No. Not all states have an income tax. Nine states impose no personal income tax on wages and salaries: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. The other 41 states and the District of Columbia tax personal income, using either a flat rate that applies to every dollar earned or a graduated system with brackets that climb as income rises.1Tax Foundation. State Individual Income Tax Rates and Brackets, 2026 New Hampshire became the ninth tax-free state on January 1, 2025, when its tax on interest and dividends was fully repealed a year ahead of schedule.
The Nine States Without a Personal Income Tax
Residents of these states keep their entire gross paycheck free from any state-level income tax. What they don’t skip is taxation altogether. Each state fills the revenue gap somewhere else.
- Alaska has no income tax and no state sales tax, though local governments may impose their own sales taxes.
- Florida has no income tax, no estate tax, and no inheritance tax.
- Nevada leans on gaming and tourism revenue, along with a combined average state and local sales tax rate near 8.24 percent.
- New Hampshire became fully income-tax-free in 2025. It has one of the highest effective property tax rates among the no-income-tax states.
- South Dakota charges no individual or corporate income tax and collects severance taxes on resource extraction.
- Tennessee has no income tax, but the combined state and local sales tax averages around 9.6 percent, one of the highest rates in the country.
- Texas has no individual or corporate income tax and no estate or inheritance tax. It offsets that with an average combined sales tax near 8.2 percent and property tax rates among the nation’s highest.
- Washington does not tax wages or salaries. It does tax long-term capital gains above a threshold, covered below.
- Wyoming collects roughly a third of its state revenue from mineral severance taxes, enough to substitute for what other states raise through income and sales taxes combined.
The Tax Foundation’s 2025 data counted eight states with no individual income tax at all and treated Washington separately because of its capital gains tax.2Tax Foundation. State Individual Income Tax Rates and Brackets, 2025 For someone comparing paychecks, though, all nine states leave wages untouched by any state income tax.
Living in a no-income-tax state doesn’t automatically mean paying less overall. A household that earns modestly but spends heavily on taxable goods could pay more in total state and local taxes in a high-sales-tax state than in a low-income-tax state next door. The best fit depends on your income, spending, and whether you own property.
Washington’s Capital Gains Tax
Washington is the one no-income-tax state that separately taxes investment profits. Since 2022, the state has taxed long-term capital gains from the sale of stocks, bonds, and other capital assets. A standard deduction shields the first $278,000 of gains in 2025, adjusted annually for inflation.2Tax Foundation. State Individual Income Tax Rates and Brackets, 2025
Starting with tax year 2025, Washington uses a two-tier rate: 7 percent on taxable gains up to $1 million and 9.9 percent on gains above that. The tax does not apply to sales of real estate, retirement accounts, or interests in privately held businesses that meet certain criteria. Alaska, Florida, Nevada, Texas, and Wyoming impose no separate capital gains tax at all.
Flat Tax and Progressive Tax States
The 41 states that do tax personal income split into two camps.
Flat-Rate States
A flat tax applies the same percentage to every dollar of taxable income. As of 2026, 15 states use a single-rate system.1Tax Foundation. State Individual Income Tax Rates and Brackets, 2026 Several have recently joined the group or cut their rates further:
- North Carolina completed a multi-year phasedown to a flat 3.99 percent on January 1, 2026.
- Kentucky dropped from 4 percent to 3.5 percent on January 1, 2026.
- Indiana decreased from 3 percent to 2.95 percent on January 1, 2026.
- Ohio moved to a flat 2.75 percent for all nonbusiness income as of January 1, 2026.
Other flat-rate states include Colorado at 4.4 percent, Idaho at 5.3 percent, Illinois at 4.95 percent, Michigan at 4.25 percent, North Dakota at 2.5 percent, Pennsylvania at 3.07 percent, and Utah at 4.5 percent. The calculation is direct: multiply your state taxable income by the rate.
Progressive States
Progressive systems use multiple brackets, with the rate climbing as income rises. California’s rates start at 1 percent on the first dollars of income and reach 13.3 percent on taxable income above $1 million. New York’s top rate of 10.9 percent applies only to taxable income exceeding $25 million.2Tax Foundation. State Individual Income Tax Rates and Brackets, 2025 Only the income inside each bracket is taxed at that bracket’s rate, so someone earning $60,000 in California pays a blended effective rate far below the top figure.
Most progressive states also allow a standard deduction or personal exemption that reduces taxable income before any brackets apply. Some tie the deduction to the federal amount, which for 2026 is $16,100 for single filers and $32,200 for married couples filing jointly, as increased by the One Big Beautiful Bill Act.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Other states set their own amounts, sometimes considerably lower.
Local Income Taxes
Even in a state with no income tax or a low one, a city, county, or school district can add its own. Thousands of local jurisdictions across roughly a dozen states impose income taxes on residents or on anyone who works within their boundaries. Pennsylvania, Ohio, Kentucky, and Maryland are where local income taxes are most widespread.
