The 9 states with no income tax
Self-employed workers in these nine states owe only federal taxes — no state income tax on their freelance or gig income. This creates a significant advantage that compounds as income grows.
Note: Washington state enacted a 7% capital gains tax on gains over $262,000 (2025 threshold), but this does not apply to ordinary self-employment income from services. Regular freelance and gig income in Washington remains untaxed at the state level.
Complete 50-state + D.C. reference table
Sorted alphabetically. The "Notable Rule" column calls out anything self-employed workers specifically need to know — SDI obligations, city taxes, alternative minimum taxes, or quirks that catch freelancers off guard. Use the SE Tax Calculator to run your specific numbers.
| State | 2025 Income Tax Range | Notable Rule for Self-Employed | SE-Friendly |
|---|---|---|---|
| Alaska | 0% | No state income or sales tax. Permanent Fund Dividend paid annually to residents. | ⭐⭐⭐ |
| Alabama | 2% – 5% | Local occupational taxes apply in Birmingham and several other cities — check local rules if operating there. | ⭐⭐ |
| Arizona | 2.5% flat | Flat 2.5% rate as of 2023. One of the lowest flat-rate states — favorable for higher-income freelancers. | ⭐⭐ |
| Arkansas | 2% – 4.4% | Top rate reduced from 4.7% to 4.4% in 2024. State generally conforms to federal SE deductions. | ⭐⭐ |
| California | 1% – 13.3% | Highest top rate in the US. CA does not conform to the federal SE tax deduction on state returns. SDI (Disability Insurance) is optional for self-employed via voluntary plan. Quarterly schedule is 30/40/0/30 — different from federal. Full CA guide → | ⭐ |
| Colorado | 4.4% flat | Flat rate. TABOR refunds can reduce effective rate in high-revenue years. No city income taxes on SE income in most Colorado cities. | ⭐⭐ |
| Connecticut | 3% – 6.99% | Credit for taxes paid to other states. Residents working in NYC may face both CT and NYC taxes — complex situation requiring a CPA. | ⭐ |
| Delaware | 2.2% – 6.6% | No sales tax. Popular LLC formation state, but LLC formation state doesn't determine your income tax — you pay income tax where you live and work. | ⭐⭐ |
| D.C. | 4% – 10.75% | High top rate. D.C. residents cannot deduct D.C. taxes on a federal return the same way state taxes are handled — unique non-state status creates some quirks. | ⭐ |
| Florida | 0% | No individual income tax. No tax on self-employment income, LLC profit, or capital gains at state level. See TX guide for similar details → | ⭐⭐⭐ |
| Georgia | 5.49% flat | Moving to a flat 5.49% rate in 2024 (from graduated brackets), dropping further to 4.99% by 2029. Favorable trajectory for self-employed. | ⭐⭐ |
| Hawaii | 1.4% – 11% | Second-highest top rate in the US after California. General Excise Tax (GET) of 4–4.5% applies to gross business income — this is not an income tax but functions like one for self-employed. Factor GET into total Hawaii tax burden. | ⭐ |
| Idaho | 5.8% flat | Flat 5.8% rate as of 2023 (reduced from graduated brackets). Generally conforms to federal SE treatment. | ⭐⭐ |
| Illinois | 4.95% flat | Flat rate regardless of income. Chicago has no separate city income tax on SE income. Illinois does not tax retirement income — relevant for freelancers planning retirement accounts. | ⭐⭐ |
| Indiana | 3.05% flat | One of the lowest flat income tax rates in the country. County income taxes (0.5%–2.9%) also apply based on county of residence — add your county rate. | ⭐⭐ |
| Iowa | 4.4% – 6% | Iowa is reducing rates — moving toward a 3.9% flat rate by 2026. Currently graduated. Generally conforms to federal deductions. | ⭐⭐ |
| Kansas | 3.1% – 5.7% | Two brackets. Wichita and other cities do not impose separate city income taxes on self-employed. Standard conformity to federal SE deduction. | ⭐⭐ |
