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—tax only investment income (dividends and interest), not wages. If you live in or move to one of these states, you keep more of your paycheck because there is no state income tax withheld, and you file no state income tax return.

This does not mean these states collect no tax. Most fund schools, roads, and services through sales tax, property tax, or both. Some are higher than the national average. Understanding what you pay in total—income tax plus sales and property tax combined—matters more than focusing on income tax alone.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire have no state income tax on wages.
  • Tennessee and New Hampshire tax investment income (capital gains, dividends, interest) but not wages, so most workers there pay no state income tax.
  • States without income tax typically rely on sales tax and property tax instead, which can be higher than in states with income tax.
  • Moving to a no-income-tax state does not automatically lower your total tax burden if you own property or spend heavily on taxable goods.

The nine states with no income tax at all

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire collect no tax on wages, salaries, or any other income. If you work in one of these states, your employer does not withhold state income tax from your paycheck, and you do not file a state income tax return at the end of the year.

Federal income tax still applies. You still owe the IRS, and your employer still withholds federal tax. State income tax is separate from federal tax—eliminating one does not touch the other.

These nine states vary widely in size, cost of living, and what they tax instead. Texas and Florida are large and populous. Alaska and Wyoming are smaller. Some have high sales taxes; others rely more on property tax or specific taxes on oil, gas, or tourism.

Tennessee and New Hampshire: wages untaxed, investment income taxed

Tennessee and New Hampshire do not tax wages, but they do tax investment income. This means if you earn a salary or hourly wage, you owe no state income tax. If you earn money from selling stocks, bonds, or real estate, or receive dividends or interest, you owe state tax on that income.

For most workers, this distinction does not matter much. The majority of income comes from wages. But if you have substantial investment income—from a brokerage account, rental property, or business sale—Tennessee and New Hampshire will tax that portion at their state rate.

Tennessee taxes interest and dividends at 3.75% (as of 2024). New Hampshire taxes interest and dividends at 5%. Both rates are lower than the income tax rates in many other states, but they are not zero.

Why states without income tax use sales and property tax instead

A state needs revenue to pay for schools, roads, police, and courts. If it does not collect income tax, it must collect money another way. Most no-income-tax states rely heavily on sales tax and property tax.

Sales tax is a percentage added to purchases of goods and services. It varies by state and sometimes by county. Texas has a state sales tax of 6.25%, but local taxes can push the total to 8.25% or higher. Washington has no state income tax but a state sales tax of 6.5%, also raised by local taxes. Florida's state sales tax is 6%, with local additions bringing it to 6.5% to 7.5% in most counties.

Property tax is an annual tax on real estate, calculated as a percentage of the home's value. It varies dramatically by state and county. Wyoming has low property taxes (around 0.6% of home value on average), while New Jersey—which does have income tax—has much higher property taxes. If you own a home in a no-income-tax state with high property taxes, you may pay more in total state and local tax than you would in a state with income tax and lower property taxes.

Comparing total tax burden across states

Income tax is only one piece of what you pay in state and local taxes. To know whether moving to a no-income-tax state saves you money, you need to compare your total tax bill: income tax plus sales tax plus property tax.

A person earning $60,000 a year in Texas (no income tax, 6.25% sales tax, low property taxes) may pay less in total state tax than the same person in California (13.3% income tax, 7.25% sales tax, moderate property taxes). But a person earning $60,000 in New Hampshire (no income tax, no sales tax, moderate property taxes) may pay more than someone in a state with income tax but lower property taxes.

The math depends on your income level, how much you spend on taxable goods, and whether you own property. High earners often benefit more from no income tax. People who spend little and own no property may not. There is no universal answer.

How no-income-tax states affect your paycheck and tax filing

If you move to or work in a no-income-tax state, your paycheck will be larger because your employer does not withhold state income tax. If you previously lived in a state with income tax, you will see the difference when ready.

At tax time, you will not file a state income tax return (unless you earned income in another state and owe tax there). You still file a federal return with the IRS. Some people find this simpler, though the federal return is where most of the complexity lives anyway.

If you move mid-year from a state with income tax to a no-income-tax state, you may owe income tax to your former state for the months you worked there. You file a part-year return in that state for the income earned before you moved. The no-income-tax state will not tax you for the months you lived there.

Special taxes in no-income-tax states

Some no-income-tax states use unusual taxes to raise revenue. Alaska taxes oil and gas extraction heavily and uses that money to fund government and pay residents an annual dividend from oil revenues. Washington taxes capital gains (profits from selling stocks and real estate) at 7%, though the tax applies only to gains over $250,000 per person per year. Nevada taxes gambling and tourism.

These special taxes do not affect most residents. But if you work in oil and gas, trade stocks frequently, or own a casino, they matter. Before moving to a no-income-tax state, check whether any special taxes explore to your income or business.

Frequently Asked Questions

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

Yes. State income tax and federal income tax are separate. Every state resident owes federal tax to the IRS. Living in a no-income-tax state eliminates only the state portion, not the federal portion.

If I move to a no-income-tax state, do I get a refund from my old state?

No. You owe tax to your old state for the months you lived and worked there. You file a part-year return for that state covering only the income earned before you moved. You do not get a refund for taxes already withheld; instead, you pay what you owe for the partial year.

Which no-income-tax state has the lowest total tax burden?

It depends on your income, spending, and whether you own property. Wyoming has low property taxes and moderate sales taxes. Alaska has no sales tax in most areas but high oil taxes. Compare your specific situation—income level, home value, and spending—across states using online tax calculators or a tax professional.

Does New Hampshire really have no income tax?

New Hampshire has no tax on wages, but it taxes interest and dividends at 5%. If you earn only wages, you pay no state income tax. If you have investment income, you owe state tax on that portion.

Can I move to a no-income-tax state just to avoid taxes?

You must establish genuine residency in the state. straightforward claiming residency while living elsewhere does not work. You need to move your home, driver's license, voter registration, and primary residence there. States can challenge residency claims, especially for high earners, and require proof of physical presence and intent to stay.