No State Income Tax: What Still Comes Out of Your Paycheck?

Key takeaways

• Federal income tax withholding can still apply based on wages and Form W-4.
• Employee Social Security and Medicare taxes generally remain.
• State paid-leave, disability, unemployment, or other program contributions may exist without broad state wage income tax.
• Benefits and other authorized deductions are separate from income tax.
• Living and working across state lines can create withholding in another state.

Federal deductions do not disappear

Employers generally withhold federal income tax from employee wages using IRS methods and the employee’s Form W-4. The final federal tax result is reconciled on the employee’s federal return when filing is required.

For 2026, IRS Publication 15 states that the employee Social Security tax rate is 6.2% on taxable wages up to the $184,500 wage base. The employee Medicare rate is 1.45%, with no wage-base limit. Employers begin withholding an additional 0.9% Medicare tax after wages paid to an employee exceed $200,000 during the calendar year. Those rules apply independently of a state’s wage-income-tax policy.

State deductions can still exist

“No state income tax” is an imprecise label. A state may lack broad tax on wages but still collect employee contributions for paid leave, disability, long-term care, or unemployment programs. Alaska, for example, publishes an employee unemployment insurance rate for 2026. Rates and covered wages can change, so an employee should use the current state agency page.

States also differ in what income they tax. New Hampshire’s Department of Revenue Administration says its interest and dividends tax was repealed for tax periods beginning January 1, 2025. Washington’s Department of Revenue says the state currently has no individual income tax, while separate Washington rules apply to certain capital gains. These details show why “no income tax” and “no wage withholding” should not be used interchangeably without a date and definition.

Other paycheck deductions

Employer payroll taxes may also be displayed for information. An employer-paid line should not reduce employee net pay merely because it appears on the stub.

Working in another state changes the question

A resident of a state without broad wage income tax may work physically in a state that taxes wages. The work state may require withholding, subject to its sourcing, reciprocity, and remote-work rules. Business travel or a move during the year can also create multiple state wage entries.

Ask payroll which residence and work location it used for each pay period. Form W-2 boxes 15 through 17 report state information, while boxes 18 through 20 cover local wages and local income tax. If a state or locality is unexpected, verify the current rule with that jurisdiction’s official tax agency before requesting a correction.

How to read the gross-to-net calculation

• Start with gross wages for the pay period.
• Identify pre-tax benefit deductions and which tax bases they reduce.
• Separate federal income tax, Social Security, and Medicare.
• Look for state program and local deductions rather than searching only for “state income tax.”
• Separate voluntary benefits and legally required deductions.
• Recalculate gross pay minus every employee deduction and compare the result with net pay.

Where this comes from

• IRS Publication 15 (2026), Employer’s Tax Guide (opens in a new tab)
• IRS: State Government Websites (opens in a new tab)
• Alaska Department of Labor: 2026 Unemployment Insurance Tax Rates (opens in a new tab)
• New Hampshire DRA: Interest and Dividends Tax Repeal (opens in a new tab)
• Washington Department of Revenue: Income Tax FAQ (opens in a new tab)
• Washington Department of Revenue: Capital Gains Tax (opens in a new tab)