| Kentucky | 4.5% flat | Flat 4.5% rate (reduced from 5% in 2023). Louisville/Jefferson County has a 2.2% occupational tax that applies to net profits from self-employment in the county. | ⭐⭐ |
| Louisiana | 1.85% – 4.25% | Rates reduced in 2025 (from previous 1.85–4.25% structure). No major city-level income taxes on SE income. | ⭐⭐ |
| Maine | 5.8% – 7.15% | Three brackets. Conforms to federal SE deductions. No city income taxes. | ⭐ |
| Maryland | 2% – 5.75% | County income taxes (2.25%–3.2%) stack on top of state rate — effective combined rate can reach 8.95% at top bracket. Montgomery and Prince George's Counties have the highest county rates. | ⭐ |
| Massachusetts | 5% (+ 4% on $1M+) | Flat 5% on most income. The "Millionaire's Tax" (Question 1, 2022) adds 4% on income over $1M, making the effective top rate 9% for very high earners. Important for highly successful freelancers and self-employed. | ⭐⭐ |
| Michigan | 4.05% flat | Flat rate. Detroit has a 2.4% city income tax on residents and 1.2% on non-residents earning in Detroit. Check if Detroit work applies. | ⭐⭐ |
| Minnesota | 5.35% – 9.85% | High top rate. Minnesota conforms to federal SE deductions. No major city income taxes on SE income. Combined with federal, top-bracket MN freelancers face one of the highest combined rates outside CA/NY. | ⭐ |
| Mississippi | 4.7% flat | Moving to a flat 4.7% rate in 2024 (from graduated structure), with plans to reduce further. No city income taxes. | ⭐⭐ |
| Missouri | 1.5% – 5.3% | St. Louis and Kansas City have 1% earnings taxes on income earned within city limits — relevant if you work on-location in those cities. Generally conforms to federal SE treatment. | ⭐⭐ |
| Montana | 1% – 6.75% | No sales tax. Rates moving toward lower structure with recent reforms. No city income taxes. | ⭐⭐ |
| Nebraska | 2.46% – 5.84% | Top rate dropping — Nebraska is reducing to 3.99% flat by 2027. Currently graduated. Omaha has no city income tax on SE income. | ⭐⭐ |
| Nevada | 0% | No individual income tax. Commerce Tax applies only to businesses with Nevada gross revenue over $4M annually — not relevant for most freelancers. | ⭐⭐⭐ |
| New Hampshire | 0% | The Interest and Dividends Tax was fully eliminated as of January 1, 2025. NH now has zero tax on any individual income including self-employment income. | ⭐⭐⭐ |
| New Jersey | 1.4% – 10.75% | High top rate. NJ residents who work in NYC may owe NYC nonresident tax (if they work in the city) on top of NJ taxes — though NJ gives a credit for taxes paid to NY. Complex commuter situation requires careful planning. | ⭐ |
| New Mexico | 1.7% – 5.9% | Graduated brackets. Gross Receipts Tax (GRT) of ~5–8% applies to gross receipts from business activities — this is separate from income tax and can significantly increase the effective burden for NM self-employed. | ⭐⭐ |
| New York | 4% – 10.9% | NYC residents add 3.078%–3.876% city income tax. The Metropolitan Commuter Transportation Mobility Tax (MCTMT) adds 0.34% on net SE earnings over $50,000 in the Metro Commuter District. Combined NY state + NYC can reach 14.8%. Full NY guide → | ⭐ |
| North Carolina | 4.5% flat | Flat rate, reducing to 3.99% by 2026. No city income taxes. Favorable flat-rate environment for growing freelance income. | ⭐⭐ |
| North Dakota | 1.1% – 2.5% | One of the lowest graduated income tax rates in any state. Very favorable for self-employed at all income levels. No city income taxes. | ⭐⭐⭐ |
| Ohio | 0% – 3.5% | City income taxes are widespread in Ohio and can be significant — Columbus, Cleveland, Cincinnati, and many other cities impose taxes of 1.5%–3% on SE income earned within city limits. Always check your municipality's rate. | ⭐⭐ |
| Oklahoma | 0.25% – 4.75% | Relatively low top rate. No city income taxes on SE income. Generally conforms to federal SE deduction treatment. | ⭐⭐ |
