9 states with no income tax: The crypto investor’s guide
David Canedo, CPA
Mar 13, 2025・7 min read
If you live in the United States, the state you reside in can significantly impact your financial planning – especially if you’re a cryptocurrency investor. Most U.S. states and the District of Columbia impose their own personal income taxes, which apply to taxable income, including wages, salaries, business income, rental income, interest, dividends, and, in many cases, capital gains from cryptocurrency transactions and other investments, as well as ordinary income from activities such as mining, staking, hard forks and airdrops. This is separate from your federal income tax liability, which you must pay regardless of where you live.
However, some U.S. states either have no personal income tax or only tax certain types of investment income, such as interest and dividends.
In this guide, we’ll list the U.S. states with no personal income tax, explain how state tax laws affect your earnings, and explore whether relocating could improve your financial outlook.
What is a no-income-tax state?
In the U.S., some states don’t tax residents' personal income, including wages or salaries – these are known as “no income tax” states. Instead of collecting revenue from income taxes, these states rely on other sources to fund public services and infrastructure, such as higher sales taxes, property taxes, and various fees. While this reduces direct tax burdens on workers, it can lead to higher costs in other areas, such as housing, goods, and services.
Which states have no income taxes?
At the time of writing, these U.S. states have no personal income tax:
- Alaska has not required residents to pay state personal income taxes since the creation of the Alaska Permanent Fund in 1980. In addition, Alaska does not impose sales taxes (although several municipalities do). Supported by oil revenues, this fund helps finance public services and provides annual dividend payments to residents.
- Florida has never collected a state personal income tax. In 1968, voters approved a constitutional amendment explicitly prohibiting the state from imposing such a tax. Instead, Florida funds its budget through sales and use taxes, tourism, and a corporate income tax of 5.5% on certain businesses.
- Nevada does not tax personal income, largely because it generates significant revenue from casinos, tourism, and the entertainment industry. The state funds its operations through its Commerce Tax on businesses, sales and use taxes, hotels, and gambling activities.
- New Hampshire previously taxed interest and dividend income but not wages, salaries, or earned income. This tax was gradually reduced and fully repealed for taxable periods beginning in 2025. As a result, New Hampshire no longer collects any form of personal income tax. New Hampshire is also one of the states that does not impose sales taxes.
- South Dakota has never levied a personal income tax since achieving statehood in 1889. Instead, it relies on sales and use taxes, excise taxes, and tourism to generate revenue.
- Tennessee has never taxed wages or salaries. However, until 2021, it imposed the Hall Income Tax on interest and dividends. This tax was fully repealed for tax periods beginning in 2021, meaning Tennessee no longer taxes personal income of any kind. Tennessee relies on sales and use taxes and imposes a business tax for businesses conducting business within the state.
- Texas amended its constitution in 1993 to require a public vote before the state could introduce a personal income tax. In addition, in 2019, voters approved a ban on state income taxes with the passage of Proposition 4. Because of this, Texas remains one of the few states that constitutionally prohibits an individual income tax, funding itself through sales and use taxes and other levies.
- Washington does not tax wages or salaries but imposes a 7% tax on long-term capital gains exceeding $270,000 per year. However, this tax applies only to specific assets such as stocks, crypto, and bonds and excludes real estate, retirement accounts, and business assets. In addition, short-term losses cannot be used to offset long-term capital gains. While most residents do not pay personal income taxes, individuals with significant investment earnings may still owe taxes to the state. Washington residents can find more information on this tax on the state’s Frequently asked questions about Washington’s capital gains tax. Washington also imposes sales and use taxes.
- Wyoming generates much of its tax revenue from energy production, including coal, oil, and natural gas. Because of this, the state does not impose a personal income tax on its residents, relying instead on energy taxes and sales and use taxes.
2025
Crypto Tax
Guide is here
CoinTracker's definitive guide to Bitcoin & crypto taxes provides everything you need to know to file your 2024 crypto taxes accurately.

No state income tax vs. income tax
Income taxes are an important source of revenue for most state governments in the U.S., helping to fund public services such as education, transportation, and healthcare programs. Some states, like California, New York, and Hawaii, have relatively high personal income tax rates. Others choose not to tax individual income at all, relying more on sales taxes, property taxes, tolls, and excise taxes on goods such as gasoline, tobacco, and alcohol.
To better understand how state income tax affects earnings, consider this example:
Massachusetts applies a flat 5% state income tax on wages and long-term capital gains (assets held for more than a year). However, short-term capital gains, including cryptocurrency trading profits, are taxed at 8.5%.
