The 9 States With No Income Tax: What Remote Workers Need to Know

Nine U.S. states levy no broad-based individual income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. For high earners looking to reduce their state tax burden, these nine states are the destination of choice — Florida and Texas alone drew hundreds of thousands of new residents from high-tax states between 2020 and 2024, per U.S. Census Bureau data. But "no income tax" is a more nuanced concept than it appears, and remote workers in particular need to understand the convenience rule trap before they assume their state tax bill has dropped to zero.

This article covers the nine no-tax states, what "no income tax" actually means in each, the 2025 New Hampshire change, the Washington special case, the convenience rule trap, and the other taxes that compensate for the missing income tax. We close with the math on whether a move actually pays off and the residency audit risk that every mover from a high-tax state should plan for.

The nine no-income-tax states

Each of the nine no-tax states funds state government through a different mix of alternative revenue. Alaska has had no income tax since 1980 and relies on oil royalties and the Alaska Permanent Fund; it also has no state sales tax and famously pays an annual dividend to residents (the 2024 dividend was $1,702 per eligible resident). Florida has not levied a personal income tax since 1885, when the state constitution was written to prohibit one; it relies on sales tax (6% state rate plus local options up to 8.5%), property tax, and corporate income tax, and has no estate or inheritance tax.

Nevada has no personal income tax and relies on gaming taxes, sales tax (6.85% state plus local options), and the Modified Business Tax on payroll; its Commerce Tax, enacted in 2015, applies to businesses with gross receipts above $4 million. New Hampshire has no tax on wages and repealed its interest and dividends tax effective January 1, 2025 (discussed below); it has no sales tax but levies high property taxes and a Business Profits Tax. South Dakota has had no personal income tax since 1943 and no corporate income tax either, relying on sales tax (4.2% state plus local options), property tax, and bank franchise taxes, and has become a leading jurisdiction for trust and banking structures.

Tennessee repealed its Hall Income Tax (on interest and dividends) effective January 1, 2021, completing a phaseout that began in 2016, and now has no individual income tax at all; the state relies on sales tax (7% state plus local options up to 9.55% combined, the highest in the nation) and the Franchise and Excise Tax on businesses. Texas has no personal income tax (constitutionally protected) and relies on sales tax (6.25% state plus local options up to 8.25%) and property tax, which is among the highest in the nation on a per-capita basis; the Texas Franchise Tax is a margin tax on businesses with revenue above $1.23 million.

Washington has no personal income tax on wages, a position voters have repeatedly affirmed, but enacted a 7% capital gains tax on long-term gains above $270,000 effective January 1, 2022, upheld by the Washington Supreme Court in 2023; the state also operates the WA Cares long-term care program (0.58% employee premium) and the Paid Family & Medical Leave program (0.74% employee premium), both funded through payroll withholding, and levies a Business & Occupation (B&O) gross receipts tax. Wyoming has no personal income tax and no corporate income tax, relying on mineral extraction taxes (coal, oil, natural gas), sales tax (4% state plus local options), and property tax, and is attractive for retirees and trust structures.

What "no income tax" actually means

"No income tax" generally means no tax on wage income. The nine states listed above do not withhold state income tax from wages, do not require an annual state income tax return for wage earners, and do not tax Social Security benefits, pension income, or (in most cases) investment income. The exceptions matter: Washington taxes long-term capital gains above $270,000, and New Hampshire only recently repealed its interest and dividends tax effective January 1, 2025.

Some "no income tax" states have other narrowly scoped taxes that affect specific types of income. New Hampshire, before the 2025 repeal, taxed interest and dividend income at 3% for taxpayers with more than $2,400 of such income ($4,800 for joint filers). Tennessee\'s former Hall Income Tax similarly targeted investment income before its 2021 repeal. These narrow taxes are the reason "no income tax" requires nuance — the headline may be true for wages but not for investment income.

The nine no-tax states compensate for the missing income tax revenue through other channels. Sales tax rates tend to be higher than the national average (Texas at 6.25%, Florida at 6%, Tennessee at 7% plus local options). Property tax rates vary widely, with Texas and New Hampshire at the high end. Business taxes (Texas franchise, Washington B&O, Nevada Commerce) also contribute significantly. The total tax burden in no-tax states is not zero; it is simply distributed differently.

New Hampshire\'s 2025 change

New Hampshire completed the repeal of its Interest and Dividends Tax effective January 1, 2025. The phaseout began in 2022, when the rate dropped from 5% to 4%, continued with a drop to 3% in 2023, then to 2% in 2024, and finally to 0% in 2025. The repeal was enacted by the New Hampshire legislature in 2021 (House Bill 2) and reaffirmed in subsequent budget cycles. As of the 2025 tax year, New Hampshire residents owe no state tax on wages, interest, or dividends.

