Nine states collect no income tax on wages, and two more tax only investment income
Nine states have no income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. Two additional states—New Hampshire and Tennessee—deserve special mention because they tax only investment income (dividends and interest), not wages. This means if you earn a salary in New Hampshire or Tennessee, you pay no state income tax on it, but you do pay tax on money from stocks, bonds, or other investments.
The absence of state income tax does not mean these states collect no revenue. Most fund schools, roads, and services through sales tax, property tax, corporate tax, or some combination. A state with no income tax often has a higher sales tax or property tax to compensate. Understanding this trade-off matters when you compare your total tax burden across states, not just income tax alone.
Key Takeaways
- Nine states impose no income tax on wages or investment income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire.
- New Hampshire and Tennessee tax only investment income (dividends and interest), not wages, so a wage earner in those states pays zero state income tax.
- States without income tax typically rely on sales tax, property tax, or corporate tax to fund services, so your total state tax burden depends on how much you spend and own property.
- If you move to a no-income-tax state, you may owe tax on income earned in your previous state during the year you moved, depending on when you established residency.
The nine states with no income tax at all
Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have never imposed a state income tax. Tennessee and New Hampshire also collect no tax on wages, though they tax investment income. These nine states represent a range of geography, population size, and economic bases—from Alaska's oil revenue to Florida's tourism and real estate to Texas's oil and business activity.
The practical effect is the same: if you earn $60,000 in wages in any of these nine states, you owe no state income tax on that $60,000. You still owe federal income tax, and you still pay any local taxes your city or county imposes. But the state itself takes nothing from your paycheck for income tax purposes.
How states without income tax fund schools and services
A state that does not tax income must raise revenue another way. The most common sources are sales tax, property tax, and corporate income tax. Some states use all three; others emphasize one or two.
Florida and Texas, for example, rely heavily on sales tax and property tax. Washington and Nevada also use sales tax. Alaska has no sales tax but collects corporate income tax and oil revenue. The result is that your total state and local tax burden—income tax plus sales tax plus property tax—may be similar to a state that has income tax, or it may be lower or higher depending on your personal situation. A person who earns a high salary but spends little and owns no property may pay less total tax in a no-income-tax state. A person who earns less but owns a home may pay more in property tax.
New Hampshire and Tennessee: wages taxed, investment income taxed
New Hampshire and Tennessee occupy a middle ground. Neither taxes wages or salaries. Both tax dividends, interest, and capital gains—the income you earn from investments. This distinction matters if you are retired and living on investment income, or if you have a brokerage account that generates significant returns.
For someone who works for a salary, New Hampshire and Tennessee function like the other nine no-income-tax states: your paycheck is not subject to state income tax. But if you also receive $10,000 in dividend income from stocks, you owe New Hampshire or Tennessee tax on that $10,000. The tax rate on investment income varies by state and has changed over time, so you should verify the current rate with the New Hampshire Department of Revenue Administration or the Tennessee Department of Revenue if this applies to you.
What happens to your taxes if you move to a no-income-tax state
If you move during the year, your tax situation depends on when you establish residency in the new state. Most states tax you as a resident only for the portion of the year you lived there. If you moved from California to Texas on July 1, you would owe California income tax on income earned January through June and Texas owes nothing (since Texas has no income tax). You file a part-year resident return in California for those six months.
Your previous state may also tax you on income earned before you left if you were still a resident at the time. The key date is usually when you move your home and establish intent to stay, not when you change your driver's license. If you are planning a move and have significant income, it is worth understanding your old state's residency rules before you go, because some states are aggressive about claiming you owed tax during a transition period.
Remote work and state income tax in no-income-tax states
If you work remotely for a company in a state with income tax but live in a no-income-tax state, you generally owe no state income tax on your wages. Your employer withholds based on where you live, not where the company is located. However, if you work remotely for a company in a state with income tax and you yourself live in that same state, you owe that state's income tax even though you work from home.
The rule is based on where you work and where you live, not where your employer is based. If you are considering a remote job and a move to a no-income-tax state, confirm with your employer's payroll department how they will handle withholding. Some employers have specific policies about remote work in different states, and you want to know before you move whether your withholding will change.
Comparing total tax burden across states
Income tax is only one piece of your state tax bill. To compare your actual cost of living in different states, you need to account for sales tax, property tax, and any local taxes. A state with no income tax but a 10 percent sales tax and high property taxes may cost you more overall than a state with a 5 percent income tax and lower property and sales taxes, depending on how much you earn, spend, and own.
The Tax Foundation and the Institute on Taxation and Economic Policy publish state tax burden comparisons that account for all state and local taxes combined. These resources show how much total tax a household at different income levels pays in each state. If you are considering a move, comparing your specific situation—your income, spending, and property ownership—across states gives you a clearer picture than income tax alone.
Frequently Asked Questions
Do I still owe federal income tax if I live in a no-income-tax state?
Yes. Federal income tax is separate from state income tax. Every person who earns above the federal threshold owes federal tax regardless of where they live. A no-income-tax state means you owe nothing to that state, but you still file a federal return and pay the IRS.
If I move to a no-income-tax state mid-year, do I owe tax to my old state?
You owe tax to your old state only on income earned while you were a resident there. If you moved on July 1, you owe tax on income earned January through June. You file a part-year resident return in your old state for those months. The exact rules vary by state, so check with your old state's revenue department about the residency date they use.
Does a no-income-tax state mean I pay less in total taxes?
Not necessarily. States without income tax typically have higher sales tax or property tax. Your total state and local tax burden depends on your income, how much you spend, and whether you own property. A high earner who spends little may pay less; a homeowner may pay more in property tax.
Are there any states that tax only wages and not investment income?
No. The nine states with no income tax tax neither wages nor investment income. New Hampshire and Tennessee tax investment income but not wages. No state has the reverse arrangement.
If I work remotely for a company in New York but live in Texas, which state taxes my income?
Texas does not tax income, so you owe no state income tax to Texas. You owe New York income tax only if you are a New York resident. If you live in Texas and work remotely for a New York company, you owe no state income tax. Your employer should withhold based on your home state, which is Texas.