Local rates usually fall between about 1 percent and 3.5 percent. In Maryland, every county and the city of Baltimore sets its own rate, which state law requires to fall between 2.25 and 3.2 percent. In Pennsylvania, school districts and municipalities each impose their own levies. Pittsburgh, for example, charges a combined local rate of 3 percent split between the city and the school district.
Employers in local-tax jurisdictions typically withhold the tax directly from each paycheck, so you may not need to file a separate local return. If you work in one local jurisdiction and live in another, though, you may owe tax in both unless one offers a credit for taxes paid to the other. Failing to pay a local income tax can lead to collection actions or liens, just as with state-level obligations.
Working or Living Across State Lines
If you live in one state and work in another, you may owe tax to both. States generally tax income based on where the work is physically performed, so a non-resident who commutes into a state with an income tax usually files a non-resident return there for the income earned in that state.
Your home state will typically let you claim a credit for income taxes paid to the state where you worked. The credit is usually the lesser of the tax you paid to the other state or the amount your home state would have charged on the same income. File the work-state return first, then your home state return with the credit form attached.
Reciprocity Agreements
About 16 states have reciprocity agreements with at least one neighboring state. Under a reciprocity agreement, you pay income tax only to your state of residence, even if you physically work in the other state. Common pairings include Illinois and Iowa, Pennsylvania and New Jersey, Virginia and Maryland, and several Midwest combinations involving Indiana, Kentucky, Michigan, Ohio, and Wisconsin. Where a reciprocity agreement applies, you typically file an exemption form with your employer so it withholds for your home state.
The 183-Day Rule
Most states use a 183-day threshold as one factor in deciding whether you count as a tax resident. Spending 183 or more days in a state during a calendar year can trigger a full state income tax filing obligation on all of your income, not just what you earned in that state. Day count isn’t the only factor. States also look at where you keep a permanent home, where your family lives, where you’re registered to vote, and where you hold professional licenses. If you split time between two states, detailed records of where you were on which days can be decisive in a residency dispute.
Remote Work and the Convenience of the Employer Rule
Remote work has complicated multi-state taxation. If you work from home in State A for an employer based in State B, which state gets to tax your income normally depends on where the work is performed. Some states apply a “convenience of the employer” rule that flips that answer.
Under this rule, a handful of states tax remote workers based on where the employer’s office sits, even if the worker never sets foot in that state. New York is the prominent example: if your primary office is in New York but you work from home elsewhere, New York treats your telecommuting days as days worked in New York unless your employer has established a legitimate office at your remote location. Connecticut, Delaware, Nebraska, Oregon (for executives only), and Pennsylvania apply some version of the rule.4National Conference of State Legislatures. State and Local Tax Considerations of Remote Work Arrangements
A remote worker can owe income tax to a state they never visit. Your home state may offer a credit for taxes paid to the employer’s state, but the credit doesn’t always cover the full amount, especially if the employer’s state has a higher rate. Many states have also adopted day-count thresholds that trigger withholding for a nonresident employee. New York’s threshold is 14 days, Connecticut’s is 15, and Illinois’s is 30.4National Conference of State Legislatures. State and Local Tax Considerations of Remote Work Arrangements Check whether your employer’s state applies a convenience rule and whether your home state grants a credit for taxes paid there. The gap can amount to thousands of dollars in unexpected liability each year.
How States Tax Retirement Income and Social Security
Where you retire affects how far your savings stretch. All nine no-income-tax states automatically exempt retirement distributions and Social Security benefits because they don’t tax personal income at all. Several income-tax states exempt common retirement income too.
A total of 13 states fully exempt distributions from IRAs and 401(k) plans. Beyond the nine no-income-tax states, Illinois, Iowa, Mississippi, and Pennsylvania exclude these distributions from state income tax. Pennsylvania also exempts pension income and Social Security benefits.
Only eight states tax Social Security to any degree: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. Even in those states, the tax usually kicks in only above certain income thresholds, so many retirees with modest incomes owe nothing on their benefits. At the federal level, a temporary senior deduction of up to $6,000 per individual for those 65 and older reduces the taxable portion of Social Security benefits for the 2025 and later tax years.
Penalties for Not Filing or Paying State Income Tax
If you owe state income tax and miss the deadline, the consequences generally mirror the federal penalty structure. The IRS charges a failure-to-pay penalty of 0.5 percent of unpaid taxes for each month or partial month the balance remains outstanding, capped at 25 percent of the amount owed.5Internal Revenue Service. Failure to Pay Penalty Many states follow a similar formula, and interest accrues on top of penalties from the original due date.
Failure to file a required return at all usually carries a steeper penalty than filing late but paying late. At the federal level, the late-filing penalty is 5 percent per month up to 25 percent. States vary, but the pattern holds. If you owe taxes in more than one state because of remote work, a move, or cross-border commuting, track each state’s deadlines and penalty rules independently. They don’t always match the federal calendar.