Updated for tax year 2025.
While most U.S. states levy a personal income tax, a few do not have a state-level individual income tax. Whether you live in one of these states or are comparing places to work, move, or retire, it helps to know how state budgets are funded without individual income tax as a revenue source. Let’s look at which states don’t tax individual income as of 2025 and how these states fund their budgets in other ways.
For the difference between state and federal IRS rules, start with our article on state income tax vs. federal income tax.
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At a glance:
- For tax years 2025 and 2026, nine states have no state individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
- Retirement income, such as pension payments or Social Security benefits, is tax-free for retirees in these states.
- No state income tax is not the same as “no state taxes.” You may still pay significant state and local sales, property, excise, and business taxes depending on where you live.
Which states have no income tax?
Nine states currently have no state individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Note: Until 2025, New Hampshire did not tax wages but did tax interest and dividends for filers over certain thresholds. However, this tax was repealed starting with tax years beginning on or after Jan. 1, 2025.
How do states with no income tax make money?
States without an income tax fund their governments through other ways, including sales and use taxes, property taxes, excise taxes, business taxes, and fees. Each state has its own tax system and tax rules; we’ve given a quick breakdown of each “no income tax” state below.
Alaska
Income tax situation
Alaska does not have a state individual income tax, estate tax, or inheritance tax.
Sales tax
Alaska is also one of the few states without a statewide general sales tax. However, some cities, municipalities, and boroughs may impose their own local sales and use taxes (Alaska’s average combined state and local sales tax rate is 1.82%).
Property taxes and exemptions
The state relies on a mix of property taxes, business taxes, natural-resource-related revenue, and other sources. There is a statewide $150,000 property tax exemption for senior citizens and disabled veterans.
Business taxes
Corporate income tax rates in Alaska are high compared with many other states (anywhere from 0% to 9.4%), but “small corporations” may be exempt if they meet specific criteria.
Learn more
See the Division of Community and Regional Affairs page for more Alaska tax facts and tax policy.
Florida
Income tax situation
Florida has no state individual income tax and no estate or inheritance tax.
Sales tax
Because Florida depends largely on tourism, it generates much of its revenue from consumption taxes, such as sales tax. Still, it has a fairly average statewide sales tax rate of 6%. Local sales taxes can add up to 2.5% more, depending on where you live.
Property taxes
Property taxes are another significant source of income for Florida ($1,686 in state and local property tax collections per capita, according to the Tax Foundation).
Business taxes
Florida also has a corporate income tax rate of 5.5%.
Learn more
See the Florida Department of Revenue for a full list of Florida taxes and tax rates.
Nevada
Income tax situation
Nevada does not have an individual income tax.
Sales tax
Nevada is another state that relies heavily on sales tax to generate much of its revenue. The statewide sales tax rate is fairly high at 6.85%, and its average local sales tax rate can add to that in some places (with a combined average of 8.24%).
Property taxes
The state also has a lower property tax collection at $1,351 per capita.
Business taxes
Nevada does not have a traditional corporate net income tax, but it does impose a commerce tax on businesses with a state gross revenue exceeding $4 million per fiscal year.
Learn more
See the State of Nevada Department of Taxation for a full list of Nevada taxes and FAQs.
New Hampshire
Income tax situation
New Hampshire does not tax individual wages or salaries at the state level, and no longer taxes interest and dividend income following the repeal of its Interest and Dividends Tax (for tax years beginning in 2025 and later).
New Hampshire does not have an estate or inheritance tax.
Sales tax
The state does not have a statewide sales tax.
Property taxes
New Hampshire relies on property taxes for a good portion of its tax revenue ($3,660 in state and local property tax collections per capita).
Business taxes
The state’s corporate income tax rate is 7.5%.
Learn more
See the New Hampshire Department of Revenue Administration for a full list of New Hampshire taxes and how they work.
South Dakota
Income tax situation
South Dakota does not have an individual or corporate income tax, estate tax, or inheritance tax.
Sales tax
The statewide sales tax rate is on the lower side at 4.2%, while the average combined state and local sales tax rate is 6.11%.
Property taxes
South Dakota state and local property tax collections are $1,695 per capita.
Learn more
See the SD Department of Revenue for more info on individual and business taxes in South Dakota.
Tennessee
Income tax situation
Tennessee’s former tax on some investment income was fully phased out in prior years, and the state has no individual income tax on wages today.
Sales tax
Tennessee has a higher statewide sales tax of 7%, with an average combined state and local sales tax rate of 9.61%.
Property taxes
The state has very low property tax collections per capita at $976.
Business taxes
Tennessee has a 6.5% corporate income tax rate, plus gross receipts taxes for certain business activities.
Learn more
See the TN Department of Revenue for a complete list of state taxes and Tennessee tax laws.
Texas
Income tax situation
Texas has no state income taxes for individuals.
Sales tax
The state relies on a mix of sales and use tax and property taxes for the bulk of its revenue. Texas has a statewide sales tax rate of 6.25%, with an average combined state and local rate of 8.2%.
Property taxes
Texas state and local property tax collections are $2,248 per capita.
Business taxes
While Texas does not have a corporate income tax, it levies a franchise tax on many businesses.
Learn more
See the Texas Comptroller for a complete list of Texas taxes, tax rates, and related FAQs.
Washington
Income tax situation
Washington doesn’t have an individual income tax. However, the state does apply a 7% capital gains tax for high-earners on the sale or exchange of long-term capital assets (for gains in excess of $278,000 per year, as of 2025). It also has an estate tax.
Sales tax
Washington has a 6.5% statewide sales tax rate (the average combined state and local sales tax rate is 9.47%).
Property taxes
Washington state and local property tax collections are $1,999 per capita.
Business taxes
The state doesn’t have a traditional corporate income tax, but it does have other business taxes, such as the B&O tax.
Learn more
See the Washington State Department of Revenue for a full list of information about various Washington tax rules.
Wyoming
Income tax situation
Wyoming doesn’t have an individual income tax.
Sales tax
Sales tax rates are on the lower side compared with many other states — the statewide sales tax rate is 4%, with a combined average state and local sales tax rate of 5.56%.
Property taxes
Wyoming uses property taxes to make up for lower sales tax and no income tax, with state and local property tax collections of $2,152 per capita.
Business taxes
Wyoming also does not have a traditional corporate income tax.
Learn more
See the Wyoming Department of Revenue for more info about Wyoming taxes and how they work.
FAQs
The bottom line
While living in a state with no income tax may sound appealing, it doesn’t mean you’ll be able to avoid taxes altogether. No income tax states still generate revenue through sales tax, property tax, and other types of taxes, so while your overall tax burden may look different, it won’t necessarily always be lower.
No matter where you live, TaxAct can help you file your federal income tax return (and any required state income tax return) with confidence. We’ll help streamline the tax filing process and ensure you’re taking advantage of every tax credit and deduction available to you.
This article is for informational purposes only and not legal or financial advice.
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