10 States With the Lowest Income Tax Rates

Do your state's personal income tax rates have you wondering where your paycheck went? Most of these states don't charge income tax at all. PeopleImages / Shutterstock

Want to keep more of your paycheck? One way is to live in one of the states with the lowest income tax rates.

Income tax is one of the main ways state governments raise revenue, but not all states treat your earnings the same. Some skip income taxes altogether. Others offer flat tax rates or only tax specific types of income.

We’re counting down the states with the lowest income tax burden, whether that’s from zero personal income tax, low marginal tax rates, or friendly policies on capital gains and dividend income.

1. Wyoming

Wyoming doesn’t tax personal income, corporate income, or capital gains. That includes dividend income too. With no state income tax return to file and low property tax rates, it’s one of the most tax-friendly states in the U.S.

Wyoming relies on sources like severance and excise taxes on natural resources to raise revenue.

2. Alaska

Like Wyoming, Alaska has no state income tax and no state sales tax. Some local taxes may apply, but overall, residents see a low total tax burden.

Alaska also sends annual oil dividend checks to permanent residents, giving it a unique financial benefit compared to other no-tax states.

3. Florida

Florida doesn’t collect individual income tax, capital gains income tax, or local income taxes. That helps retirees, business owners, and single taxpayers alike.

The state raises money through sales tax and property taxes (Florida’s average effective property tax rate is 0.82 percent), so residents may still feel the pinch in other areas.

4. South Dakota

South Dakota has no personal income tax and no corporate income tax. That makes it attractive to both individuals and businesses.

The state does impose sales taxes to compensate (South Dakota’s combined state and local sales tax is about 6.1 percent, which is relatively low compared to much of the U.S.), but the lack of income tax filings keeps things simple for taxpayers.

5. Texas

Texas eliminates the personal income tax entirely, so residents don’t pay state income taxes on their annual income. The state relies heavily on property taxes and sales taxes for funding.

Business profits are subject to a gross receipts tax, but it’s not based on taxable income like a traditional corporate income tax.

6. Tennessee

Tennessee phased out taxes on dividend and interest income in 2021, joining the ranks of no-income-tax states. While it has relatively high sales tax rates, the lack of a state income tax return benefits everyone from single taxpayers to married couples filing jointly.

7. Nevada

Nevada doesn’t tax personal income, so there’s no state income tax or local income taxes to worry about.

It does have one of the highest sales tax rates, and excise taxes on items like alcohol and gambling contribute significantly to state revenue.

8. Washington

There’s no personal income tax in Washington, but there is a new excise tax on capital gains income above certain thresholds.

Even with this, Washington ranks among the lowest income tax states due to no tax on wages or salaries.

9. New Hampshire

New Hampshire doesn’t tax earned income, which keeps the tax burden light for wage earners. It does, however, tax interest and dividends, though these are being phased out and will be eliminated for the 2025 tax year.

Property taxes are high, but there’s no state sales tax, helping balance the tax bill.

10. North Dakota

North Dakota has income taxes, but they’re among the lowest in the country. It uses a progressive structure with low marginal tax rates, benefiting single and joint filers.

The state also ranks well for its low property tax rate and moderate sales tax.

We created this article in conjunction with AI technology, then made sure it was fact-checked and edited by a HowStuffWorks editor.