| Oregon | 4.75% – 9.9% | Portland's Metro area adds a 1% tax on income over $125,000 (individual). Multnomah County adds another 1.5% on income over $125,000, reaching 2% over $250,000. Portland-area freelancers can face effectively 12–13% in combined state/local rates. | ⭐ |
| Pennsylvania | 3.07% flat | One of the lowest flat income tax rates. Philadelphia imposes a 3.75% Net Profits Tax on self-employment income earned in the city — a major consideration for Philadelphia-based freelancers. Outside Philly, PA is very SE-friendly. | ⭐⭐ |
| Rhode Island | 3.75% – 5.99% | Three brackets. No major city income taxes. Conforms to federal SE deductions. | ⭐⭐ |
| South Carolina | 0% – 6.5% | Top rate reducing — dropping to 6% in 2024 and 5.7% in 2025. No city income taxes. Favorable trajectory. | ⭐⭐ |
| South Dakota | 0% | No income tax. Popular state for LLC formation. No state income tax on self-employment income or LLC distributions. | ⭐⭐⭐ |
| Tennessee | 0% | The Hall Income Tax (previously applied to dividends and interest) was fully eliminated in 2022. Tennessee now has zero tax on any individual income including SE income. | ⭐⭐⭐ |
| Texas | 0% | No individual income tax. Texas Franchise Tax applies to businesses with gross receipts over $2.47M — not relevant for most freelancers. No city income taxes. Full TX guide → | ⭐⭐⭐ |
| Utah | 4.85% flat | Flat rate. Utah offers a nonrefundable income tax credit for lower-income households. Generally conforms to federal SE treatment. No city income taxes. | ⭐⭐ |
| Vermont | 3.35% – 8.75% | High top rate for a small state. No city income taxes. Conforms to federal SE deductions. | ⭐ |
| Virginia | 2% – 5.75% | Graduated brackets. No city income taxes on SE income. Some localities have business license taxes (BPOL) — check if your county requires a local business license. | ⭐⭐ |
| Washington | 0%* | No income tax on wages or SE income. *7% capital gains tax on gains over $262,000 (2025). Business & Occupation (B&O) tax applies to gross business receipts at varying rates — relevant for high-volume freelancers. | ⭐⭐⭐ |
| West Virginia | 3% – 6.5% | Rates reducing — WV is phasing down income taxes. No city income taxes. Conforms to federal SE deductions. | ⭐⭐ |
| Wisconsin | 3.54% – 7.65% | Four brackets. No major city income taxes. Conforms to federal SE deductions. Top rate notably higher than neighboring states. | ⭐ |
| Wyoming | 0% | No income tax, no franchise tax, no corporate income tax. One of the most SE-friendly states. Popular for LLC formation due to low annual fees and strong privacy protections. | ⭐⭐⭐ |
⭐⭐⭐ = No state income tax | ⭐⭐ = Low-moderate rate or flat rate under 5.5% | ⭐ = High rate or complex multi-layer taxation. Ratings reflect state income tax only — total tax burden depends on deductions, local taxes, and individual circumstances.
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Check my hustle →State spotlights: what self-employed workers need to know
Four states deserve a deeper look — either because of their unusual complexity or because they represent the extremes of what freelancers can expect to owe.
California — the highest combined state rate in the US
California is uniquely challenging for the self-employed. The state income tax tops out at 13.3% — the highest marginal rate in the nation. But the complexity doesn't stop there:
- No SE tax deduction on state return: Unlike the federal return (where you deduct half your SE tax), California doesn't allow this deduction. Your California taxable income is higher than your federal taxable income.
- California SDI (Disability Insurance): Self-employed Californians can voluntarily elect into the State Disability Insurance program (about 1.1% of wages up to the SDI wage base) to receive short-term disability benefits.
