9 States With No Income Tax: Keep More of Your Money

Seeing how much of your salary goes to state income tax may have you wondering about more affordable places to live. urbazon / Getty Images

For residents of certain states, the absence of a state income tax can be a significant tax benefit. Instead of paying personal income tax rates to the state, individuals in these states only pay federal income tax on their taxable income.

However, states with no income tax often generate revenue in other ways, such as higher property taxes, sales tax or excise taxes.

While skipping a state income tax might lower your overall tax bill, other state taxes can offset those savings. Some states rely on property tax rates, while others use higher sales tax or taxes on dividend income and capital gains income to balance their budgets. Here are the 9 states that do not levy a state income tax, listed in alphabetical order.

1. Alaska

Alaska has no state income tax and also does not collect a sales tax at the state level. Instead, the state relies on oil revenues and excise taxes to generate income tax revenue. Alaskans also receive a yearly dividend from the Permanent Fund, which distributes oil revenue earnings.

2. Florida

Florida does not impose an individual income tax, making it a popular destination for retirees and businesses. The state makes up for lost income tax revenue with higher sales tax and tourism-related taxes.

While property tax rates vary by county, Florida remains an attractive state due to its lack of state income tax.

3. Nevada

Nevada has no state income tax and does not tax dividend income or capital gains income. Instead, the state relies heavily on revenue from tourism, gaming and high sales tax rates. Property taxes in Nevada are relatively low; excise taxes on goods like alcohol and tobacco help fund public services.

4. New Hampshire

While New Hampshire does not levy a tax on wage income, it does tax dividend income and interest income — for now. For tax periods beginning on or after Jan. 1, 2025, New Hampshire will no longer levy any Interest and Dividends Tax.

The state generates revenue through high property taxes and excise taxes. Despite its high property tax rate, New Hampshire consistently ranks as one of the lowest-taxed states in overall state taxes.

5. South Dakota

South Dakota has no state income tax and no taxes on dividend income or capital gains income. Instead, it relies on sales tax and excise taxes to generate revenue. Property taxes in South Dakota are moderate, and the state is business-friendly due to its tax policies.

6. Tennessee

Tennessee does not tax wage income (or any personal income, for that matter), but it previously taxed dividend and interest income through the Hall Income Tax, which the state phased out in 2021.

The state relies on sales tax and excise taxes to generate revenue. Property tax rates in Tennessee are lower than the national average.

7. Texas

Texas does not have a state income tax but compensates with relatively high property taxes and sales tax. The state's revenue is primarily generated through property tax rates and business taxes. Despite the lack of an individual income tax, the overall cost of living varies by region.

8. Washington

Washington does not levy an individual income tax, but it does tax capital gains income above a certain threshold. The state makes up for the lack of state income tax with high sales tax rates and business taxes. Property taxes in Washington are moderate compared to national averages.

9. Wyoming

Wyoming has no state income tax and also benefits from low property tax rates. The state generates revenue primarily from mineral extraction, sales tax and excise taxes. Its tax-friendly environment makes it attractive to both retirees and businesses.

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