Which States Have No Income Tax? The 2026 List

Key Takeaways: States With No Income Tax in 2026

• Nine states do not tax wages in 2026: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
• New Hampshire became fully income-tax free when it repealed its 3% tax on interest and dividends for tax periods beginning on or after January 1, 2025.
• Washington taxes long-term capital gains at 7%, rising to 9.9% on taxable gains over $1 million, and a 9.9% tax on income over $1 million is scheduled to begin in 2028. Voters decide Initiative 645 on November 3, 2026.
• States without an income tax make up the revenue through other taxes. Tennessee and Washington have average combined sales tax rates of 9.61% and 9.57%, and Texas and New Hampshire rely heavily on property taxes.
• A single filer earning $100,000 pays $0 in state income tax in these nine states, compared with $3,070 in Pennsylvania and about $3,481 in North Carolina. Federal income and payroll taxes stay at $20,820 anywhere.
• Moving does not erase state taxes already owed. Back taxes, penalties, and interest stay on the books, and California’s Franchise Tax Board has 20 years to collect.

Nine states do not tax wages or salaries: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire became fully income-tax free in 2025, when its tax on interest and dividends ended. Washington comes with an asterisk: it taxes large capital gains now, and a new tax on income over $1 million is scheduled to begin in 2028.

Living in one of these states can lower a tax bill, but each state makes up the revenue elsewhere, usually through sales, property, or business taxes. Here is what each one taxes instead, what a move could save, and what it takes to make a new state home for tax purposes.

The Nine States With No Income Tax at a Glance

All nine states skip a tax on wages, but their other taxes vary widely. Tennessee and Washington have two of the highest combined sales tax rates in the country, while Alaska has no statewide sales tax and New Hampshire has no general sales tax. The table shows each state’s rates and the main thing to know.

State	State sales tax	Avg. combined sales tax	What else to know
Alaska	None	1.82%	Local sales taxes; residents receive the Permanent Fund Dividend
Florida	6%	6.98%	Relies on sales and tourism-driven taxes
Nevada	6.85%	8.24%	1.17% Modified Business Tax on larger payrolls
New Hampshire	None	None	Interest and dividends tax repealed for 2025; high property taxes
South Dakota	4.2%	6.11%	State rate scheduled to return to 4.5% on July 1, 2027
Tennessee	7%	9.61%	Tax on interest and dividends repealed in 2021
Texas	6.25%	8.2%	Income tax banned by the state constitution; high property taxes
Washington	6.5%	9.57%	Capital gains tax now; 9.9% tax on income over $1 million scheduled for 2028
Wyoming	4%	5.39%	Relies on severance taxes from coal, oil, and natural gas

Sales tax rates as of July 1, 2026. Source: Tax Foundation.

What Each State Taxes Instead

Each of these states replaces income tax revenue in its own way, and the mix affects who comes out ahead. Here is how each one does it.

Alaska 

Alaska has no state income tax and relies heavily on revenue from its vast oil resources. The state has vast oil reserves, particularly on the North Slope, which it leverages for substantial tax revenue. Alaska imposes severance taxes on oil production, which provides a significant portion of the state’s budget. To share oil wealth with residents, Alaska offers the Permanent Fund Dividend (PFD), an annual payment to eligible residents funded by earnings from the state’s Permanent Fund, which was built with oil revenue. Alaska has no statewide sales tax, though some localities impose a sales tax. Property taxes are are set mainly at the local level, so rates vary by community.

Florida 

Known for its favorable tax climate, Florida does not impose personal income taxes. The state relies on tourism, sales taxes, and other business-related taxes to generate revenue. The state has a 6% statewide sales tax, which is boosted by high tourism activity. Florida’s local governments rely on property taxes for funding. While the state does not have unusually high property taxes, it leans on property tax revenues, especially in areas with high property values. Florida also levies a corporate income tax, which helps balance the revenue lost by not taxing individuals. All of these factors make Florida a popular destination for retirees and business owners alike. 

Nevada 

With no state income tax, Nevada benefits from a strong tourism industry, particularly from Las Vegas, Reno, and other gambling centers. These generate billions in revenue through taxes on gaming, entertainment, and tourism-related businesses. Nevada has a high sales tax rate, with a statewide base of 6.85%, and local jurisdictions can add additional rates, making the effective sales tax around 8.38% in some areas. Nevada also imposes the Modified Business Tax on wages paid by employers. This is essentially a 1.17% payroll tax that contributes to the state’s general fund. 

New Hampshire 

New Hampshire has never taxed wages, and starting in 2025, it does not tax investment income either. The state’s Interest and Dividends Tax, which was 3% for 2024, was repealed for tax periods beginning on or after January 1, 2025. That makes 2024 the last year residents owed it.