- Different quarterly payment schedule: California requires 30%/40%/0%/30% — not the federal 25%/25%/25%/25%. Paying federal schedule only means underpaying California in Q1 and Q2.
- $800 LLC minimum franchise tax: California LLCs owe $800 per year to the FTB regardless of profit, plus an additional fee on gross receipts over $250,000.
For a full breakdown, see our California Self-Employment Tax guide.
New York — state + city + Metro tax stacking
New York has arguably the most complex self-employment tax situation in the country. If you live in New York City, you face three separate layers beyond federal:
- NY state income tax: 4%–10.9% on income, with the top bracket kicking in at $1M+ for individuals.
- NYC city income tax: NYC residents (not just workers — residents) owe an additional 3.078%–3.876%. This applies to all income, including freelance income.
- Metropolitan Commuter Transportation Mobility Tax (MCTMT): Self-employed workers in the Metro Commuter District with net SE earnings over $50,000 owe an additional 0.34% — a small but often-forgotten tax that adds up.
A New York City freelancer in the top brackets can face a combined state + city effective rate of around 10–14% on top of federal taxes. See the full New York Self-Employment Tax guide for quarterly payment details and city-specific rules.
Texas — zero state income tax, but know the nuances
Texas has no individual income tax. That means a Texas freelancer earning $100,000 in net profit saves roughly $3,000–9,000 per year compared to the same freelancer in a moderate-tax state — and $10,000–13,000 per year compared to California.
- Texas Franchise Tax: Businesses with Texas gross receipts over $2.47 million (2024–2025 threshold) owe franchise tax. The vast majority of freelancers and gig workers fall well below this threshold and owe nothing.
- No LLC income tax: Texas LLCs pay no state income tax — you pay only federal SE tax and federal income tax on your profits.
- Property taxes: Texas offsets its no-income-tax status with high property taxes. If you own a home or office space, factor this in.
For complete details, see the Texas Self-Employment Tax guide.
Florida — the Southeast's tax haven for freelancers
Florida has no individual income tax and never has. For self-employed workers, this means:
- All self-employment income is subject only to federal SE tax (15.3%) and federal income tax.
- No state quarterly estimated tax payments — only federal quarterly payments to the IRS.
- Florida LLCs owe no state income tax. The Florida corporate income tax (5.5%) applies only to C-corporations, not to LLCs, S-corps, or sole proprietors.
- No city income taxes in any Florida municipality — Miami, Orlando, Tampa, and Jacksonville all have zero local income tax on SE income.
The primary tradeoff: Florida has high property insurance costs and no state-level income tax deduction benefit on federal returns (since there's no state income tax to deduct).
How to calculate your combined federal + state burden
For any self-employed worker, the total tax picture has three components:
- Federal SE tax: 15.3% on net SE income × 0.9235 (the "self-employment tax base"). This is fixed regardless of state.
- Federal income tax: Applies to net income after the SE deduction (half of SE tax) and the standard deduction. The 2025 standard deduction is $15,000 for single filers.
- State income tax: Varies by state. Applied to income as defined by your state's rules — some states allow the federal SE deduction, some (like California) do not.
Quick reference for a freelancer with $60,000 in net SE profit:
| State scenario | Federal SE tax | Federal income tax | State income tax (approx.) | Total (approx.) |
|---|---|---|---|---|
| Texas / Florida (no state tax) | ~$8,478 | ~$4,800 | $0 | ~$13,278 |
| Indiana (3.05% flat) | ~$8,478 | ~$4,800 | ~$1,740 | ~$15,018 |
| Georgia (5.49% flat) | ~$8,478 | ~$4,800 | ~$2,900 | ~$16,178 |
| New York (state only, no NYC) | ~$8,478 | ~$4,800 | ~$3,600 | ~$16,878 |
| California | ~$8,478 | ~$4,800 | ~$2,800 | ~$16,078 |
Estimates assume single filer, $60,000 net SE profit, standard deduction, no other income. For a personalized calculation, use the SE Tax Calculator.
