Running payroll in states with no income tax is genuinely simpler than running it in the other 41 — but "simpler" is not "different in kind." The federal half of every paycheck is identical in Dallas and Philadelphia, and two of the nine no-tax states still pull real money out of employee checks under other program names. The useful question is never "does this state have an income tax," it is "which of the four or five separate withholding obligations apply to this employee, in this state, this year."
The nine states with no income tax on wages
For payroll purposes, nine states impose no state income tax withholding on wages:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Two are recent additions to the clean list, which is why older articles still flag them. Tennessee's Hall income tax was "imposed only on individuals and other entities receiving interest from bonds and notes and dividends from stock" — never on salaries and wages — and it "was repealed for tax periods that begin on January 1, 2021, or later" (Tennessee Department of Revenue, Hall Income Tax). New Hampshire's Interest and Dividends Tax has likewise been repealed, effective for taxable periods beginning after December 31, 2024 (New Hampshire Department of Revenue Administration). Neither tax ever touched a paycheck.
One live asterisk remains. Washington's Department of Revenue states that "the Washington state legislature recently enacted an income tax on individuals with an annual adjusted gross income of $1,000,000 or more" (Washington Department of Revenue, Income tax). That is assessed on the individual rather than published as an employer withholding table, so it does not change an ordinary paycheck — but if you pay at that level, read the department's current guidance rather than the old shorthand.
What payroll withholds in every state, no exceptions
None of the following changes when you cross a state line.
FICA. Social Security is 6.2% from the employee and 6.2% from the employer; Medicare is 1.45% from each side (IRS Topic No. 751). Social Security stops at a wage base that resets annually — $184,500 for 2026 earnings (IRS Topic No. 751, 2026) — while Medicare has no ceiling at all. Once an employee's wages pass $200,000 in a calendar year you also withhold an additional 0.9% Additional Medicare Tax on the excess, with no employer match (IRS Topic No. 751).
Federal income tax. Computed from the employee's Form W-4 using the methods in Publication 15-T: the percentage method for automated payroll systems, the wage bracket method for manual ones, and a computational bridge for pre-2020 W-4s still on file (IRS Publication 15-T, 2026). Nothing in that calculation references the state.
Employer-only federal tax. FUTA is 6.0% on the first $7,000 paid to each employee during the year, and employers who pay their state unemployment tax in full and on time can claim a credit of up to 5.4% of FUTA taxable wages, which brings the effective federal rate to 0.6% (IRS Topic No. 759).
This article is general information, not tax or legal advice — confirm your own situation with a qualified professional or with the agency involved.
Payroll in states with no income tax: a worked example
Take a $2,000 gross paycheck — same employee, same W-4 — once in Texas and once in Pennsylvania. Pennsylvania is a useful comparison because it withholds at a flat rate, which keeps the arithmetic visible.
Identical on both checks:
- Social Security: 6.2% of $2,000 = $124.00
- Medicare: 1.45% of $2,000 = $29.00
- Federal income tax: the same figure either way, straight out of Publication 15-T
Texas state income tax withheld: $0.00.
Pennsylvania: employers "are required to withhold PA personal income tax at a flat rate of 3.07 percent of compensation from resident and nonresident employees earning income in Pennsylvania" (Pennsylvania Department of Revenue, Employer Withholding). That is 3.07% of $2,000 = $61.40.
So the entire difference on this check is one line worth $61.40 — a meaningful line, not a transformation of payroll. Note what the flat-rate example hides, though: in a graduated-bracket state the equivalent line requires that state's own withholding tables and its own treatment of allowances or exemptions. That is why withholding has to be built state by state rather than region by region.
States with no income tax that still take payroll deductions
Two of the nine deduct from employee paychecks under headings other than "income tax." Missing these is the most common payroll error in this group.
Alaska is one of the few states where employees themselves contribute to unemployment insurance. For 2026 the employee rate is 0.50% on wages up to a taxable wage base of $54,200 (Alaska Department of Labor and Workforce Development, 2026 unemployment insurance tax rates). On the $2,000 check above that is $10.00 withheld — a state payroll deduction in a state with no income tax.
Washington funds two programs out of employee wages. Paid Family and Medical Leave costs 1.13% of gross wages in 2026, split so that employees pay 71.43% of the premium and employers pay 28.57%; employers with fewer than 50 employees owe no employer share but must still collect the employee portion (Washington Employment Security Department, 2026 premium rate). WA Cares adds "0.58% of an employee's gross wages," paid entirely by the employee, and unlike Paid Leave it is not capped at the Social Security taxable maximum (WA Cares Fund, employer information).
Run the same $2,000 check through Washington:
- Paid Leave: 1.13% of $2,000 = $22.60 total premium; the employee's 71.43% share = $16.14
- WA Cares: 0.58% of $2,000 = $11.60
That is $27.74 of state-program withholding on a paycheck with zero state income tax — and both amounts have to appear correctly, and separately, on the pay statement.
Employer-side state payroll taxes exist in all 50
State unemployment tax is an employer obligation everywhere, and it has nothing to do with whether the state taxes wages. Texas illustrates it cleanly: employers "pay taxes on the first $9,000 per employee, per year" (Texas Workforce Commission), at a rate tied to the employer's industry average or its own experience rating. Rates and wage bases differ in every state, most reset annually, and an experience-rated employer's number is specific to that account.
Beyond unemployment tax, a no-income-tax state still generally expects you to register with its workforce agency, report new hires, and carry workers' compensation coverage on that state's terms. Dropping a withholding line does not drop state payroll registration.
Where the employee lives can undo the simplicity
The most expensive assumption here is that the employer's state controls. It does not, on its own: withholding follows where the work is performed and, separately, where the employee is a resident. A remote employee living in a state that taxes wages does not stop owing that state's tax because the employer is headquartered in Florida or Nevada, and some state pairs have reciprocity agreements that change which state you withhold for. Before setting a remote worker's withholding, read the published guidance of both the work state and the resident state — those agencies, not a general article, are the authority for that pairing.
The year-end paperwork is federal, so it is the same everywhere
Nothing about a no-tax state shrinks the year-end stack. Forms W-2 must be provided to employees and filed with the SSA by January 31, and Form 1099-NEC must be filed with the IRS and furnished to recipients by January 31 (IRS, Employment Tax Due Dates). Form 941 is due by the last day of the month following the end of each quarter, and Form 940 reports the prior year's FUTA wages after year-end (IRS, Employment Tax Due Dates). The one item that genuinely disappears in the nine states is the state income tax withholding reconciliation return.
UWageCo can produce the documents in that stack — pay statements, contractor payment statements, W-2s and 1099s — from the wage and hour figures you supply, with state handling that reflects whether the work state withholds income tax at all. It computes federal withholding from Publication 15-T plus FICA, and state withholding from each state's own published formulas, at $27.54 per payroll statement with no subscription. UWageCo prepares the documents; you file them with the IRS, the SSA, and any state agency. Every document it generates carries a disclosure that the information was supplied by the customer and has not been independently verified.
If you remember one thing: "no state income tax" describes exactly one line on a pay stub. FICA, federal withholding, FUTA, state unemployment tax, and — in Alaska and Washington — real employee deductions all survive the state line intact.