New Hampshire also has no general sales tax, so local governments fund schools and public services mainly through property taxes. The state’s effective property tax rate on owner-occupied homes is about 1.50%, among the highest in the country. The state also imposes a business profits tax, which is based on profits, and a business enterprise tax, which is based on the compensation, interest, and dividends a business pays.

South Dakota 

South Dakota has no income tax and maintains low taxes across the board. The state relies on its 4.2% statewide sales tax, along with additional local sales taxes, to generate revenue. Many cities add their own local sales tax, most often 1% to 2%, bringing the average combined rate to about 6.1%. The 4.2% state rate is temporary and is scheduled to return to 4.5% on July 1, 2027, unless lawmakers change the law. Tourism is another major revenue generator for South Dakota, particularly around attractions like Mount Rushmore, Badlands National Park, and the Black Hills. With a small population, South Dakota maintains a lower cost structure for providing public services, which also contributes to the state’s ability to function without income taxes.  

Tennessee 

As of 2021, Tennessee fully eliminated its tax on interest and dividends, making it a no-income-tax state. The state relies on sales tax and business taxes for revenue generation. To help offset this, Tennessee has one of the highest combined state and local sales tax rates in the country, with a statewide rate of 7%, and local jurisdictions can add up to 2.75%. In some areas, the total sales tax rate can be as high as 9.75%. The state also imposes a franchise tax on a business’s net worth, as well as an excise tax on corporate income. These taxes generate revenue from businesses operating in the state. Finally, Tennessee also imposes high sin taxes on alcohol, tobacco, and other goods to further supplement its budget. 

Texas 

Texas is well-known for its lack of state income taxes. Texas voters added the ban to the state constitution in 2019. It now says the legislature “may not impose a tax on the net incomes of individuals.” It offsets this by having some of the highest property taxes in the country and significant sales tax collections. Texas has a 6.25% base sales tax, and local jurisdictions can add up to 2%, bringing the total rate to 8.25% in many areas. This sales tax applies to most goods and certain services. Texas also benefits from severance taxes on oil and natural gas production, given the state’s dominance in the energy sector. These taxes provide a significant revenue stream. The state’s large economy, bolstered by industries such as energy, technology, and agriculture, helps to support public services. 

Washington 

Washington does not tax wages, but it is no longer a pure no-income-tax state. It taxes long-term capital gains above an annual threshold, and a new 9.9% tax on income over $1 million is scheduled to start in 2028. Like other states without a wage tax, Washington leans on sales tax: the state rate is 6.5%, and local additions push the combined rate over 10% in some areas. Washington also levies a business and occupation (B&O) tax, which is based on gross receipts from business activities rather than profits.

Wyoming 

With no personal or corporate income tax, Wyoming relies heavily on taxes from natural resource extraction, particularly coal, oil, and natural gas. Severance taxes on these industries provide significant revenue. Wyoming has a 4% state sales tax, with local governments allowed to add an additional amount. The overall sales tax rate in most places remains relatively low compared to other states. Finally, Wyoming’s small population allows the state to maintain lower overall public spending, which in turn helps it operate without a personal income tax. 

Does Washington Have a State Income Tax?

Washington does not have a state income tax on wages today. Washington taxes long-term capital gains above an annual standard deduction ($278,000 for 2025) at 7%, and taxable gains above $1 million at 9.9%. A 2026 law adds a 9.9% tax on income over $1 million per household starting January 1, 2028, and voters will decide whether to repeal it on November 3, 2026.

The Capital Gains Tax (in Effect Now)

• Rate: 7% on the first $1 million of taxable Washington capital gains (after the standard deduction), plus an additional 2.9% on taxable gains above $1 million, for a top rate of 9.9%. This applies starting with the 2025 tax year.
• Threshold: a standard deduction ($278,000 for 2025) that adjusts for inflation each year.
• Exempt: real estate, assets held in certain retirement accounts, and some assets used in a business, among others.
• Filing: the return is due the same day as the federal income tax return.

The Tax on Income Over $1 Million (Starts in 2028)

Engrossed Substitute Senate Bill 6346, signed March 30, 2026, imposes a 9.9% tax on Washington taxable income after a $1 million standard deduction. Married couples and state-registered domestic partners share a single $1 million deduction. The tax applies to tax years beginning on or after January 1, 2028, so the first returns are due in 2029.

What Could Change It

Two challenges are pending. Initiative 645, on the November 3, 2026 ballot, would repeal the tax and prohibit state and local taxes on individual income. Separately, a lawsuit filed in Klickitat County Superior Court in April 2026 argues the tax violates the state constitution. Until one of them succeeds, the tax remains scheduled for 2028.

Other Taxes to Weigh Before You Move

No income tax does not guarantee a lower tax bill. These states collect revenue in other ways, so savings depend on what a person earns, spends, and owns. A high earner who rents often comes out ahead, while a homeowner with a moderate income can see much of the savings go to property and sales taxes.

