Nine states have no state income tax at all
Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire do not tax wages or salaries. 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 make up their tax revenue through sales tax, property tax, corporate tax, or some combination — not by taking a percentage of what you earn.
If you live or work in one of these states, you keep more of your paycheck than residents of states with income tax. The trade-off is usually higher sales tax or property tax. For example, Washington and Tennessee have no income tax but charge 9.45% and 9.55% sales tax respectively, among the highest in the country.
Moving to a no-income-tax state does not automatically lower your total tax burden. A state with no income tax but 10% sales tax may cost you more than a state with 5% income tax and 7% sales tax, depending on how much you earn and spend. The math changes based on your income level, whether you own property, and how much you purchase.
Key Takeaways
- Nine states charge no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income only).
- States without income tax typically charge higher sales tax or property tax to fund schools, roads, and services.
- Your total tax burden depends on income level, property ownership, and spending habits, not just whether a state has income tax.
- If you work in a no-income-tax state but live in one that has income tax, you may still owe state tax to your home state.
- Retirement income, investment gains, and business income are taxed differently in each state, even among those with no wage tax.
How no-income-tax states fund government services
States without income tax rely on other revenue sources. Sales tax is the most common: Washington, Tennessee, and Texas all use it heavily. Some states, like Alaska, depend on oil revenue and corporate taxes. Wyoming funds schools and infrastructure through mineral extraction taxes and property tax. Florida uses sales tax and corporate tax.
Property tax rates vary widely among no-income-tax states. New Hampshire and Texas have relatively high property taxes compared to other states. Alaska has lower property taxes but higher overall costs of living. Wyoming has moderate property taxes. The point is that you cannot assume a no-income-tax state will be cheaper overall — you have to look at the full tax picture for your situation.
What types of income are still taxed in no-income-tax states
Even in states with no income tax, certain income may still be taxed. New Hampshire taxes interest, dividends, and capital gains at 5%, though it does not tax wages. Tennessee taxes investment income but not wages. Some states tax business income or corporate profits even if they do not tax individual wages.
If you receive Social Security, pension income, or retirement distributions, check your specific state's rules. Many no-income-tax states exempt retirement income entirely, but others do not. For example, Tennessee exempts military pensions and some other retirement income but not all. Alaska exempts all retirement income. The rules are state-specific and change, so verify the current rules for your situation before you move or retire.
State income tax and where you work versus where you live
If you live in a state with income tax but work in a no-income-tax state, you typically owe tax to your home state, not your work state. Your employer withholds based on where you work, but your home state may still demand payment. Some states have reciprocal agreements that prevent this double taxation, but most do not.
If you work in a state with income tax but live in a no-income-tax state, you owe tax to the state where you work. Your employer withholds from your paycheck for that state. You do not owe tax to your home state because it has no income tax. This is one reason people who work in high-tax states but live across the border in a no-income-tax state can save money — though commuting costs and time may offset the savings.
How moving to a no-income-tax state affects your taxes
Moving to a no-income-tax state changes your tax situation only if you actually move your residence and job there. Simply working remotely for a company in a high-tax state while living in a no-income-tax state does not automatically exempt you from your home state's income tax. Most states tax residents on all income, regardless of where the money comes from.
To benefit from a no-income-tax state, you generally need to establish residency there: register to vote, get a driver's license, lease or own a home, and show that you intend to stay. States scrutinize remote workers and retirees who claim residency without clear ties to the state. If you move but keep a home in your old state or spend half the year elsewhere, the state you left may argue you are still a resident and owe tax.
Comparing total tax burden across states
The table below shows how income tax, sales tax, and property tax vary among the nine no-income-tax states. This is a rough comparison and does not account for local taxes, which can add significantly to the total.
| State | Income Tax | Sales Tax | Property Tax (Median) |
|---|---|---|---|
| Alaska | None | 0% (local varies) | Low |
| Florida | None | 6% | Moderate |
| Nevada | None | 8.23% | Low |
| South Dakota | None | 6.5% | Moderate |
| Tennessee | None (wages) | 9.55% | Moderate |
| Texas | None | 8.25% | Moderate |
| Washington | None | 9.45% | Moderate |
| Wyoming | None | 4% | Low |
| New Hampshire | None (wages) | 0% | High |
Wyoming has the lowest sales tax among no-income-tax states at 4%, but property taxes vary by county. New Hampshire has no sales tax but the highest property taxes in the group. Alaska has no state sales tax, though some municipalities charge local sales tax. The state you choose depends on your income sources, whether you own property, and how much you spend on taxable goods.
Frequently Asked Questions
Do I have to pay federal income tax if I live in a no-income-tax state?
Yes. Federal income tax is separate from state income tax. Every U.S. resident pays federal tax on wages and most other income, regardless of which state they live in. Living in Alaska, Florida, or any other no-income-tax state does not reduce your federal tax burden.
Can I move to a no-income-tax state to avoid taxes?
You can move to reduce your total tax burden, but you must actually move and establish residency. States investigate people who claim residency without real ties to the state. If you own a home in your old state, keep a driver's license there, or spend significant time there, your former state may claim you are still a resident and demand tax payment.
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%. If your income comes from investments or savings, you will owe New Hampshire tax. If you earn wages, you will not.
What if I work in a high-tax state but live in a no-income-tax state?
You owe income tax to the state where you work, not where you live. Your employer withholds tax for your work state. You do not owe tax to your home state because it has no income tax. This arrangement saves money for people who commute across state lines.
Are property taxes higher in no-income-tax states?
Not always. Some no-income-tax states like Nevada and Wyoming have low property taxes. Others like New Hampshire have high property taxes. The relationship between income tax and property tax is not automatic — it depends on how each state chooses to fund services.