No-Income-Tax States: What an Owner Actually Saves
What moving a business or an owner to Florida, Texas, Tennessee, or another no-income-tax state really changes, the taxes those states collect instead, and the income that stays taxable elsewhere.
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Nine states impose no personal income tax on wages: Florida, Texas, Tennessee, Nevada, South Dakota, Washington, Wyoming, Alaska, and New Hampshire. For an owner, the saving is real on pass-through profit, salary, and investment income — but each state collects something else instead, income sourced to other states stays taxable there, and the move must be genuine.
On this page
What do these states tax instead?
| State | No tax on | Taxes they do impose |
|---|---|---|
| Florida | Individual income | Corporate income tax on C corporations; sales tax; property tax; documentary stamp tax; tangible personal property tax on business equipment |
| Texas | Individual and corporate income | Franchise (margin) tax on most entities above a threshold; high property tax; sales tax |
| Tennessee | Individual income | Franchise and excise taxes on entities including LLCs; sales tax among the highest |
| Nevada | Individual and corporate income | Commerce tax on gross receipts above a threshold; modified business tax on payroll; sales tax |
| Washington | Individual income (except a 7 percent tax on long-term capital gains above an annual deduction — $278,000 for 2025 — plus 2.9 percent more, 9.9 percent in total, on gains above $1 million from 2025) | Business and occupation tax on gross receipts; sales tax; estate tax; a 9.9 percent tax on income above $1 million, enacted in 2026 to start in 2028 and facing a November 2026 repeal initiative and court challenges |
| South Dakota, Wyoming | Individual and corporate income | Sales and property taxes |
| Alaska | Individual income and state sales tax | Corporate income tax; local sales taxes |
| New Hampshire | Wages, and since 2025 interest and dividends (that tax was repealed for tax periods beginning after December 31, 2024) | Business profits and business enterprise taxes, which reach sole proprietorships and pass-through entities above filing thresholds |
What does the owner save?
State income tax on pass-through profit and salary — often 4 to 13 percent in the former state — plus state tax on capital gains, retirement withdrawals, and investment income. For an S corporation owner netting $400,000, leaving a 6 percent state saves roughly $24,000 a year, against higher property taxes or a franchise tax in the new state.
What stays taxable elsewhere?
- Business income apportioned to states where the company still has customers, employees, or property
- Wages for days worked in other states, and all wages under a convenience-of-the-employer rule in states such as New York
- Rental income and gains on real estate located in other states
- Deferred compensation and stock options earned while working in the former state, sourced back to it — except deferred compensation that counts as retirement income under 4 U.S.C. §114 (below)
- Pension income is the exception: 4 U.S.C. §114 bars the former state from taxing a nonresident's distributions from qualified plans, IRAs, SEPs, 403(b) and 457 plans, and nonqualified deferred compensation paid in substantially equal installments over life or at least 10 years
Florida's lack of an income tax also means no credit for taxes paid to other states; that tax is simply a cost.
What does the former state check?
Where you spend your days, where your home and family are, where your business is run from, and whether the move was permanent. High-tax states audit departures of high earners, and the first year's return is where the facts are decided.
Frequently asked questions
Does my S corporation stop paying state tax when I move?
Only on income apportioned to your new state; income from operations in the old state remains taxable there through nonresident filings.
Does a no-income-tax state tax my Canadian pension?
Not the state; the federal government taxes it, and under Article XVIII of the U.S.–Canada treaty Canada may also tax periodic pension payments at up to 15 percent of the gross amount.
Is Florida's corporate income tax a problem for small business?
Only for C corporations — including LLCs taxed as corporations — with Florida net income above the $50,000 exemption, and for S corporations on income taxed federally at the entity level; other LLCs, other S corporation income, and sole proprietors pay none.
Can I keep my business entity in the old state and just move myself?
Yes, but the entity's apportioned income there stays taxable, and the old state may argue the business is still managed from there.
Official sources
The Florida Department of Revenue explains: “Florida does not impose personal income tax, inheritance tax, gift taxes, or tax on intangible personal property.” — Florida Department of Revenue, Tax Information for New Residents (GT-800025), https://floridarevenue.com/Forms_library/current/brochure/gt800025.pdf
The statute provides: “No State may impose an income tax on any retirement income of an individual who is not a resident or domiciliary of such State (as determined under the laws of such State).” — U.S. Code, 4 U.S. Code § 114 - Limitation on State income taxation of certain pension income, https://www.law.cornell.edu/uscode/text/4/114
Next step
Fairlight Accounting handles U.S. domestic, cross-border (U.S.–Canada), and international tax returns, plus bookkeeping, payroll, and CFO advisory. Our U.S. Tax Desk models the saving against the new state's other taxes and the income that stays sourced elsewhere before an owner moves. See pricing or book a free fit call.
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