Which states do not tax wages
Nine states do not impose a state income tax on wages: 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 or salaries. If you work in one of these states or are considering a move, you will not owe state income tax on your paycheck, though you will still owe federal income tax.
The absence of state income tax does not mean these states collect no revenue. Most fund their budgets through sales tax, property tax, corporate tax, or some combination. Your total tax burden depends on where you spend money and own property, not just where you work.
Key Takeaways
- Nine states have no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income only).
- Working in a no-income-tax state does not reduce your federal income tax obligation, which you still owe to the IRS.
- States without income tax typically rely on higher sales taxes, property taxes, or corporate taxes to fund government services.
- If you live in one state and work in another, you may owe income tax to your state of residence even if your workplace state has no income tax.
- Moving to a no-income-tax state for tax reasons requires understanding that state's sales tax rate and property tax structure.
How state income tax works when you move or work across state lines
Your state income tax obligation is usually tied to where you live, not where you work. If you live in a state with income tax and work in a no-income-tax state, you typically still owe income tax to your state of residence. Your employer in the no-income-tax state will not withhold state income tax, but you may need to file a return in your home state and pay tax there.
The reverse is also true: if you live in a no-income-tax state and work in a state that has income tax, you may owe income tax to the state where you work. Some states have reciprocal agreements that reduce or eliminate this obligation, but you need to check the specific rules between the two states involved. Your paycheck stub and W-2 will show which state withheld tax, and that is where you will file.
Remote work has created new complications. If you live in Florida and work for a company based in New York, the question of which state can tax your wages depends on where you physically perform the work and where your employer is located. Many states are still clarifying their rules for remote workers, so if this applies to you, contact your state tax department or a tax professional for guidance specific to your situation.
The nine states and their tax structures
| State | Income Tax on Wages | Primary Revenue Sources |
|---|---|---|
| Alaska | None | Oil revenue, sales tax, property tax |
| Florida | None | Sales tax, property tax, corporate tax |
| Nevada | None | Sales tax, gaming tax, property tax |
| South Dakota | None | Sales tax, property tax, corporate tax |
| Tennessee | None | Sales tax, property tax, corporate tax |
| Texas | None | Sales tax, property tax, corporate tax |
| Washington | None | Sales tax, property tax, corporate tax |
| Wyoming | None | Sales tax, property tax, mineral extraction tax |
| New Hampshire | None on wages; 5% on interest and dividends | Sales tax, property tax, corporate tax |
Each of these states has chosen a different mix of taxes to fund schools, roads, and public services. Alaska benefits from oil revenue and does not have a statewide sales tax in some areas. Nevada and Wyoming have no sales tax on groceries. Tennessee and Texas have relatively high sales taxes. Understanding the full tax picture in any state requires looking beyond income tax alone.
Sales tax and property tax in no-income-tax states
States without income tax often compensate with higher sales taxes. Washington, Tennessee, and Louisiana have among the highest combined state and local sales tax rates in the country, sometimes exceeding 9 percent. If you spend heavily on taxable goods, this can offset the savings from no income tax. Groceries, prescription medications, and some medical equipment are often exempt from sales tax, but the rules vary by state.
Property tax is another major revenue source. Texas and New Jersey have high property tax rates despite different income tax structures. If you own a home, the property tax bill in a no-income-tax state may be higher than in a state with income tax. Renters do not pay property tax directly, but landlords often pass the cost along in higher rent.
Before relocating for tax reasons, calculate your total tax burden: income tax (if any) plus sales tax on what you typically spend plus property tax on a home at the price range you are considering. A state with no income tax is not automatically cheaper.
Federal income tax still applies in all states
State income tax and federal income tax are separate obligations. Working in Alaska, Texas, or any other no-income-tax state does not reduce what you owe to the IRS. You will still file Form 1040 with the federal government and pay federal income tax based on your total income, filing status, and deductions.
Your W-2 form will show federal income tax withheld in Box 2, and state income tax withheld (if any) in Box 19. When you file your federal return, you report your income the same way regardless of which state you live in. The only difference is that residents of no-income-tax states will have zero or near-zero state tax liability when they file their state return.
How to report income if you live and work in different states
If you live in State A and work in State B, you will typically file a resident return in State A and a nonresident return in State B. Your employer withholds tax based on where you work. You then file in both states and claim a credit in your home state for taxes paid to the other state, so you do not pay twice on the same income.
The process is straightforward if both states have income tax. It becomes simpler if your work state has no income tax — you will have no state withholding from your paycheck, but you may still owe tax to your home state. If your home state has no income tax and your work state does, you will owe tax to your work state.
Some states have reciprocal tax agreements that exempt residents of neighboring states from income tax. For example, Pennsylvania residents who work in New Jersey may not owe New Jersey income tax. Check your specific state pair before assuming you owe tax in both places.
Frequently Asked Questions
Do I have to file a state tax return if I live in a no-income-tax state?
Not if you have no income tax liability. However, if you received state income tax withholding by mistake, you should file to get a refund. Some states also require residents to file even with zero liability if they had any income during the year. Check your state's rules or contact the state tax department.
If I move to Texas from California, do I owe California income tax on my last paycheck?
You owe California income tax on income earned while you were a California resident. Your last paycheck from your California job is taxable to California. Once you move and establish residency in Texas, future income is not subject to California tax. Keep documentation of your move date and your new Texas address.
Does New Hampshire really have no income tax?
New Hampshire has no tax on wages or salaries, but it taxes interest and dividend income at 5 percent. If your income comes entirely from a job, you owe no state income tax. If you have investment income, you will owe tax on that portion. Federal income tax still applies to all income.
Can I reduce my federal income tax by moving to a no-income-tax state?
No. Federal income tax is owed to the IRS regardless of which state you live in. Moving to Alaska, Florida, or Texas reduces only your state income tax obligation, not your federal obligation. Your federal tax bracket and liability depend on your total income and filing status, not your location.
What happens if I work remotely for a company in New York but live in Florida?
The answer depends on where you physically perform the work and your employer's location. If you live and work in Florida, you typically owe no Florida income tax. However, New York may try to tax you if your employer is based there. This area of tax law is still evolving. Contact the Florida Department of Revenue or a tax professional for guidance on your specific situation.