Nine states do not tax wage income at all
Nine states have no state income tax: 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. If you live in one of these states, you owe no state income tax on your salary, business income, or investment gains, though you still owe federal income tax like everyone else.
The absence of state income tax does not mean these states collect no revenue. Most fund government through sales tax, property tax, corporate tax, or some combination. Alaska and Nevada have no sales tax either, which makes them unusual. Understanding how your state funds itself matters because it shapes what you actually pay in total tax, not just what label it carries.
If you are considering a move to one of these states for tax reasons, the decision depends on your income type, where you currently live, and what other taxes you pay. A high earner in California might save substantially by moving to Texas. A retiree in Florida might pay more in property tax than they save on income tax. The math is personal.
Key Takeaways
- Nine states impose no tax on wage or business income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes investment income only).
- States without income tax typically rely on sales tax, property tax, or corporate tax instead, so your total state tax burden depends on how you spend and what you own.
- Moving to a no-income-tax state saves money only if your income type and spending patterns align with that state's tax structure.
- If you move to a no-income-tax state, you may still owe income tax to your previous state for part of the year, depending on residency rules and when you establish domicile.
- Remote workers and retirees should model their full tax picture in both states before relocating, because income tax savings can be offset by higher sales or property tax.
How no-income-tax states fund government instead
States without income tax must raise revenue somewhere. Texas, Washington, and Florida rely heavily on sales tax — typically 6 to 7 percent on most purchases. South Dakota and Nevada also use sales tax. Tennessee taxes sales but not income, making it attractive to high earners who spend less than they make.
Alaska and Wyoming fund government primarily through oil and mineral extraction taxes and corporate taxes, not sales tax. This structure means residents pay less tax on consumption but the state depends on commodity prices and business activity. Alaska also has a permanent fund that distributes oil revenue to residents annually, which is not income and not taxed.
Property tax varies widely even among no-income-tax states. New Hampshire has no sales tax and no income tax but funds schools and local government through property tax, which runs higher than in many other states. Texas property tax is also substantial. If you own a home, property tax can offset or exceed income tax savings.
When moving to a no-income-tax state actually saves money
The tax benefit depends on your income source and spending. A W-2 employee earning $150,000 in California (13.3 percent state income tax) saves roughly $20,000 per year by moving to Texas (no income tax). That is real money. But if that same person moves to New Hampshire, they save the income tax but may pay $3,000 to $5,000 more annually in property tax, depending on home value.
High earners with investment income benefit most from no-income-tax states. If you have $500,000 in a taxable brokerage account generating $15,000 per year in dividends and capital gains, a state income tax of 5 to 13 percent costs you $750 to $1,950 annually. That savings compounds over decades. New Hampshire taxes investment income, so it does not help here — but Alaska, Florida, Nevada, and Texas do.
Retirees drawing from IRAs and 401(k)s benefit significantly. Many no-income-tax states do not tax retirement account withdrawals, whereas high-tax states like California and New York do. A retiree withdrawing $60,000 per year from a 401(k) in California pays roughly $6,000 in state tax; in Texas, they pay zero. Over a 30-year retirement, that is $180,000 in tax savings.
Conversely, if you spend most of your income, sales tax erodes the benefit. A person earning $80,000 and spending $70,000 annually in Texas pays 8.25 percent sales tax on that spending — roughly $5,775 per year. In a state with 5 percent income tax, they would pay $4,000. The sales tax approach costs more in this scenario.
Residency and domicile rules when you relocate
Moving to a no-income-tax state does not when ready erase your tax obligation to your old state. Most states tax residents on all income earned during the months you lived there. If you move from New York to Florida on July 1, you owe New York income tax on January through June earnings, and Florida owes nothing because you were not a resident.
Establishing domicile in your new state matters for future years. Domicile is your permanent home — the place you intend to return to and where you have the most significant connections. States look at driver's license address, voter registration, property ownership, and where you spend most of your time. If you move to Florida but keep a home in New York and spend half the year there, New York may argue you are still a resident and tax your worldwide income.
