Which states do not tax your wages

Nine states do not collect income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception — it taxes only dividends and interest income, not wages or salaries. If you live or work in one of these states, you will not owe state income tax on your paycheck, though you still owe federal income tax to the IRS.

This matters most if you are moving, changing jobs across state lines, or deciding where to retire. The absence of state income tax does not mean these states have no taxes at all — they fund government through sales tax, property tax, corporate tax, and other sources. The tax burden you actually pay depends on your total income, where you spend money, and what property you own.

Key Takeaways

  • Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income only).
  • No state income tax does not mean no state taxes — these states use sales tax, property tax, and other revenue sources instead.
  • If you move to a no-income-tax state mid-year, you may owe income tax to your old state for the months you lived there, depending on that state's rules.
  • Federal income tax applies in all states regardless, so your total tax bill depends on federal rates, state rates, and local taxes combined.

How state income tax works in these nine states

When you file federal taxes on Form 1040, you report all income earned anywhere in the United States. State income tax is separate — you file a state return only if your state collects it. In the nine no-income-tax states, you have no state return to file for wages, though you may still file if you owe other state taxes or want a refund of withheld amounts.

If your employer withheld state income tax by mistake, you can recover it. Contact your state's tax department or your employer's payroll office to request a refund. Keep your pay stubs as proof of what was withheld. The process varies by state, but most issue refunds within 30 to 60 days of a valid claim.

What happens if you move to or from a no-income-tax state

If you move mid-year, your old state may still claim income tax on wages earned while you lived there. This depends on your old state's residency rules. For example, if you lived in California (which has income tax) for six months and then moved to Texas (which does not), California will tax only the income you earned during those six months. You report this on your California state return for that year.

To prove when you moved, keep documentation: a lease or deed showing your move-out date, utility bills, a driver's license with your new address, or a letter from your employer confirming your relocation date. When you file, you may claim resident status for part of the year and nonresident status for the rest. Your old state's tax form will ask for the date you left.

If you moved from a no-income-tax state to one that collects income tax, you owe tax on wages earned after your move-in date. Your new state determines residency differently — some use the date you establish a permanent home, others use the date you register to vote or get a driver's license. Check your new state's rules before filing.

Sales tax and property tax in no-income-tax states

States without income tax typically rely on sales tax to fund schools and services. Sales tax rates vary widely. Tennessee and Washington have the highest combined state and local sales taxes, around 9 to 10 percent depending on the county. Alaska has no state sales tax but allows local sales taxes. Florida, Nevada, South Dakota, Texas, and Wyoming have sales taxes between 5 and 8 percent.

Property tax also varies. Texas and New Hampshire have notably high property tax rates to offset the lack of income tax. If you own a home in these states, your annual property tax bill may be substantial. Renters do not pay property tax directly, but landlords often pass the cost along through higher rent. Before moving, compare the total tax burden — income tax plus sales tax plus property tax — not just income tax alone.

New Hampshire's partial income tax

New Hampshire taxes dividends and interest income at 5 percent but does not tax wages, salaries, or self-employment income. If you work for an employer and receive a paycheck, you owe no New Hampshire income tax. If you earn money from investments — stocks, bonds, rental property, or a business — you may owe New Hampshire tax on that income.

You report investment income on New Hampshire's Form DP-10 if your total dividends and interest exceed $2,400 in a year. This threshold changes annually, so check the current year's form. If you live in New Hampshire and earn investment income, file both federal and state returns. If you live elsewhere but earn New Hampshire investment income, you may still owe New Hampshire tax — check the state's rules for nonresidents.

Federal income tax still applies everywhere

Living in a no-income-tax state does not reduce your federal income tax. You file Form 1040 with the IRS regardless of where you live. Your federal tax bracket, standard deduction, and credits are the same whether you live in Alaska or New York. The only difference is that you skip the state return.

Your employer withholds federal income tax from every paycheck based on your W-4 form. This withholding goes to the IRS, not to your state. When you file your federal return in April, you report all income and claim deductions and credits. If too much was withheld, you receive a federal refund. If too little was withheld, you owe the IRS when you file.

Self-employment income in no-income-tax states

If you are self-employed, you owe federal self-employment tax (Social Security and Medicare) on your net profit, regardless of which state you live in. You file Schedule C with your Form 1040 to report business income and expenses. In a no-income-tax state, you do not file a state return for self-employment income, but you still owe federal tax.

Some no-income-tax states do collect corporate income tax or business taxes. If you operate a business as a corporation or LLC, check your state's rules. Alaska, for example, has no income tax but does tax certain business activities. Texas has no income tax but collects a franchise tax on some businesses. The rules vary, so contact your state's tax department or a tax professional if you own a business.

Frequently Asked Questions

Do I have to file a state tax return if I live in a no-income-tax state?

Not for income tax purposes. However, you may still file if you want to claim a refund of withheld taxes, if you owe other state taxes, or if your state requires it for a specific reason. Check your state's website to confirm whether filing is required in your situation.

If I work in a state with income tax but live in a no-income-tax state, which state taxes my wages?

The state where you work taxes your wages. If you live in Nevada and work in California, California taxes your income. You file a California state return and may claim a credit on your federal return for taxes paid to California. Some states have reciprocal agreements that change this rule — check both states' websites.

Does living in a no-income-tax state save me money overall?

Not necessarily. While you avoid income tax, you may pay more in sales tax and property tax. The total depends on your income level, spending habits, and whether you own property. High earners often save money in no-income-tax states; lower-income households may pay more in sales tax. Calculate your own situation before deciding.

What if my employer withheld state income tax even though I live in a no-income-tax state?

Contact your employer's payroll department and ask them to stop withholding. If they already withheld, request a refund. You can also file a claim with your state's tax department. Keep your pay stubs as proof of the withholding.

Do I owe federal taxes if I live in a no-income-tax state?

Yes. Federal income tax applies in all states. You file Form 1040 with the IRS and pay federal tax based on your income and filing status. The absence of state income tax does not affect your federal obligation.