Nine states collect no income tax on wages, and four more tax only investment income

Nine states do not tax wages or salaries at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. Four additional states — Illinois, Mississippi, Pennsylvania, and Tennessee — tax only investment income (dividends, interest, capital gains) but not wages. If you live or work in one of these states, you will not owe state income tax on your paycheck, though you may still owe federal income tax and other state taxes like sales tax or property tax.

The absence of state income tax does not mean you file fewer forms or skip state filing altogether. You may still need to file a state return if you have investment income, business income, or other sources of revenue that the state tracks. Some of these states also require you to report certain credits or deductions even if you owe no tax. The federal return remains the same regardless of where you live.

Key Takeaways

  • Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire.
  • Four states tax investment income only and do not tax wages: Illinois, Mississippi, Pennsylvania, and Tennessee.
  • Living in a no-income-tax state does not eliminate federal income tax or other state taxes like sales tax, property tax, or excise tax.
  • You may still need to file a state return in a no-income-tax state if you have self-employment income, rental income, or investment income above certain thresholds.
  • Moving to a no-income-tax state does not change your federal tax filing requirements or the forms you use.

The nine states with no income tax on wages

Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have never imposed a state income tax on wages. Tennessee and New Hampshire repealed their income taxes in recent years — Tennessee phased out its tax on wages between 2021 and 2022, and New Hampshire eliminated its tax on wages starting in 2024, though it still taxes investment income until 2025.

If you work in one of these states or live there and earn wages, you will not see a state income tax withholding on your paycheck. Your employer will still withhold federal income tax, Social Security tax, and Medicare tax. You will still file a federal Form 1040, but you will not file a state income tax return unless you have other income sources the state requires you to report.

Four states that tax investment income but not wages

Illinois, Mississippi, Pennsylvania, and Tennessee have chosen to tax only investment income — meaning dividends, interest, capital gains, and similar returns — while leaving wages untaxed. This structure means a person who earns $80,000 in salary owes no state income tax, but the same person earning $5,000 in dividend income would owe state tax on that $5,000.

If you live in one of these states and have investment income, you will need to file a state return to report that income and pay the tax owed. The state return is separate from your federal return. Your federal return will include all income sources, but your state return will focus only on the investment portion.

How no-income-tax states fund government services

States without income tax rely on other revenue sources: sales tax, property tax, excise tax (on fuel, alcohol, or tobacco), business licensing fees, and in some cases, oil and gas revenue. Alaska, for example, receives substantial revenue from oil production and has historically paid residents an annual dividend from the Alaska Permanent Fund. Texas and Washington rely heavily on sales tax and business taxes.

The overall tax burden in a no-income-tax state is not necessarily lower than in a state with income tax. A state with no income tax may have a higher sales tax or property tax to compensate. When comparing the cost of living between states, consider all taxes together, not just income tax.

When you must file a state return in a no-income-tax state

Even in states with no income tax on wages, you may need to file a state return if you have self-employment income, rental income, farm income, or investment income above the state's threshold. Each state sets its own rules about what income requires filing and what forms to use.

For example, if you live in Florida and earn $500 in rental income, you may need to file a Florida return even though Florida has no income tax, because the state wants to track that income for other purposes. If you live in Pennsylvania and have only wage income, you file no state return, but if you have dividend income, you file a state return for that portion only.

The best way to know whether you must file is to check your state's department of revenue website or use the state's own tax software. Many states offer free filing options for residents, and some offer free federal filing as well through the IRS Free File program.

How federal filing works if you live in a no-income-tax state

Your federal tax return is identical whether you live in a no-income-tax state or a state with income tax. You still file Form 1040 with the IRS, report all income sources, and claim deductions and credits you are may have access to to. The federal government taxes income regardless of state residence.

The only difference is that you will not have a state return to file alongside your federal return (or you will file a state return only for specific income types, depending on your state). Your federal refund and your state refund, if any, are separate and arrive on different timelines.

Moving to a no-income-tax state: what changes and what does not

If you move to a no-income-tax state during the year, you may owe income tax to both your old state and your new state for the portions of the year you lived in each. Most states tax you based on where you lived on December 31 of that tax year, so if you moved on June 1, you would owe tax to your old state for January through May and your new state for June through December.

Some states offer credits to prevent double taxation, and some have reciprocal agreements with neighboring states. If you moved mid-year, file your federal return as usual and then file state returns for both states, reporting only the income earned during the months you lived there. Your old state's tax software will usually guide you through this split-year filing.

Frequently Asked Questions

Do I still owe federal income tax if I live in a no-income-tax state?

Yes. Federal income tax is separate from state income tax. The IRS taxes all U.S. citizens and residents on their worldwide income regardless of which state they live in. Living in Alaska, Florida, Texas, or any other no-income-tax state does not change your federal filing requirements or reduce your federal tax liability.

If I work in a no-income-tax state but live in a state with income tax, which state taxes my wages?

Most states tax you based on where you live, not where you work. If you live in New York and work in Florida, you owe New York state income tax on your wages. However, some states have reciprocal agreements or special rules for commuters. Check with your home state's department of revenue to confirm.

Do I need to file a state return in a no-income-tax state if I have no income?

No. If you have no income and live in a state with no income tax, you do not need to file a state return. You may still need to file a federal return if your income exceeds the federal threshold, which depends on your age and filing status.

Can I claim state income tax as a deduction on my federal return if I live in a no-income-tax state?

No. You can only deduct state income tax you actually paid. If you live in a no-income-tax state and paid no state income tax, you have nothing to deduct. You may be able to deduct other state and local taxes, such as property tax or sales tax, up to $10,000 total per year.

Does New Hampshire still tax wages?

No. New Hampshire eliminated its tax on wages starting in 2024. It still taxes investment income (dividends and interest) through 2025, after which that tax will also end. Beginning in 2026, New Hampshire will have no income tax on any source.