Forty-two states and the District of Columbia levy some form of individual income tax on wages. The remaining eight states collect no income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming. Whether you live in a state that taxes your income, and how much it takes, depends on where you establish residency and, in some cases, where you work.
The Eight States With No Income Tax
If you live in one of these eight states, your paycheck is not subject to any state-level income tax on wages, salaries, or self-employment income:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Wyoming
New Hampshire is the most recent addition to this list. The state previously taxed interest and dividend income at 5%, but that tax was repealed effective January 1, 2025, after legislation signed by Governor Chris Sununu in 2023. New Hampshire residents now pay zero state income tax on any type of personal income.
Living in a no-tax state does not mean you avoid all state and local taxes. These states fund their governments through other revenue sources, most commonly sales taxes, property taxes, or severance taxes on natural resource extraction. Alaska, for instance, has no income tax and no statewide sales tax, but local governments there can impose their own sales taxes, and the state collects significant oil revenue. Florida and Texas rely heavily on sales tax and property tax to make up the difference.
How the Other 42 States Tax Income
The states that do levy income taxes fall into two broad categories: flat-rate states and graduated-rate (progressive) states.
A flat-rate state charges every taxpayer the same percentage regardless of how much they earn. Fifteen states currently use a flat income tax structure, and that number is growing. Ohio transitioned to a flat-rate income tax in 2026, joining this group. Flat rates across these states range from under 3% to around 5%, depending on the state.
The remaining states use graduated brackets, similar to the federal income tax. You pay a lower rate on your first dollars of income and progressively higher rates as your income climbs into higher brackets. Top marginal rates in graduated states range from roughly 3% to over 13%, with the highest rates typically kicking in at income levels well into six figures.
North Carolina is an example of a state actively lowering its flat rate over time, with legislation in place to gradually bring it down to 3.99%. Several other states have passed similar phased reduction plans, meaning the landscape of state income tax rates shifts each year.
What Matters If You Work Across State Lines
Your state of residence generally determines where you owe income tax. But if you live in one state and commute to a job in another, both states could technically claim the right to tax your wages. This is where reciprocity agreements come in.
Sixteen states and the District of Columbia currently participate in reciprocal tax agreements. These pacts let you pay income tax only to your home state, even if your employer is located in a different state. For example, if you live in Maryland but work in Pennsylvania, you would not owe Pennsylvania income tax because those two states have a reciprocity agreement.
If your two states do not have a reciprocity agreement, you will typically need to file a nonresident return in the state where you work and a resident return in the state where you live. Most states give you a credit on your resident return for taxes paid to the other state, so you generally are not taxed twice on the same income. But you will end up paying the higher of the two state rates between your work state and home state.
Remote workers face their own set of complications. Some states tax you based on where you are physically sitting when you do the work, while others look at where your employer is located. If you work remotely from a no-tax state for a company headquartered in a state with income tax, whether you owe that state anything depends on that state’s specific sourcing rules.
How State Income Tax Affects Your Take-Home Pay
The practical difference between living in a no-tax state and a high-tax state is significant. Someone earning $100,000 in a state with a 5% flat income tax pays roughly $5,000 per year in state income tax alone. In a state with a top marginal rate above 10%, a high earner could owe $10,000 or more on the same income. In a no-tax state, that money stays in your paycheck.
That said, total tax burden is what matters. A state with no income tax but high property taxes and sales taxes may cost you just as much as a state with a moderate income tax but lower taxes elsewhere. Where you come out ahead depends on your income level, whether you own property, and how much you spend on taxable goods and services. Comparing income tax rates alone gives you an incomplete picture.
States Currently Reducing Their Income Tax
The trend in recent years has been toward lower rates. Multiple states have passed legislation to phase down their income tax rates over several years, often contingent on revenue targets being met. North Carolina’s planned reduction to a 3.99% flat rate is one prominent example. Ohio’s shift to a flat-rate structure in 2026 consolidated what had been a graduated system.
No state has fully eliminated its income tax through a phaseout plan that is currently on the books, but several state legislatures have debated the idea. If a state you live in or are considering moving to is in the middle of a phased reduction, checking the current year’s rate before filing is worth the effort, since the rate that applied last year may no longer be accurate.