboring states for comparison
If you live near a state border, the difference in take-home pay is concrete. California taxes income at up to 13.3%. New York tops out at 10.9%. In contrast, someone earning $100,000 in Texas pays zero state income tax, while the same person in California owes roughly $9,200 in state income tax. However, California's property taxes are capped at 1%, so a homeowner there may pay less in property tax than a Texas homeowner.
The comparison matters most for high earners and retirees. A retiree living on $50,000 in Social Security and investment income saves nothing in Alaska or Texas (neither taxes Social Security), but saves significantly in states like New York or California if they have other income. A software engineer earning $200,000 saves far more by moving to Washington than a retail worker earning $35,000 would.
Social Security and retirement income in no-income-tax states
None of the nine no-income-tax states tax Social Security benefits. This is a major draw for retirees. However, other retirement income — pensions, 401(k) withdrawals, and investment gains — is treated differently. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming tax none of these. New Hampshire taxes interest and dividends but not wages or retirement account withdrawals, making it favorable for retirees with modest investment income.
A retiree with a $40,000 pension and $20,000 in Social Security pays zero state tax in Florida or Texas. The same person in New York would owe roughly $2,000 in state income tax on the pension. This difference compounds over decades and is why many retirees relocate to Florida or Texas specifically for tax reasons.
Sales tax burden in states without income tax
The trade-off for no income tax is often a higher sales tax. Tennessee has the highest combined state and local sales tax in the nation at 9.55%. Washington state's rate is 10.25% in some cities. These rates apply to most goods, though groceries are often exempt or taxed at a lower rate. A family spending $50,000 annually on taxable goods in Tennessee pays roughly $4,775 in sales tax — a significant amount that does not exist in income-tax states.
However, sales tax is avoidable in ways income tax is not. You can reduce spending, buy tax-exempt items, or shop across state lines for large purchases. Income tax is automatic and unavoidable if you earn wages in that state. For low-income households that spend most of their money on groceries and rent, the sales tax burden is lower because groceries are usually exempt. For high-income households that spend less as a percentage of earnings, sales tax is a smaller burden than income tax would be.
Whether moving to a no-income-tax state saves money
The answer depends entirely on your income, spending, and assets. A high earner ($150,000+) who rents almost always saves money by moving to a no-income-tax state. A middle-income earner ($50,000–$100,000) who owns a home may break even or lose money, depending on property tax rates. A low-income earner may pay more in sales tax than they would have in income tax elsewhere.
Before moving, calculate your actual tax burden in both states. Use your state's tax calculator (most have them online) and compare property tax, sales tax, and income tax together. Do not assume that "no income tax" means lower overall taxes. A person earning $60,000 and owning a $300,000 home in New Hampshire may pay more in property tax than they would in income tax in Massachusetts, even though Massachusetts has a 5% income tax.
Frequently Asked Questions
Do I have to live in a no-income-tax state to benefit from it?
No. If you work in a no-income-tax state but live in another state, you typically owe income tax to your state of residence, not your state of work. However, some states tax residents who work out of state. Check your state's rules before relying on this strategy.
Does New Hampshire really have no income tax?
New Hampshire has no tax on wages or salaries, but it taxes interest, dividends, and capital gains at 5%. It also has no sales tax. For wage earners, it functions like the other eight states, but retirees with investment income owe state tax.
Are property taxes higher in no-income-tax states?
It varies. New Hampshire and Texas have high property taxes (around 1.8–2.1% of home value annually), while Alaska and South Dakota are lower. Compare the specific county or city you are considering, not just the state average.
If I move to Florida, do I owe back taxes to my old state?
No. Once you establish residency in Florida (usually by getting a driver's license and registering to vote), you owe Florida taxes going forward, not retroactive taxes to your old state. However, your old state may tax income you earned there before moving.
Which no-income-tax state has the lowest overall taxes?
Alaska has the lowest combined state and local tax burden for most households because it has no income tax, no state sales tax, and moderate property taxes. However, the cost of living is much higher, which offsets tax savings for many people.