The repeal makes New Hampshire the newest addition to the no-income-tax list in decades. The change is particularly significant because New Hampshire also has no sales tax, making it the only state besides Alaska and Delaware with neither a broad-based income tax nor a broad-based sales tax. New Hampshire funds state government through business taxes (the Business Profits Tax and Business Enterprise Tax), meals and rooms taxes, and property tax, with the property tax burden among the highest in the nation.

For remote workers considering a move to New Hampshire, the 2025 repeal removes the last argument against the move on tax grounds. The state still has high property taxes, particularly in towns with limited commercial tax base, but the combination of no income tax and no sales tax is unique outside Alaska. New Hampshire also has a residency audit framework that, while less aggressive than California or New York, still requires documentation of domicile change.

Washington\'s special case

Washington presents a unique situation among the no-income-tax states because of its 7% capital gains tax on long-term capital gains above $270,000, enacted under Engrossed Substitute Senate Bill 5096 and effective January 1, 2022. The Washington Supreme Court upheld the tax as constitutional in its 2023 ruling in Quint v. Washington, rejecting challenges that the tax was an unconstitutional income tax (which would require a constitutional amendment) and instead classifying it as an excise tax on the sale of capital assets.

The capital gains tax applies to long-term gains from the sale of stocks, bonds, business interests, and other intangible assets above the $270,000 annual threshold, which is indexed for inflation. Real estate is exempt (covered by Washington\'s real estate excise tax instead). Retirement account holdings are also exempt. The tax raised approximately $849 million in its first full year of collection, exceeding state revenue forecasts.

For remote workers in Washington, the implication is that the state is no longer truly "no income tax" for high earners with significant investment portfolios. A Washington resident selling a business or realizing a large stock gain may face a 7% state tax on the gain above $270,000. The tax is separate from federal capital gains tax and does not affect wage income, but it complicates the picture for high-net-worth residents.

How no-tax states affect remote workers

A remote worker living in a no-tax state and working for an employer in another state faces a state income tax question that depends on the work state\'s rules. If the work state does not enforce the convenience rule, the work state cannot tax the wages because the work is not performed there and the worker is not a resident. The worker owes no state income tax and files no state return.

Consider a Texas resident working remotely from Austin for a Colorado employer. Colorado does not enforce the convenience rule, and the worker performs all work in Texas. Colorado cannot tax the wages because the income is not Colorado-source. The employer should withhold zero Colorado tax, and the worker files no state return. The worker pays federal tax, FICA, and Texas sales and property taxes, but no state income tax.

The picture changes if the work state enforces the convenience rule. A Florida resident working remotely for a New York employer faces New York\'s aggressive convenience rule, which treats the wages as New York-source because the remote work is for the employee\'s convenience rather than employer necessity. New York withholds tax as if the worker commuted to Manhattan. The worker files a New York non-resident return, pays New York tax at non-resident rates, and cannot claim a credit against Florida tax because Florida has no income tax to credit against.

The "convenience rule" trap

The convenience rule is the single most important rule for remote workers in no-tax states. The eight states that enforce some version of the rule are Alabama, Connecticut, Delaware, Nebraska, New Jersey, New York, Oregon, and Pennsylvania. New York is the most aggressive enforcer; the other states apply the rule with varying degrees of strictness and scope.

The trap is that a worker who moves from New York to Florida expecting to pay no state income tax may discover that the New York employer\'s withholding continues unchanged. The worker must either convince the employer that the move is for employer necessity (rare and fact-specific) or accept that New York will continue to tax the wages. The only clean escape is to change employers to one based in a state that does not enforce the convenience rule.

Connecticut has retaliated with its own rule that effectively taxes Connecticut residents working remotely for New York employers on the same wages, then credits the New York tax. The result is double-counting that benefits Connecticut at New York\'s expense. Other states have considered similar retaliatory rules but have not enacted them. For a deeper dive, see our convenience rule guide and our New York-specific deep dive.

Other taxes to consider

The absence of an income tax does not mean the absence of state and local taxes. Property taxes in Texas average 1.74% of home value annually (Texas Comptroller data), well above the national average. New Hampshire property taxes average 2.18% (New Hampshire Department of Revenue Administration), the third-highest in the nation. Nevada and Florida property taxes are closer to the national average but have risen with the housing market.

Sales taxes in no-tax states tend to be higher than the national average. Tennessee has the highest combined state and local sales tax rate in the nation at 9.55% on average, per the Tax Foundation. Louisiana, Arkansas, and Washington also have high combined rates. Texas at 8.20% combined and Florida at 7.02% combined are above the national median. The sales tax burden falls disproportionately on lower-income households because consumption is a larger share of income.

