Nine states levy no personal income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Eight of them tax no form of personal income at all. Washington is the outlier, taxing long-term capital gains on financial assets while leaving salaries alone. If you live in any of these states, your paycheck arrives without a state income tax withholding line, though federal income tax and payroll taxes still apply everywhere in the country.
New Hampshire is the newest name on the list. It used to tax interest and dividend income at 5%, stepped the rate down to 4% for 2023 and 3% for 2024, and repealed the tax entirely for tax years beginning after December 31, 2024.1NH Department of Revenue Administration. Interest and Dividends Tax Starting with the 2025 tax year, New Hampshire residents owe the state nothing on any form of personal income.
The Washington Capital Gains Exception
Calling Washington a no-income-tax state without qualification can produce a surprise bill. Wages, salaries, and retirement income are untaxed. But since tax year 2025, Washington applies a tiered tax on long-term capital gains from the sale of stocks, bonds, and other financial assets: 7% on the first $1 million of taxable gains, and an effective 9.9% on anything above that threshold.2Washington Department of Revenue. New Tiered Rates for Washington’s Capital Gains Tax
The tax applies only to gains above a standard deduction and excludes real estate sales, retirement account withdrawals, and certain small-business interests. A high-salary earner who never sells investments experiences Washington as fully tax-free. Someone regularly liquidating a portfolio will not.
How These States Pay for Government
Roads, schools, and emergency services still cost money. Skipping the income tax means the revenue comes from somewhere else, and whether a move actually saves you money depends on how those other taxes hit your particular life.
Sales Taxes
Consumption taxes carry a lot of the weight. Tennessee and Washington both have combined state and local sales tax rates above 9.5%, among the highest in the country. Texas and Nevada sit close behind. Alaska is the exception: no statewide sales tax, though some local governments impose their own. If you spend heavily on taxable goods, the sales tax quietly claws back part of what the missing income tax gave you.
Property Taxes
This is where many no-income-tax states recover the most revenue, and it surprises new homeowners. Texas and New Hampshire both have effective property tax rates above 1.4%, well above the national median. Florida’s effective rate is lower, around 0.78%, but property tax bills in popular areas can still be steep because home values are high. If you own a home in one of these states, budget for property tax as a substantial annual expense.
Severance Taxes on Natural Resources
Alaska and Wyoming lean on the energy industry. Severance taxes on oil, gas, and mineral extraction produce a large share of state revenue. Alaska has historically depended on petroleum for up to 90% of its budget, though the figure moves with commodity prices.3U.S. Energy Information Administration. Major Fossil Fuel-Producing States Rely Heavily on Severance Taxes Wyoming’s severance revenue comes primarily from coal. Alaska also pays residents a share of its oil earnings through the Permanent Fund Dividend, which was $1,000 per person in 2025.4Alaska Department of Revenue. Department of Revenue Announces 2025 Permanent Fund Dividend Amount
Business Taxes
If you are self-employed or run a small business, the personal tax picture is only half the story. Texas charges a franchise tax on most businesses. For 2026 the rate is 0.75% of taxable margin for most entities, or 0.375% for retailers and wholesalers, with businesses at or below $2,650,000 in total revenue owing nothing.5Texas Comptroller of Public Accounts. Franchise Tax
Washington’s Business and Occupation tax hits gross receipts, not profits. Retailers pay 0.471%, manufacturers and wholesalers 0.484%, and service businesses 1.5%.6Washington Department of Revenue. Business and Occupation (B&O) Tax Because the tax is on revenue rather than profit, low-margin businesses feel it more than the rate suggests. Nevada’s commerce tax kicks in only above $4 million in Nevada gross revenue, with rates from 0.051% to 0.331% depending on industry.7Nevada Legislature. NRS Chapter 363C – Commerce Tax Most small businesses stay under the threshold.
Federal Income Tax Still Applies
No state’s tax policy affects what you owe the IRS. The Sixteenth Amendment grants Congress the power to tax income, and 26 U.S.C. Section 1 imposes tax on the taxable income of every individual.8Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed The federal brackets, from 10% on the lowest income up to 37% at the top, apply the same in Anchorage as they do in Manhattan.
Payroll taxes are also uniform. Every worker pays 7.65% of wages toward Social Security (6.2%) and Medicare (1.45%), matched by the employer.9Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates The Social Security portion applies to wages up to $184,500 in 2026; above that ceiling only the 1.45% Medicare tax continues, plus an additional 0.9% Medicare surtax on wages above $200,000.10Social Security Administration. Contribution and Benefit Base
Ignoring the federal obligation is not an option. Willfully evading federal tax is a felony carrying up to $100,000 in fines and five years in prison.11Office of the Law Revision Counsel. 26 U.S. Code 7201 – Attempt to Evade or Defeat Tax Simply failing to file a required return is a separate misdemeanor with penalties up to $25,000 and one year in prison.12Office of the Law Revision Counsel. 26 USC 7203 – Willful Failure to File Return, Supply Information, or Pay Tax
Making a Move Count for Tax Purposes
Relocating to a no-income-tax state only reduces your tax bill if the state you left actually agrees you have gone. Buying a Florida condo while your life stays in New Jersey will not end your New Jersey tax liability. This is the part most plans get wrong.
Domicile and the 183-Day Rule
States that tax income generally use two tests. Your domicile is your true home, the place you intend to return to after any absence, and you can only have one at a time. Statutory residency is separate: many states treat you as a resident if you maintain a permanent home there and spend more than 183 days in the state during the year. You can trigger tax under either test. Change your domicile to Texas but spend 200 days in your old state, and you may owe both.
What Auditors Look At
Auditors do not just count days. When someone claims to have moved from a high-tax state to a no-tax one, examiners look at a pattern of evidence. The heaviest factors are the size and use of your homes in each state, where you physically work, and whether your daily life actually shifted. Keeping a fully furnished apartment in your old state and using the new address only for mail is a signal, and auditors know the signal.
Secondary factors include where your spouse and children live, which state issued your driver’s license and voter registration, the location of your doctors and financial advisors, and where you attend religious services or belong to social clubs. Even the location of pets, artwork, and family heirlooms can matter. A real move updates all of these, not just the mailing address.
If you are leaving a state that charges income tax, treat the transition as a full relocation. Register to vote, get a new driver’s license, move your bank accounts, and spend the majority of your days at the new address. Keep records that prove your physical presence. New York and California audit these cases aggressively, and the burden of proof is on you to show the move was genuine.