States Without an Income Tax
Currently, the 7 states listed below do not tax their residents' income. If you are an official resident of one of these 7 states, you don't need to file a state tax return for that state:
- South Dakota
In addition, 2 states only tax interest and dividend income, not earnings:
- New Hampshire only collects tax on interest and dividend income exceeding $2,400 ($4800 for joint filers) plus additional exemptions for age, blindness and disability. More info
- Tennessee only collects tax on interest income from bonds, notes and dividends from stock exceeding $1,250 ($2,500 for joint filers). More info
However, if you earned income by working in one of these 9 "nontaxable" states but you are a resident of a "taxable" state that does collect income tax, your resident state will tax you on the income you earned in the "nontaxable" state.
Example – Fred, who lives in California, worked on an oil rig in Texas and earned $100,000. Although Fred doesn't need to file a tax return in Texas, he still needs to report the $100,000 on his California tax return even though it was earned in Texas, which doesn't have an income tax.
Similarly, if you're a resident in one of the nine "nontaxable" states but you earned money in a "taxable" state, you still need to file a return in the "taxable" state.
Example – Linda, a Texas resident, earned $64,000 while working in California as a software developer. Because she earned the money in California, she'll need to file a California return to report the $64,000 even though she lives in Texas, which doesn't have an income tax.