Live Tax-Free? These 9 States Have No Income Tax

Did you know that nine states have chosen to forgo income taxes entirely, relying on other revenue sources to fund their governments and services. 

If you live in these states, you probably experience seeing your entire paycheck hit your bank account without a state tax deduction. But, what are the trade-offs? Let’s look into the surprising list of nine US states that let you live income tax-free.

1. Alaska

Live Tax-Free? These 9 States Have No Income Tax » fairbanks alaska dp98463852
Image Credit: sepavone/Deposit Photos
  • Oil Revenue: Alaska is rich in natural resources, particularly oil. The state receives significant revenue from oil production taxes and royalties.
  • Permanent Fund Dividend: Part of the state’s oil wealth is distributed to residents annually through the Alaska Permanent Fund Dividend, a program that provides every eligible resident with a share of the state’s oil revenue.(ref)
  • Tourism: Alaska’s stunning natural beauty attracts tourists from around the world, contributing to the state’s economy through sales taxes and other spending.

2. Florida

Live Tax-Free? These 9 States Have No Income Tax » amelia island florida ss2243290537
Image Credit: Dianela Urdaneta/Shutterstock
  • Tourism: Florida’s warm climate, beaches, and theme parks make it a major tourist destination. Tourism generates significant revenue through sales taxes, hotel taxes, and other tourism-related spending.
  • Property Taxes: Florida has a high population of retirees and second-home owners, leading to a substantial property tax base.
  • Sales Taxes: Florida has a relatively high state sales tax rate at 6%, which generates a significant portion of the state’s revenue.(ref)

3. Nevada

Live Tax-Free? These 9 States Have No Income Tax » las vegas nevada ss793194880
Image Credit: Lucky-photographer/Shutterstock
  • Gaming: Nevada is synonymous with gambling and entertainment. The state’s casinos and gaming industry provide a massive source of revenue through gaming taxes and fees.
  • Sales Taxes: Nevada also has a relatively high base state sales tax rate at 6.85%, which contributes to the state’s overall revenue. The total sales tax rates differ from one county to another.(ref)
  • Tourism: Las Vegas and other tourist destinations in Nevada attract visitors from around the world, generating revenue through sales taxes and other spending.

4. New Hampshire

Live Tax-Free? These 9 States Have No Income Tax » blair covered bridge new hampshire ss1314016280
Image Credit: B Brown/Shutterstock
  • Property Taxes: New Hampshire relies heavily on property taxes to fund its government services. The state has a high property tax rate, and this generates a significant portion of its revenue.
  • Business Taxes: New Hampshire also imposes various business taxes, including the Business Profits Tax and the Business Enterprise Tax, which contribute to the state’s revenue.
  • Fees and Charges: The state generates revenue from various fees and charges, such as vehicle registration fees, hunting and fishing licenses, and court fees.
  • Limited Income Tax: New Hampshire does not tax earned income from wages and salaries but does tax interest and dividends at a 5% rate.(ref)

5. South Dakota

Live Tax-Free? These 9 States Have No Income Tax » south dakota dp215982992
Image Credit: paulbradyphoto/DepositPhotos
  • Sales Taxes: South Dakota has a broad-based sales tax at 4.2% that applies to most goods and services.(ref) This tax generates a significant portion of the state’s revenue.
  • Tourism: The state’s natural beauty, including the Black Hills and Mount Rushmore, attracts tourists from around the country. Tourism contributes to the state’s economy through sales taxes and other spending.
  • Agriculture: South Dakota has a strong agricultural sector, and agriculture-related taxes and fees contribute to the state’s revenue.

6. Tennessee

Live Tax-Free? These 9 States Have No Income Tax » fort campbell tennessee wc
Image Credit: LouisvilleUSACE, Public domain, via Wikimedia Commons
  • Sales Tax: Tennessee has a high state sales tax rate of 7%, and local taxes can add to this.(ref) This generates a substantial portion of the state’s revenue.
  • Excise Taxes: The state levies excise taxes on items like gasoline, tobacco, and alcohol, which contribute to its income.
  • Business Taxes: Businesses in Tennessee pay various taxes, including a franchise tax and excise tax, that contribute to the state’s coffers.
  • No Tax on Earned Income: Tennessee does not tax earned income from wages and salaries. However, there is a Hall income tax on interest and dividends.(ref)

7. Texas

Live Tax-Free? These 9 States Have No Income Tax » houston texas dp49662861
Image Credit: Hackman/Deposit Photos
  • Property Taxes: Property taxes play a major role in funding Texas’s government services, including education and infrastructure.
  • Sales Taxes: The state has a 6.25% state sales tax, and local taxes can add up to 2% to this rate.(ref)
  • Oil and Gas Production Taxes: Texas is a major producer of oil and natural gas, and the taxes levied on these industries contribute significantly to the state’s revenue.
  • Franchise Tax: Businesses in Texas pay a franchise tax based on their revenue.(ref)

8. Washington

Live Tax-Free? These 9 States Have No Income Tax » washington dc wc
Image Credit: Carol M. Highsmith, Public domain, via Wikimedia Commons
  • Sales Tax: Washington has a relatively high state sales tax rate of 6.5%, and local taxes can increase this further.(ref)
  • Business and Occupation Tax: Businesses in the state pay a Business and Occupation (B&O) tax based on their gross receipts.
  • Property Taxes: Property taxes also contribute to the state’s revenue, though they are not as high as in some other states.
  • Capital Gains Tax: Washington does not have a traditional income tax but does levy a 7% capital gains tax on high earners with long-term capital gains exceeding $250,000 annually.(ref)

9. Wyoming

Live Tax-Free? These 9 States Have No Income Tax » cody wyoming dp480907406
Image Credit: photopicstock/Deposit Photos
  • Mineral Extraction Taxes: Wyoming is rich in natural resources, particularly coal, natural gas, and oil. The state levies severance taxes on these resources when they are extracted, generating significant revenue.
  • Sales Taxes: The state has a 4% state sales tax, with local taxes adding up to 2% in some areas.(ref)
  • Property Taxes: Property taxes contribute to Wyoming’s revenue, but the state’s property tax rates are relatively low.

The absence of a broad-based state income tax does not necessarily mean a lower overall tax burden. Residents in these states may pay higher sales or property taxes, or they may face higher fees for certain services.

The lack of income tax can sometimes lead to limitations in government services or infrastructure development.

Nancy Maffia » nancy
Nancy Maffia
Author & Editor | + posts

Nancy received a bachelor’s in biology from Elmira College and a master’s degree in horticulture and communications from the University of Kentucky. Worked in plant taxonomy at the University of Florida and the L. H. Bailey Hortorium at Cornell University, and wrote and edited gardening books at Rodale Press in Emmaus, PA. Her interests are plant identification, gardening, hiking, and reading.