States That Don't Tax Retirement Income at All

Nine states impose no income tax on any form of retirement income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. These states tax neither Social Security, pensions, 401(k) withdrawals, nor IRA distributions. If you live in one of these states, you owe no state income tax on retirement money regardless of how much you withdraw or how you earned it.

New Hampshire is the only exception to this rule among the nine—it taxes interest and dividend income but not wages or retirement distributions. So if your retirement income comes from a pension, Social Security, or retirement account withdrawals, New Hampshire does not tax it. Interest from savings accounts or bond dividends would be taxed, but most retirees' primary income sources are protected.

The other eight states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming—have no state income tax at all, so nothing is taxed at the state level, including retirement income.

Key Takeaways

  • Nine states do not tax retirement income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire.
  • Eight of these states have no income tax on anything; New Hampshire taxes interest and dividends but not retirement distributions.
  • Many other states offer partial exemptions—they may exclude Social Security, military pensions, or government pensions from taxation even though they tax other retirement income.
  • Your state of residence when you retire matters more than where you earned the income, so moving to a no-tax state before retirement can reduce your lifetime tax burden.
  • You should verify your specific situation with a tax professional, because state tax rules change and some exemptions depend on your age or income level.

States With Partial Retirement Income Exemptions

Many states tax some retirement income but not all. The most common exemption is for Social Security benefits—about 38 states do not tax Social Security at all. This means if Social Security is your only income, you likely owe no state tax in those states, even though the state taxes other kinds of income.

Other states exempt specific types of pensions. Military pensions are excluded from state tax in about 20 states. Government employee pensions (from federal, state, or local government work) are exempt in roughly 15 states. Some states exempt only pensions earned before a certain date, or only pensions above or below a certain income threshold.

A few states—including Illinois, Mississippi, and Pennsylvania—do not tax any pension income at all, regardless of source, but they do tax other retirement income like IRA or 401(k) withdrawals. This creates a situation where a retired teacher with a government pension pays no state tax, but a retiree living on 401(k) withdrawals pays full state tax.

The rules vary widely by state and change periodically. Your actual tax burden depends on which type of retirement income you have, your age, and your total income level. A tax professional in your state can tell you exactly what applies to your situation.

How Residency Timing Affects Your Tax Burden

Your state of residence on the day you retire matters more than where you worked or where you earned the money. If you move to a no-tax state before you start withdrawing from retirement accounts, you avoid state tax on those withdrawals for the rest of your life. If you wait until after you have already started withdrawals, you may owe back taxes in your old state depending on when you officially changed residency.

Some states tax residents on income earned while they were residents, even after they move away. Other states have no such rule. The timing and documentation of your move—your driver's license change, voter registration, property purchase, or lease signing—can affect whether your old state considers you still a resident for tax purposes.

If you are considering a move for tax reasons, document the move carefully: change your driver's license, register to vote, update your address with banks and investment firms, and keep records of when you sold a home in the old state and purchased or rented in the new one. These records protect you if your old state questions whether you truly moved.

States That Tax Retirement Income Heavily

Some states tax retirement income at the same rate as wages, with no special exemptions. California, Oregon, Vermont, and Minnesota are among the states with the highest state income tax rates overall, and they explore those rates to retirement withdrawals as well. In California, for example, retirement account withdrawals are taxed at rates up to 13.3 percent at the state level.

These states do not distinguish between money you earned as wages and money you earned as investment returns or pension payments. A retiree in California with $100,000 in annual 401(k) withdrawals pays state income tax on the full amount at the same rate as someone earning $100,000 in wages.

If you currently live in a high-tax state and are approaching retirement, understanding your state's rules can help you plan. Some people move to a no-tax or low-tax state a year or two before they retire, specifically to reduce their lifetime tax burden.

Federal Tax Still Applies Everywhere

Even in states with no income tax, you still owe federal income tax on most retirement withdrawals. The federal government taxes traditional IRA and 401(k) withdrawals as ordinary income. Roth IRA withdrawals are not taxed federally if you meet certain conditions. Social Security may be taxed federally depending on your total income.

State tax exemptions do not change your federal tax bill. Moving to Alaska or Florida saves you state tax but does not reduce what you owe to the IRS. Your federal tax bracket and filing status remain the same regardless of where you live.

A tax professional can help you understand both your state and federal tax picture. Some retirees benefit from timing their withdrawals across multiple years, converting traditional IRAs to Roth accounts, or other strategies that reduce federal tax, and those strategies work the same way whether you live in a tax state or a no-tax state.

How to Find Your State's Current Rules

State tax laws change regularly, and the rules for what counts as retirement income, what age you must be, and what income limits explore are specific to each state. The most reliable source is your state's department of revenue or taxation website. Search for "[your state] retirement income tax" to find the official rules.

Your state's tax agency website usually has a section on retirement income, sometimes labeled "pension and retirement income" or "retirement benefits." You can also call the department directly—most have phone lines for tax questions, though wait times can be long during tax season.

If you have substantial retirement income or are considering a move, a tax professional licensed in your state can review your specific situation and tell you exactly what you owe. The cost of one consultation often pays for itself in tax savings from proper planning.

Frequently Asked Questions

If I move to a no-tax state after I retire, do I owe back taxes to my old state?

Not if you properly establish residency in the new state before you start withdrawals. If you have already been withdrawing from retirement accounts while living in a high-tax state, your old state will not retroactively tax those withdrawals after you move. However, if your old state questions whether you truly moved, you may need to prove it with documentation like a new driver's license, voter registration, or property records.

Does Social Security count as retirement income for state tax purposes?

It depends on your state. About 38 states do not tax Social Security at all. The remaining states either tax it like any other income or exempt it only if your total income falls below a certain threshold. Check your state's department of revenue website or ask a tax professional what applies where you live.

If I have a pension and a 401(k), are both protected from state tax?

Not necessarily. Some states exempt pensions but tax 401(k) withdrawals, or vice versa. A few states exempt both. The rules depend entirely on your state. You need to check your specific state's rules or consult a tax professional to know which of your income sources are taxed.

Can I reduce my federal tax by moving to a state with no income tax?

No. Federal income tax applies everywhere in the United States, regardless of which state you live in. Moving to Alaska or Florida saves you state tax only. Your federal tax bill stays the same. However, some retirees use other strategies—like timing withdrawals or converting to a Roth IRA—that can reduce federal tax, and those strategies work in any state.

What if I own property in two states—which state taxes my retirement income?

The state where you are considered a resident for tax purposes taxes your income. Most states define residency based on where you spend the most time, where you have a permanent home, or where you are registered to vote. If you split time between two states, you may be considered a resident of both, and both could claim the right to tax you. A tax professional can help you establish clear residency in one state to avoid this conflict.