Nine states collect no income tax on wages, and four more tax only investment income

Nine states do not tax wages or salaries at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. Four additional states — Illinois, Mississippi, Pennsylvania, and Tennessee — tax only investment income (dividends and capital gains), not wages. If you live in or moved to one of these states, your federal tax return stays the same, but your state return may be simpler or may not exist.

The absence of state income tax does not mean no state taxes exist. Most no-income-tax states collect sales tax, property tax, or both. Some fund state operations through business taxes, excise taxes on specific goods, or other revenue sources. Understanding what your state does tax matters when you file, because it changes which forms you need and whether you owe anything to your state at all.

Key Takeaways

  • Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire.
  • Four states tax investment income only, not wages: Illinois, Mississippi, Pennsylvania, and Tennessee.
  • No state income tax does not mean no state taxes — most collect sales tax, property tax, or both instead.
  • If you work in a no-income-tax state but live in a state that taxes income, you may owe tax to your home state on wages earned elsewhere.
  • Your federal return is unaffected by whether your state taxes income; state returns are what change.

The nine states with no wage income tax

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire do not tax income from wages, salaries, or self-employment. If you earn money in any of these states and live there, you file a federal return but no state income tax return.

New Hampshire is the only exception to this rule: it taxes interest and dividend income but not wages. So if you live in New Hampshire and earn $50,000 in salary, you owe nothing to the state. If you earn $2,000 in stock dividends, you owe New Hampshire tax on that amount.

If you live in one of these states and have no other income sources (wages only, no investment income, no self-employment), you may have no state return to file at all. Check your state's tax authority website to confirm, because some states require returns even when no tax is owed.

Four states that tax investment income but not wages

Illinois, Mississippi, Pennsylvania, and Tennessee tax dividends and capital gains but not wages or salaries. If you live in one of these states and earn only W-2 wages, you file a federal return but no state income tax return.

If you earn investment income — money from selling stock, mutual funds, bonds, or real estate — you file a state return and pay tax on that income. The tax rate and rules vary by state. Pennsylvania, for example, taxes dividends and capital gains at a flat rate of 3.07 percent. Mississippi's rate is 5 percent. Check your state's tax authority for the current rate and any deductions or exemptions.

Self-employment income is typically treated as wages in these states, not investment income, so you would owe no state tax on it. Confirm this with your state's tax authority, because the rules can change and vary by income type.

What happens if you work in a no-income-tax state but live elsewhere

If you live in a state that taxes income but work in a state that does not, you usually owe tax to your home state, not your work state. For example, if you live in New York and work in Florida, you file a New York state return and pay New York tax on your Florida wages. Florida collects no tax from you because it has no income tax.

Some states have reciprocal agreements that change this rule. A reciprocal agreement means two states agree that residents of one state who work in the other do not owe tax to the work state. The states with reciprocal agreements are limited and specific. If you work across a state line, check whether your home state and work state have a reciprocal agreement. Your employer's payroll department or your state tax authority can tell you whether one applies to you.

If no reciprocal agreement exists, you may be able to claim a credit on your home state return for taxes paid to your work state, but the rules vary. Some states offer no credit. File both returns — one to your work state (if required) and one to your home state — and then check whether your home state allows a credit for taxes paid elsewhere.

How no-income-tax states fund government services

States without income tax must collect revenue another way. Most rely on sales tax, which is a tax on purchases of goods and services. Alaska has no sales tax either, but collects oil revenue and uses it to fund the state budget. Other no-income-tax states have sales tax rates that are higher than the national average to compensate for the missing income tax.

Property tax is another major revenue source in no-income-tax states. If you own a home or land, you pay property tax to your county or municipality. The rate varies widely by location, even within the same state. Some no-income-tax states also tax specific goods or activities — gasoline, cigarettes, alcohol, gambling, or business licenses — to raise revenue.

Understanding your state's tax structure helps you plan your overall tax burden. A state with no income tax but high sales tax may cost you the same or more than a state with income tax but lower sales tax, depending on your spending and income level.

How to file if you live in a no-income-tax state

If you live in a no-income-tax state and have only wage income, you file your federal return as usual. You do not file a state income tax return because your state does not have one. If you have investment income and live in Illinois, Mississippi, Pennsylvania, or Tennessee, you file a state return for that income only.

If you moved to a no-income-tax state during the year, you may owe tax to your previous state for the months you lived there. File a part-year resident return to your old state, reporting only income earned while you lived there. Your new state may not require a return at all, or may require one only if you earned income in that state during the year. Check both state tax authority websites for their specific rules on part-year residents.

If you are self-employed, you still file your federal return and pay self-employment tax (Social Security and Medicare). Your state return depends on where you live. If you live in a no-income-tax state, you file no state income tax return. If you live in a state that taxes income, you file a state return and pay tax on your self-employment income.

State tax forms and where to find them

Each state's tax authority publishes forms and instructions on its website. The state tax authority is usually called the Department of Revenue, Department of Taxation, or State Tax Commission. Search "[your state] tax forms" to find the official site.

If you live in a no-income-tax state, you may not need to read any state forms. If you live in a state that taxes investment income only, read the form for that income type — usually called a capital gains form or dividend form — and follow the instructions included with it.

If you moved during the year or worked in multiple states, you may need forms from more than one state. read all relevant forms before you start, so you know what information you need to gather. Many state tax authorities also offer free tax software or links to free software providers, similar to the federal IRS Free File program.

Frequently Asked Questions

Do I still file a federal return if I live in a no-income-tax state?

Yes. Your state's tax rules do not affect your federal return. You file a federal return to the IRS based on your income, filing status, and age, regardless of whether your state taxes income. The federal return is separate from any state return you may owe.

If I move to a no-income-tax state mid-year, do I owe tax to my old state?

Usually yes, for the months you lived there. File a part-year resident return to your old state reporting income earned while you were a resident. Your new state may require a return only if you earned income there. Check both states' tax authority websites for their part-year resident rules.

Does New Hampshire really have no income tax?

New Hampshire has no tax on wages, but it does tax interest and dividend income. If your only income is wages, you owe no New Hampshire tax. If you earn investment income, you file a state return and pay tax on that income at the state's rate.

What if I work in Florida but live in Georgia — which state do I pay?

You pay Georgia, your home state. Florida has no income tax, so it collects nothing from you. Georgia taxes income, so you file a Georgia return and pay tax on your Florida wages. Check whether Georgia and Florida have a reciprocal agreement, though reciprocal agreements are rare and explore only to specific state pairs.

Are property taxes higher in no-income-tax states?

Not always. Property tax rates vary by county and municipality within every state, regardless of whether the state taxes income. Some no-income-tax states have low property taxes; others have high ones. Research the specific county or city where you plan to live to compare property tax rates.