9 States With No Income Tax: What It Means

When people talk about reducing their tax burden, moving to a state with no income tax often tops the list. Nine U.S. states don’t levy a state income tax on wages, which sounds like a straightforward win. But the reality is more nuanced — these states still need revenue, and they get it through other means that might offset some or all of the savings.

Let’s look at which states have no income tax, how they compensate, and who benefits most from living in these states.

The 9 States With No State Income Tax

As of 2025, the following states do not tax individual wage income:

1. Alaska
2. Florida
3. Nevada
4. New Hampshire
5. South Dakota
6. Tennessee
7. Texas
8. Washington
9. Wyoming

A quick note on New Hampshire: while it doesn’t tax wages or salary, it historically taxed interest and dividend income. That tax was phased out completely as of January 2025, making New Hampshire fully income-tax-free.

How These States Make Up the Revenue

States need money to fund roads, schools, emergency services, and government operations. Without an income tax, they rely more heavily on other revenue sources.

Higher Sales Tax

Several no-income-tax states compensate with above-average sales tax rates. Tennessee has one of the highest combined state and local sales tax rates in the country, averaging over 9.5%. Texas and Nevada also have relatively high sales tax rates. Washington state has a state rate of 6.5%, but when local taxes are added, combined rates can exceed 10% in some cities.

Alaska is the exception — it has no state sales tax, though some local municipalities charge their own.

Higher Property Tax

Texas is the most notable example. With no income tax, Texas relies heavily on property taxes, and its effective property tax rate is among the highest in the nation — roughly 1.6% to 1.8% of assessed home value. For a $400,000 home, that’s $6,400 to $7,200 per year. Compare that to a state like California, where Proposition 13 keeps many homeowners’ effective rates well below 1%.

New Hampshire also has very high property taxes, with effective rates averaging around 1.9%.

Natural Resource Revenue

Alaska, Wyoming, and to some extent Texas benefit from natural resource extraction (oil, gas, minerals). Alaska is unique in that it actually pays residents an annual dividend from its Permanent Fund, which is funded by oil revenues.

Tourism and Hospitality Taxes

Nevada and Florida benefit enormously from tourism. Hotel taxes, gaming revenue (Nevada), and visitor spending generate significant state income without burdening residents with income taxes.

Who Benefits Most From No-Income-Tax States?

High Earners Save the Most

The benefit of no state income tax scales directly with income. If you earn $50,000 in a state with a 5% income tax, you save $2,500 by living in a no-income-tax state. If you earn $500,000, you save $25,000 or more.

This is why high-earning professionals, business owners, and retirees with substantial investment income gravitate toward states like Florida, Texas, and Nevada.

Use our Paycheck Calculator to compare your take-home pay across different states and see the exact difference, or try the state comparison tool for a side-by-side breakdown.

Remote Workers Have New Flexibility

The rise of remote work has made this a practical consideration for millions of workers. If your employer allows you to work from anywhere, relocating from a high-tax state like California (top rate 13.3%) or New York (top rate 10.9%) to Florida or Texas can mean thousands of dollars in annual tax savings — with no change to your gross pay.

Retirees With Diverse Income

Retirees who draw income from 401(k)s, IRAs, pensions, and investments can benefit significantly. In states that tax income, these distributions are often taxed as ordinary income. In no-income-tax states, that money goes directly into your pocket.

Who Might Not Benefit

Homeowners in High-Property-Tax States

If you’re buying a home in Texas or New Hampshire, the property tax burden can be substantial. A family paying $8,000 per year in property taxes might find that it equals or exceeds what they would have paid in state income tax elsewhere.

Lower-Income Households

For households earning under $50,000, the income tax savings are modest (often $1,000–$2,500), while higher sales taxes on everyday purchases can eat into or eliminate those savings. Sales taxes are regressive — they take a larger percentage of income from lower earners because everyone pays the same rate on goods regardless of income.

People Who Don’t Own Property

Renters in no-income-tax states may indirectly pay higher property taxes through higher rents, without getting the property tax deduction benefit on their federal return.

State-by-State Quick Comparison

Best for High Earners

Florida and Texas offer large populations, diverse economies, and no income tax. Florida has no estate tax and relatively moderate property taxes. Texas has higher property taxes but no state estate tax and a strong job market. See the Texas vs Florida comparison for a side-by-side breakdown.

Washington is appealing for tech workers, though its high sales tax and cost of living in the Seattle area reduce the benefit. Washington also has a capital gains tax on gains over $270,000.

Best for Retirees

Florida is the classic retirement destination for a reason: no income tax, no estate tax, and warm weather. Nevada offers similar tax advantages with lower cost of living than Florida’s popular metro areas.

Tennessee has a low cost of living, no income tax, and a lower overall tax burden for retirees, though its high sales tax affects daily spending.

Best for Outdoor Enthusiasts

Wyoming, Alaska, and South Dakota offer stunning natural environments with no income tax. Alaska’s Permanent Fund Dividend is a unique bonus, though the high cost of living and remote location are trade-offs.

The Full Picture: Total Tax Burden

Looking at income tax alone gives an incomplete picture. The Tax Foundation ranks states by total tax burden — combining income, sales, property, and excise taxes. Some states with income taxes (like Utah and Indiana with flat, moderate rates) may have a lower total tax burden than some no-income-tax states. For a full ranking of state income tax rates, see our dedicated guide.

The key question isn’t “Does this state have an income tax?” but rather “What’s my total tax burden in this state given my specific situation?”

Factors to consider:

• Your income level: Higher income = bigger income tax savings
• Whether you own or rent: Property taxes matter more for owners
• Your spending habits: High sales tax states penalize big spenders
• Your family size: Some states offer generous credits that offset income tax
• Cost of living: A lower tax burden means nothing if housing costs 3x more — see our cost of living by state comparison

Calculate Your State-Specific Take-Home Pay

The best way to compare is with real numbers. Use our Paycheck Calculator to enter your salary and see your take-home pay in any state. Try comparing your current state with a no-income-tax alternative — the results might surprise you in either direction.

Key Takeaways

• 9 states charge no state income tax on wages
• These states compensate with higher sales taxes, property taxes, or natural resource revenue
• High earners benefit the most from no-income-tax states
• Lower-income households may not save as much due to regressive sales taxes
• Always look at the total tax burden, not just income tax
• Your specific situation (income, homeownership, spending) determines whether a move makes financial sense