The 9 States With No Income Tax

The biggest tax break for hourly workers is living in one of the nine states with no state income tax: Florida, Texas, Washington, Nevada, Alaska, South Dakota, Wyoming, New Hampshire, and Tennessee. That means every dollar you earn in hourly wages goes straight to federal tax, FICA, and your pocket—no state slice.

For a full-time worker earning $20 an hour ($41,600/year), this means keeping more each month than they would in a state that levies an income tax on wages. Over the course of a 30-year career, that difference adds up to a substantial amount of extra take-home pay.

Real $20/Hour Comparison: No-Tax vs. Tax State

Let's look at what a $20/hour full-time worker (40 hrs/week, 52 weeks = $41,600) takes home in 2026, using the official 2026 federal standard deduction of $16,100 and federal brackets. Federal tax is about $2,812 and FICA is $3,182 in every state; only state tax varies:

Note: State income tax is complex and depends on each state's own brackets, standard deduction, and credits. The figures above use our simplified calculator model and are estimates for planning only — verify your actual liability with your state's tax authority.

Calculator: Compare States Side by Side

The tool below shows every state ranked by take-home pay at your annual income. It reveals exactly how much the state tax choice is worth each year.

Other States With (Relatively) Low Income Tax

The no-tax states get all the attention, but several states have reasonable tax rates for hourly workers. Statutory rates for 2026 include:

Colorado: Flat 4.4% state tax. Our simplified model estimates roughly $600/year on $41,600 of income.

Illinois: Flat 4.95% tax. On $41,600, our model estimates roughly $1,140/year. Illinois has a flat tax with no progressive brackets.

These are approximations — your actual bill depends on deductions and credits. Use the calculator above for a personalized estimate.

Cross-State Work: The Tax Complications

If you live in one state but work in another, things get tricky. The general rule: you pay tax to your state of residence on all income, regardless of where you earned it. But if you work in a state with an income tax, that state can also tax the income earned within its borders.

Here's how it works in practice for a few common scenarios:

Live in Texas (no tax), work in California: You'll need to file a California non-resident return (Form 540NR) and pay California tax on your CA-earned income. Texas has no income tax, so your Texas-resident return is straightforward. You won't get a credit for CA taxes on a Texas return (since Texas has no income tax to offset).

Live in California, work remotely for a Texas company: California taxes you on all income earned worldwide, even if your employer is in Texas. You'll file only a California return and pay California state tax. Texas has no income tax, so no filing is needed there.

Reciprocity Agreements: The Simplification

A handful of states have reciprocity agreements that eliminate the need for dual filing. Under these agreements, you only pay tax to your state of residence—you don't need to file in the work state. Key reciprocal pairs for 2026 include: Minnesota/North Dakota, Indiana/Kentucky, Ohio/West Virginia, Wisconsin/Illinois (partial).

No-tax states don't have reciprocity agreements because they have nothing to reciprocate. But this works out in your favor—if you live in Florida and commute to Georgia (a tax state), you'll pay Georgia tax on the income earned there, file a Georgia return, and get no credit on your Florida (non-existent) return.

One More Thing: Local Taxes

Some cities and counties impose local income taxes on top of state tax. New York City adds a city income tax (roughly 3.876% for most residents) on top of New York State tax; Philadelphia adds a 3.876% wage tax. These local taxes can add another $1,000+ per year to your tax bill depending on your income level.