On … The states with no income tax are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Several other states have a relatively low tax rate across all income levels. Where you live can help or hinder your ability to make ends meet. And if you don't like the cold, you can simply use your tax savings to buy excellent heating equipment since Alaska doesn't have income tax. Good news! Most state governments in the United States collect a state income tax on all income earned within the state, which is different from and must be filed separately from the federal income tax. Although each of these states has their own reasons, the main answer is that the states have found better sources of income than income tax could bring in. Seven states have no income tax and two only tax interest and dividends. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming are the exceptions because they do not tax residents’ incomes. Weighing the tax landscape against your financial picture lets you stretch your dollars. As of 2018, the seven states that don't impose an income tax are: Wyoming, Alaska, Texas, Washington, Florida, Nevada and South Dakota. Image source: Getty Images. Nearly all states have an income tax, ranging from 1-13%. Arizona, Colorado, Illinois, Indiana, Michigan, New Mexico, North Dakota, Ohio, Pennsylvania and Utah levy tax on income under 5%. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming don't have income tax. States With No Income Taxes Alaska. State Income Tax. In addition, New Hampshire and Tennessee only tax interest and dividend income, not wages, earnings, or other income: New Hampshire residents only file a tax return if their interest and dividend income … This means that there are seven states that have no income tax whatsoever right now, and by 2021, an eighth state will be joining the ranks. One way to do this is to live in a state that does not tax your income. There are 11 states with no income tax for retirees. These states have no income tax Alaska once had an income tax, but it was repealed in 1980. The state doesn’t have a sales tax either (though some localities do charge a sales tax). Here's a roundup of the highest and lowest taxes by state. What’s more, every resident receives extra money every year from the Alaska Permanent Fund Corporation. Currently, nine states in the U.S. don’t tax wages, with two states (New Hampshire and Tennessee) phasing out all taxes on investment income and interest by the year 2025. A myriad of taxes—property, license, state and local sales, property, inheritance, estate and excise taxes on gasoline—eat away at your disposable income. Preparing for retirement? If you're a resident of one of these states, you don't need to file a return in that state. 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