Some states, particularly New York and California, are aggressive about pursuing former residents. If you move and still have income-producing property, a business, or family in the old state, that state may claim you are still domiciled there. You may need to file in both states and claim a credit for taxes paid to one state against taxes owed to the other. This is where a tax professional becomes necessary.
How remote work changes the calculation
Remote workers have more flexibility to relocate than employees who work on-site. If your employer is in New York but you work from home in Texas, you typically owe Texas income tax (zero) rather than New York income tax. However, some employers require employees to pay tax in the state where the company is headquartered, regardless of where work happens. Check your employment agreement and ask your payroll department which state they withhold for.
If you are self-employed or a business owner, the rules are different. You owe tax in the state where you have a physical presence or where you conduct business. A consultant who moves to Florida but serves clients primarily in New York may still owe New York tax. A business with no office and clients nationwide typically owes tax only in the state where the owner is domiciled.
The pandemic shifted this landscape. Many states temporarily allowed remote workers to work from other states without triggering tax obligations. Some of those rules have expired, and others remain. Before relocating for remote work, confirm your state's current rules with your employer's payroll or tax department, not just your state's website.
Comparing total tax burden across no-income-tax states
No two no-income-tax states have identical tax structures. Here is how they differ for a household earning $100,000 and spending $70,000 annually on taxable purchases:
| State | Income Tax | Sales Tax | Estimated Annual Tax on Scenario |
|---|---|---|---|
| Texas | 0% | 8.25% | ~$5,775 |
| Florida | 0% | 6% | ~$4,200 |
| Nevada | 0% | 8.375% | ~$5,863 |
| Washington | 0% | 10.25% | ~$7,175 |
| Alaska | 0% | 0% | ~$0 (sales tax) |
| New Hampshire | 5% (investment only) | 0% | ~$0 (wage income) |
This table shows sales tax only and assumes no property tax or other state taxes. Property tax, corporate tax, and excise taxes vary by state and locality. Alaska's lack of both income and sales tax makes it unique, but cost of living and limited job markets offset the tax advantage for many people. New Hampshire's property tax is high enough that total state tax burden often exceeds that of neighboring states with income tax.
When you should model your specific situation
A generic comparison is a starting point, not a decision. You need to model your own numbers: your income, investment gains, spending, property value, and family situation. A spreadsheet with income tax, sales tax, and property tax for both your current state and the target state shows the real difference.
Include less obvious costs. Some no-income-tax states have higher insurance premiums, higher utility costs, or higher housing prices. Florida has hurricane insurance. Texas has property tax that rises with home value. Alaska has shipping costs that inflate the price of goods. These are not taxes, but they affect your total cost of living.
If you are considering a move primarily for tax reasons, consult a tax professional who knows both states. They can model your specific income, deductions, and timeline. The cost of an hour or two of information often pays for itself in a single year of optimized planning.
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. Everyone in the United States owes federal income tax on their income, regardless of state. Living in a no-income-tax state saves you only the state portion, not the federal portion.
If I move mid-year, do I owe tax to both states?
Usually yes, for the portion of the year you lived in each state. If you move from California to Texas on June 30, you owe California income tax on January through June income and Texas owes nothing (because you were not a resident). File a part-year resident return in California and a resident return in Texas for the year of the move.
Can I claim a tax credit if I pay tax to two states?
Yes. Most states offer a credit for taxes paid to another state, so you do not pay double tax on the same income. The credit is usually limited to the lower of the tax you paid to the other state or the tax you owe to your current state. A tax professional can help you claim this correctly.
Does New Hampshire really have no income tax on wages?
Correct. New Hampshire taxes interest and dividend income at 5 percent but does not tax wages, salaries, or business income. If your income is primarily from a job, New Hampshire functions like the other no-income-tax states. If you have significant investment income, you will owe tax there.
Is Alaska's permanent fund dividend considered income for tax purposes?
No. Alaska's Permanent Fund Dividend is not taxed as income by Alaska or the federal government. It is treated as a return of oil wealth, not earned income. You do not report it on your federal return, and Alaska does not tax it.