States that don't tax pension income at all

Eight states impose no income tax on any pension income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. These states have no state income tax period, so pensions are not taxed there regardless of the source — whether from a government job, military service, or a private employer plan.

If you live in one of these eight states, you owe no state tax on pension withdrawals, 401(k) distributions, or IRA payouts. This applies whether you worked in that state or moved there after retiring. The only exception is if you still work and earn wages in another state — you would owe tax to that state on the wages you earned there, but not on pension income received while living in a no-tax state.

Moving to one of these states after you retire can lower your overall tax bill, though you should also consider property taxes, sales taxes, and cost of living, which vary widely among them.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax, so pension income is never taxed there.
  • Fourteen additional states tax some pension income but exempt military pensions, government pensions, or both entirely.
  • Some states exempt only pensions earned before a certain date or only pensions from government employment, so the rules depend on your specific pension source and when you earned it.
  • Your state of residence when you receive the pension is what matters for state tax purposes, not where you worked or where the pension is paid from.
  • Pension tax rules change periodically, so you should verify the current rules in your state before making a move or filing your return.

States that exempt military pensions

Eleven states exempt military pensions from state income tax while still taxing other pension income: Connecticut, Illinois, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, and Ohio. If you receive a pension from military service, you owe no state tax on that income in these states, even if you also receive other pension income that is taxed.

Military pension means a pension earned through service in the U.S. Armed Forces — Army, Navy, Air Force, Marines, Coast Guard, or Space Force. It includes both active-duty pensions and Reserve or National Guard pensions if you served long enough to earn one. The exemption applies to the full military pension amount, not just a portion of it.

If you live in one of these states and receive both a military pension and a civilian pension, only the military portion is tax-free. You would still owe state tax on the civilian pension.

States that exempt government pensions

Illinois, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, and Pennsylvania exempt pensions from government employment — federal, state, or local — from state income tax. This includes pensions from teaching, police work, fire departments, and other public-sector jobs, but not pensions from private employers.

The definition of government pension varies slightly by state. Some states exempt only state and local government pensions, while others also include federal pensions. Illinois and Pennsylvania, for example, exempt all government pensions but tax private pensions. Louisiana exempts government pensions earned before a certain date (January 1, 2012) but taxes those earned after.

If you spent your career in public employment and now receive a government pension, moving to one of these states can eliminate state tax on that income. If you also receive a private pension or retirement account withdrawals, those would still be taxed in most of these states.

States with partial pension exemptions or income limits

Several states allow you to exclude some pension income from taxation, either up to a dollar amount or based on your total income. Colorado, Delaware, Georgia, Hawaii, Kentucky, Maine, North Carolina, and Virginia all have rules that reduce or eliminate tax on pension income for some retirees.

Colorado allows a pension exemption of up to $24,000 per person (as of 2024, though this amount changes yearly). Delaware exempts all retirement income, including pensions, for residents age 60 and older. Georgia exempts up to $35,000 of retirement income per person if you are age 65 or older. Kentucky exempts all pension and retirement income regardless of age.

North Carolina taxes pensions but allows a deduction that phases out as your income rises — the higher your total income, the less you can exclude. Virginia has a similar structure. Hawaii taxes pensions but allows a deduction for residents age 59½ and older. Maine and Delaware have age-based exemptions as well.

These rules are complex and change frequently. If you live in one of these states or are considering moving to one, you should check the current rules with your state tax authority or a tax professional, because the income limits and age thresholds shift year to year.

How to find out what your state taxes

Your state of residence on December 31 of the tax year determines which state's tax rules explore to your pension income. If you moved during the year, the state where you lived on that date is the one that taxes your income. Some states tax residents on all income earned during the year even if they moved away partway through, so check your former state's rules if you relocated.

To find the current pension tax rules for your state, visit your state's department of revenue website and search for "pension tax" or "retirement income". Most states post a summary of which pensions are taxed and which are exempt. You can also call the department directly — they have staff who answer tax questions about residency and pension treatment.

If you receive a pension from a state other than where you now live, you may owe tax to both states. Some states have reciprocal agreements that prevent this, but most do not. Your pension payer should send you a 1099-R form showing how much you received; use that to file your state return.

Military and government pensions: what counts

States define military and government pensions narrowly, so it matters where you worked. A military pension means you served in the U.S. Armed Forces and earned a pension through that service — not a pension from working at a military base as a civilian. A government pension means you worked directly for a government employer: a school district, city, county, state agency, or federal agency.

If you worked for a contractor on a military base or for a private company that provides services to the government, your pension is a private pension, not a military or government pension. Similarly, if you worked for a nonprofit or a private university, your pension is private even if the organization received government funding.

Some states also have rules about when the pension was earned. Louisiana, for example, exempts government pensions earned before 2012 but taxes those earned after. If you earned part of your pension before the cutoff date and part after, only the earlier portion may be exempt. Check your state's specific rules to know which part of your pension is taxed.

Moving to a low-tax state: what else to consider

Eliminating state income tax on your pension can save thousands per year, but state income tax is only one part of your total tax bill. Before moving, compare property taxes, sales taxes, and the cost of living in your target state. Some states with no income tax have high property taxes or sales taxes that offset the savings.

Florida and Texas have no income tax and relatively low property taxes in many areas, but housing costs are high in desirable regions. South Dakota and Wyoming have low property taxes and no income tax, but fewer urban amenities and higher heating costs. Tennessee has no income tax but taxes groceries, which affects retirees on fixed incomes.

You should also consider healthcare access, proximity to family, and climate. A state that saves you money on taxes but costs more to live in or requires you to move far from your support network may not be the right choice. Work with a tax professional or financial advisor to model your total tax bill in each state you are considering.

Frequently Asked Questions

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

No. Your state of residence when you receive the pension is what matters. Once you move to a state with no income tax, you owe that state nothing on pension income. Your old state cannot tax you on income received after you leave, though some states do tax residents on income earned during the year they moved away. Check your former state's rules if you relocated partway through a tax year.

What if I receive both a military pension and a civilian pension?

In states that exempt military pensions, only the military portion is tax-free. You would owe state tax on the civilian pension. If you live in a state that exempts government pensions but not military pensions, the opposite applies — the government pension is tax-free and the military pension is taxed. Some states exempt both, so check your specific state's rules.

Do I have to live in a state for a certain amount of time before the pension tax exemption applies?

No. Most states explore their pension tax rules based on your state of residence on the last day of the tax year, regardless of how long you have lived there. If you move to Florida on January 2 and live there for the rest of the year, Florida's no-income-tax rule applies to your full-year income. However, your old state may still tax you on income earned before you moved, so file a part-year return there if required.

Can I claim a pension exemption in two states if I moved during the year?

No. You file a return in each state where you lived, but you claim the exemption only in the state where you lived when you received the income. If you moved from Illinois to Florida in June, you file a part-year return in Illinois for January through May and a return in Florida for June through December. Illinois taxes your pension for the months you lived there; Florida does not tax it for the months you lived there.

Do these pension tax rules explore to Social Security income too?

No. Social Security is taxed under federal rules, not state rules. However, some states do tax Social Security income while others exempt it. The states that exempt pensions do not necessarily exempt Social Security, so check your state's rules on both. A few states, including Illinois and Mississippi, exempt both pensions and Social Security from state tax.