Suppose you live in Massachusetts and earn $60,000 from short-term crypto trading and $40,000 in wages, totaling $100,000 in taxable income. Your federal tax liability depends on tax brackets, deductions, and credits. (For simplicity, assume you owe $17,000 in federal taxes.) Because you live in Massachusetts, you would owe:
- $5,100 in state taxes on the $60,000 in short-term capital gains (8.5%)
- $2,000 in state taxes on the $40,000 in wages (5%)
- Total Massachusetts state tax liability: $7,100
But if you lived in Florida or another state without a personal income tax, you would only owe federal taxes, which would potentially save you $7,100 in state tax payments.
This is a simplified scenario, and in reality, many factors affect both state and federal tax liability, including deductions, tax credits, sourcing rules, and local tax policies. Again, tax-free states often compensate for the lack of income tax with higher property taxes, sales taxes, or local fees, which can reduce or offset some of the savings.
Pros and cons of living in a state with no income tax
Moving to a state with no income tax might seem like a smart financial move, and there are certainly benefits. But before you pack up and go, it’s important to consider the full picture. While these states offer tax advantages, they also come with trade-offs that could affect your overall cost of living.
Pros
- Lower overall tax burden on wages and investments: In states that tax personal income, you keep a smaller portion of your earnings. By living in a no-income-tax state, you keep more of what you earn after federal taxes, which can improve your financial flexibility.
- Simplified tax filing: In states with income taxes, residents must file a personal state income tax return with their state’s revenue department. This can involve additional paperwork, filing fees, and, for those using tax professionals, potential additional costs.
- Greater long-term earning potential: With no state income tax, you can reinvest more of your earnings (after federal taxes). Even saving a few percentage points annually can compound over time, leading to significant long-term financial benefits.
Cons
- Higher sales and property taxes: States without a personal income tax often raise revenue through higher sales taxes, property taxes, and other fees. This means you may pay more when purchasing goods, services, or real estate.
- Variation in public service funding: Some states without an income tax compensate by reducing spending on public services such as roads, schools, and healthcare. However, this varies widely – some no-income-tax states maintain strong public infrastructure by relying on other funding sources.
- Potentially higher cost of living: Some no-income-tax states, including Florida, Texas, and Tennessee, have seen population booms, leading to increased demand for housing. As a result, home prices, rental costs, and general living expenses have risen, which can offset some of the savings from not paying state income tax.
How states with no income tax can benefit crypto investors
- No state taxes on cryptocurrency gains and income: While you will still owe federal taxes on crypto profits and income, such as staking and airdrops, you won’t have to pay state income tax on your earnings. If you’re currently in a high-tax state, this could result in significant savings. However, tax laws vary, so it’s important to understand how your crypto gains are classified and sourced before making a move.
- A potentially more business-friendly environment: Some states without income taxes also have pro-business tax policies, which may attract crypto startups, investors, and fintech companies. However, business regulations vary, and not all no-income-tax states have laws that favor crypto or businesses.
- Increased profitability for crypto miners: Like crypto investors, miners benefit from not paying state income tax on their mining rewards. However, other factors, such as electricity costs, regulations, and infrastructure, can impact mining profitability more than tax savings alone.
Is it worth moving into a no-income-tax state?
For many investors, relocating to one of the nine no-income-tax states may seem like an obvious choice. However, moving is a major decision, and it’s important to make sure it truly benefits you.
- Review your current tax situation: How will moving to a no-income-tax state impact your overall financial picture? If you know how much you paid in state income taxes last year, this can help estimate potential savings. However, consider your future taxable income and how state tax laws may affect it.
- Compare costs in both states: While you may save money on income and investment taxes, other expenses could rise. Many no-income-tax states rely on higher sales taxes, property taxes, or fees to generate revenue. Compare your current and expected living costs, including housing, food, and transportation, to ensure potential tax savings aren’t outweighed by higher expenses.
- Factor in timing and major financial events: Will relocating help you avoid state taxes on capital gains? In many cases, yes – but some states, like California and New York, have stringent exit laws and sourcing rules that may still tax gains tied to your previous residency. If you plan to sell investments or a business after moving, research state tax laws carefully to avoid unexpected liabilities.
- Consider the full picture: Moving to a new state is a major undertaking. It may involve buying or selling property, moving expenses, and finding a new job or business opportunities. Research your options carefully so you can make an informed decision before committing to a move.
Plan your next big crypto move with CoinTracker
Whether you’re relocating to a new state or staying put, CoinTracker can help you calculate your total tax liability and simplify tax filing. It accurately and securely tracks all your crypto trades while integrating with your wallets and exchanges. Join the millions of investors who trust CoinTracker for seamless crypto tax reporting. Start your free CoinTracker trial today.