• Sales tax. Tennessee and Washington have two of the highest average combined sales tax rates in the country, at 9.61% and 9.57%. Alaska has no statewide sales tax, and New Hampshire has no general sales tax. For more, see sales tax vs. income tax.
• Property tax. Texas and New Hampshire rely heavily on property taxes, so homeowners there can pay far more each year than they would in a state like Tennessee.
• Retirement income. None of the nine states taxes Social Security benefits, pensions, or IRA and 401(k) withdrawals today. For other states, see the most and least tax-friendly states for retirees.
• Everything else. Insurance premiums, tolls, and fees can offset part of the savings. Our guide to the hidden costs of moving to a no-income-tax state breaks these down.

Which States Have the Lowest Income Taxes?

If none of the nine states fits, several others tax income at about 3% or less. Arizona has a flat 2.5% rate, and North Dakota’s rates run from 0% to 2.5%. Ohio moved to a flat 2.75% on income over $26,050 in 2026. Here are the lowest rates for 2026:

• Arizona: 2.5% flat
• North Dakota: 0% to 2.5%, depending on income
• Ohio: 2.75% on income over $26,050
• Indiana: 2.95% flat, plus county income taxes
• Louisiana: 3% flat
• Pennsylvania: 3.07% flat, plus local earned income taxes

A low rate is only part of the picture. Deductions, exemptions, and local taxes can make a state with a higher rate cost less for some households.

How to Change Your State of Residence for Taxes

Moving belongings is not enough. A former state can keep taxing a person as a resident until that person establishes domicile in the new state, meaning it is clearly the permanent home. States look at where a person lives, works, votes, and banks. States like California and New York are known for residency audits, especially for high earners and business owners.

• Get a driver’s license and register vehicles in the new state.
• Register to vote there and cancel the old registration.
• Move mailing address, bank accounts, insurance, and doctors, and file for a homestead exemption if the new state offers one.
• Spend most of the year in the new state and keep records, like travel dates and receipts, that show it.
• File a part-year resident return in the former state for the year of the move. It reports income earned while still living there.

Rules vary by state, and some states count the days spent there when deciding whether resident taxes are owed. For anyone who will keep working for an employer in the old state, see how taxes work when you live in one state and work in another.

Moving Doesn’t Erase State Taxes You Already Owe

Leaving a state does not cancel a balance owed to it. Back taxes, penalties, and interest stay on the books after a move, and many states have years to collect. California’s Franchise Tax Board, for example, has 20 years to collect a tax liability. A former state can also still tax income earned there before the move. How long a state can pursue a balance depends on its rules. See how long your state can collect back taxes and what happens if you don’t pay state taxes. If a balance is following you to a new state, Optima can help with state tax relief and resolution.

Frequently Asked Questions

What is the most tax-friendly state?

It depends on what a person earns, spends, and owns, but Wyoming ranks first on the Tax Foundation’s 2026 State Tax Competitiveness Index, followed by South Dakota and New Hampshire. By overall burden, Alaska comes out lowest: state and local taxes took about 4.6% of the state’s net product in 2022, the Tax Foundation’s latest estimate. Retirees can compare states in our guide to the most and least tax-friendly states for retirees.

Is it cheaper to live in a state with no income tax?

Not always. Higher sales taxes, property taxes, insurance, and housing costs can offset some or all of the savings, especially for homeowners. See the hidden costs of moving to a no-income-tax state.

Does New Hampshire have a state income tax?

No. New Hampshire does not tax wages, and it repealed its tax on interest and dividends for tax periods beginning on or after January 1, 2025.

Why doesn’t Texas have a state income tax?

The Texas Constitution prohibits it. An amendment voters approved in 2019 says the legislature “may not impose a tax on the net incomes of individuals.” Texas and its local governments rely instead on sales, property, and business taxes, plus severance taxes on oil and natural gas.

Do I still file a federal tax return if my state has no income tax?

Yes, if income requires one. State and federal income taxes are separate, so living in a no-income-tax state does not change the federal filing requirement or what is owed in federal income, Social Security, and Medicare taxes.

Which states have no sales tax and no income tax?

New Hampshire and Alaska. Neither has a general statewide sales tax or a tax on wages, although many Alaska cities and boroughs charge local sales taxes.

Is any state getting rid of its income tax?

Mississippi is cutting its income tax rate from 4% in 2026 to 3% by 2030, and state law allows further cuts after that if revenue targets are met.

Tax Help for Those Who Owe 

Moving to a state without an income tax can lower what a person owes going forward, but it will not resolve taxes already owed to the IRS or a former state. If a tax balance is following you, you do not have to handle it alone. Optima Tax Relief is the nation’s leading tax resolution firm with over $3 billion in resolved tax liabilities.

If You Need Tax Help, Contact Us Today for a Free Consultation