Discover the states where you won’t pay income tax, keeping more of your hard-earned money. From Alaska to Wyoming, explore the 9 states with no state income tax and learn how they generate revenue in other ways.
9 States With No Income Tax: Keep More of Your Money
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.
Nine states in the United States do not have a state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
This means that residents of these states are not required to pay state income taxes on their earnings.
However, some of these states may still impose other taxes such as sales or property taxes.
The lack of a state income tax can be beneficial for residents, but it also means that the state relies heavily on other sources of revenue.
How States Without Income Tax Revenue
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.
The 9 States With No State Income Tax
Here are the 9 states that do not levy a state income tax, listed in alphabetical order:
Several US states have no state income tax, including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
These states rely on other sources of revenue, such as sales taxes or property taxes, to fund public services.
For example, 'Alaska generates revenue from oil production,' while 'Florida relies heavily on tourism.'
Residents in these states may face higher costs for essential services, but they also enjoy lower tax burdens.
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.
Located in the northwest corner of North America, 'Alaska' is the largest state in the United States by land area.
With a vast wilderness covering over 663,000 square miles, 'Alaska' accounts for more than half of the country's total landmass.
The state has a sparse population of around 739,795 residents, with most living in urban areas such as Anchorage and Juneau.
Alaska is known for its breathtaking natural beauty, including glaciers, fjords, and mountains.
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.
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.
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.
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.
Tennessee does not tax wage income (or any personal income), 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.
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.
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.
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.
- howstuffworks.com | 9 States With No Income Tax: Keep More of Your Money