Business taxes in no-tax states can affect remote workers who operate side businesses or have self-employment income. Washington\'s B&O tax applies to gross receipts with no deduction for expenses, ranging from 0.138% to 1.5% depending on industry. Texas\'s franchise tax is a margin tax on businesses with revenue above $1.23 million, calculated at 0.375% (retail) or 0.375% to 0.75% (other industries). Nevada\'s Commerce Tax applies to businesses with Nevada gross receipts above $4 million, with industry-specific rates.

The SUI side: employers still register in no-tax states

Employers with employees in no-tax states must still register for State Unemployment Insurance (SUI) in those states. SUI is a federal-state program under the Federal Unemployment Tax Act (FUTA); every state operates an SUI program, including the no-income-tax states. Employers pay SUI at state-specific rates on state-specific wage bases, and the rates are experience-rated based on the employer\'s history of layoffs and benefit charges.

SUI rates in no-tax states vary widely. Texas SUI rates for 2025 range from 0.31% to 6.31% on the first $9,000 of wages per employee, per the Texas Workforce Commission. Florida SUI rates range from 0.1% to 5.4% on the first $7,000, per the Florida Department of Revenue. Washington SUI rates range from 0.11% to 5.59% on the first $63,200 (Washington has one of the highest SUI wage bases in the country), per the Washington Employment Security Department.

The four-factor test for SUI localization determines which state receives SUI for multi-state employees. A Texas resident working entirely in Texas for a Colorado employer has SUI paid to Texas, not Colorado. An employee split across two states may have SUI paid to whichever state the work is localized in under the four-factor analysis. The absence of an income tax in the work state does not affect SUI; the two tax systems are separate. See our SUI 4-factor test guide for the complete framework.

Should you move to a no-tax state?

The decision to move to a no-tax state should be made with a full accounting of the costs and benefits, not just the headline income tax rate. The math has four components: state income tax savings, change in property tax, change in sales tax, and change in cost of living. For high earners, the income tax savings typically dominate; for moderate earners, the cost-of-living change often dominates.

Consider a New York City resident earning $400,000 who moves to Austin, Texas. New York State and New York City combined income tax at that income level is approximately $40,000 to $45,000; Texas has no income tax, so the savings is the full $40,000-plus. Texas property taxes on a comparable home may be $8,000 to $15,000 higher than New York property taxes, and sales tax differences add another $1,000 to $3,000. The net tax saving is roughly $25,000 to $35,000 per year. Cost of living is the wild card — Austin housing costs have risen sharply with the influx of movers, and property insurance in Texas and Florida has also risen sharply. For a worker in the highest brackets moving from California or New York, the math usually works; for a moderate earner moving from a low-tax state, it often does not.

Residency audit risk

The most consequential risk for movers from high-tax states is the residency audit. California, New York, and New Jersey all maintain dedicated residency audit teams and have expanded them in recent years. The Tax Foundation has documented rising audit rates for movers from these states, particularly for high earners. The California Franchise Tax Board, the New York Division of Taxation, and the New Jersey Division of Taxation each publish detailed residency audit guidelines.

The audit focus is whether the move genuinely changed domicile or was a sham to escape tax. Auditors look at the five-to-seven domicile factors: home, family, business, time, items, and legal ties. A mover who keeps their prior residence, returns frequently, retains club memberships, and keeps the prior driver\'s license will lose the audit. A mover who sells the prior residence, severs ties, and establishes new ones will win.

Day-count documentation is the most common point of failure. Auditors demand concrete evidence of where you were on each day of the tax year. Credit card statements, cell phone tower records, airline boarding passes, toll records, and hotel receipts are the gold standard. A reconstructed diary prepared after the audit notice carries little weight. Maintain day-count evidence for at least seven years after the move, and consult a multi-state tax professional before the move to plan the documentation strategy.

What to do next

If you are considering a move to a no-tax state, start by running your numbers through our multi-state withholding calculator with both your current state and the destination state. The calculator will show the income tax saving, the change in withholding, and the convenience rule impact if your employer is in a convenience-rule state.

Then consult a multi-state tax professional — not a generalist, but someone whose practice includes residency audits. The cost of the consultation is small compared to the cost of a failed residency audit. Read our resident vs. non-resident guide for the residency framework, and our 2025 state tax bracket reference for the rates you would face in each potential destination state.

Finally, if your employer is in a convenience-rule state, understand that the move may not reduce your state tax bill at all unless you also change employers. The convenience rule is the single biggest trap for movers to no-tax states, and it is the first thing a tax professional will ask about.