The deductions layer matters: Business deductions — home office, equipment, software, health insurance premiums, retirement contributions — reduce your net SE income before any of these taxes apply. A freelancer with $80,000 gross income and $20,000 in legitimate deductions pays taxes on $60,000, not $80,000. Maximizing deductions is the primary tool for reducing both federal and state tax burden. See the Side Hustle Taxes guide for a full deduction checklist.
What about LLC formation and state taxes?
A common misconception: forming an LLC in a tax-friendly state like Wyoming or Delaware does not reduce your income tax burden. You pay income tax where you live and work, not where your LLC is registered.
If you're a California resident with a Wyoming LLC, you still owe California state income tax on all income earned in California. The Wyoming LLC gives you liability protection, not a tax advantage on income earned as a CA resident.
The legitimate tax benefit of forming an LLC in a tax-friendly state only applies if you actually live and work in that state. For high-income freelancers, physically relocating to a no-income-tax state is a real tax strategy — but it requires establishing genuine domicile, which means more than just getting a PO box.
Frequently asked questions
Do I pay state income tax on gig work and freelance income?
Yes, in most states. Self-employment income is taxed as ordinary income for state purposes. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no state income tax, so self-employed workers there owe only federal taxes. All other states apply their standard income tax rates to freelance and gig income.
Which state is best for self-employed workers?
The nine no-income-tax states are the most favorable. Among states with income tax, Arizona (2.5% flat), Indiana (3.05% flat), North Dakota (up to 2.5%), and Pennsylvania (3.07% flat) stand out for their low rates. California, New York, New Jersey, Oregon, Hawaii, and Minnesota have the highest combined burdens, particularly for higher-income freelancers.
Does moving states affect my self-employment tax?
Moving states changes your state income tax but not your federal SE tax (15.3% regardless of state). Moving from California to Texas eliminates state income tax entirely — at $100,000 net SE income, that's roughly $7,000–9,000 in annual savings. State domicile rules require you to establish genuine residency: driver's license, voter registration, the majority of your time, and your primary financial connections in the new state.
Do self-employed workers in no-income-tax states still owe any state-level taxes?
Usually very little or nothing on regular SE income. Washington's 7% capital gains tax applies to gains over $262,000 — but not to ordinary service income. Texas has a franchise tax only on businesses with gross revenue over $2.47M. Hawaii has a General Excise Tax on gross receipts that can affect self-employed workers there. New Hampshire, Nevada, South Dakota, Wyoming, Alaska, Florida, and Tennessee now have essentially zero tax on individual self-employment income.
Can I deduct the federal SE tax on my state return?
Most states let you deduct half of SE tax from income before applying state brackets — the same as the federal deduction. Notable exception: California does not allow this deduction on state returns, meaning California taxable income is slightly higher than federal. Always check your state's conformity to federal tax rules.
What is the difference between self-employment tax and state income tax?
Federal SE tax (15.3%) covers Social Security and Medicare and goes to the IRS — it applies equally to all self-employed workers regardless of state. State income tax is separate, collected by your state, and applied to your total income including SE income. Nine states have zero income tax; the rest range from under 3% to 13.3%. The SE Tax Calculator can show both taxes for your specific situation.
The bottom line
The 15.3% federal SE tax is unavoidable for any self-employed worker — it's the price of being your own boss and funding your own Social Security and Medicare. State income tax is where geography matters. A freelancer in Wyoming or Florida effectively pays one set of taxes; the same freelancer in California or New York City pays two or three layers on top.
For most self-employed workers, the practical takeaways are:
- Know your state's rate and factor it into how much you set aside quarterly.
- Pay state estimated taxes separately — paying the IRS doesn't pay your state, and state due dates may differ from federal.
- Maximize deductions first — reducing net SE income saves on both federal SE tax and state income tax simultaneously.
- Don't assume LLC registration = tax savings — your tax domicile is where you live and work, not where your LLC is filed.
Use the free SideHustleGuard checker to get a personalized federal + state tax estimate for your specific hustle and state.
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