No Income Tax States

How It Works

Nine states currently impose no income tax on wages, making them popular destinations for high-income earners and retirees. These states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire is a partial exception — it taxes interest and dividend income at 3% but is phasing this out completely by 2027. Washington also has a unique 7% capital gains tax on gains exceeding $270,000, though it does not tax wages. Living in a no-income-tax state can save significant money. A couple earning $300,000 moving from California to Florida saves over $22,000 per year in state income tax alone. However, these states fund government services through other revenue sources. Texas relies heavily on property taxes (averaging 1.60% of home value), while Nevada, Tennessee, and Washington have high sales tax rates. Alaska has no income or sales tax but receives substantial revenue from oil production. Florida uses a combination of sales tax, tourism taxes, and relatively moderate property taxes. When evaluating a move to a no-income-tax state, calculate the total tax burden including property tax on your expected home value, sales tax on your spending, and any vehicle or excise taxes. For retirees, the absence of state income tax on retirement distributions and Social Security can compound savings significantly over a multi-decade retirement.