States That Don't Tax Retirement Income at All
Nine states have no income tax on any form of retirement income: Alaska, Florida, Illinois, Mississippi, Nevada, South Dakota, Tennessee, Texas, and Wyoming. These states tax neither Social Security, pensions, 401(k) withdrawals, nor IRA distributions. If you live in one of these states, you keep the full amount of whatever retirement income you receive.
Alaska, Nevada, South Dakota, Tennessee, Texas, and Wyoming also have no state income tax on wages or other earned income, so they don't tax anything. Florida and Illinois have state income tax on wages but specifically exempted retirement income from taxation. Mississippi taxes wages but exempts both pensions and Social Security.
The tax treatment in these states does not change based on your age or how long you have been retired. A person receiving a pension at 55 pays the same state tax as someone receiving one at 75 — which is zero.
Key Takeaways
- Nine states—Alaska, Florida, Illinois, Mississippi, Nevada, South Dakota, Tennessee, Texas, and Wyoming—do not tax retirement income in any form.
- Six of these states (Alaska, Nevada, South Dakota, Tennessee, Texas, Wyoming) have no state income tax at all, so they tax neither retirement income nor wages.
- Florida and Illinois allow state income tax on wages but exclude retirement income from taxation.
- Many other states tax some forms of retirement income but not others—for example, exempting Social Security while taxing pensions.
States That Tax Some Retirement Income but Not Others
Fourteen additional states exempt Social Security from taxation but tax other retirement income like pensions and withdrawals from retirement accounts. These are: Colorado, Connecticut, Delaware, Georgia, Hawaii, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, and Missouri.
In these states, your Social Security check is not subject to state income tax, but money you withdraw from a traditional IRA, 401(k), or pension plan is taxable at the state level. The tax rate and brackets vary by state. For example, Colorado taxes retirement account withdrawals but allows a deduction for some pension income depending on your age and total income.
A few states in this group have additional rules. Pennsylvania and New Hampshire do not tax income from pensions or retirement accounts at all, but they do tax other income. This makes them similar to the nine no-tax states for people living primarily on pension or retirement account withdrawals.
How State Tax Treatment Affects Your Retirement Planning
Where you live during retirement can change how much of your income you keep. A person with a $50,000 annual pension in Florida pays zero state income tax on it. The same person in New York, which taxes all retirement income, would owe state tax on that full amount. The difference compounds over decades of retirement.
State tax treatment also interacts with federal tax rules. Social Security is taxed federally based on your combined income (Social Security plus other income), but state taxation is separate. A state that does not tax Social Security can still tax your IRA withdrawals or pension, and vice versa.
If you are considering moving for retirement, check not only state income tax but also property tax, sales tax, and local taxes in your target state. Some states with no income tax have higher property or sales taxes. Your total tax burden depends on all of these together, not income tax alone.
States That Tax All Retirement Income
Most states tax retirement income the same way they tax wages. These states include California, New York, Oregon, Vermont, and many others. In these states, withdrawals from IRAs and 401(k)s, pension payments, and Social Security are all subject to state income tax (though some have age-based deductions or exemptions for lower-income retirees).
Some high-tax states offer small breaks. California does not tax Social Security but taxes all other retirement income. Vermont and Oregon have similar rules. These partial exemptions reduce the tax burden slightly but do not eliminate it.
The tax rate on retirement income in these states ranges from roughly 3 percent to over 13 percent, depending on the state and your income level. A retiree in a high-tax state may pay significantly more in state income tax than a retiree with the same income in a no-tax state.
How to Find Your State's Rules
Your state's department of revenue or taxation website lists the current rules for retirement income. Search "[your state] retirement income tax" to find the official page. The rules can change year to year, so checking the current year's information is important.
If you receive Social Security, a pension, and IRA withdrawals, you may need to look up each type separately on your state's site, because the tax treatment can differ. Some states have worksheets or calculators to estimate your state tax liability based on your specific income sources.
A tax professional or CPA in your state can also explain how your particular mix of income will be taxed. This is especially useful if you are considering a move or if your retirement income comes from multiple sources.
Moving to a Lower-Tax State for Retirement
If you are retired or nearing retirement and live in a high-tax state, moving to a no-income-tax state can reduce your annual tax bill. However, the move itself has costs and timing matters. You must establish residency in the new state, which usually means living there for at least part of the year and updating your driver's license, voter registration, and mailing address.
Some states challenge whether you have truly moved if you still own property or spend significant time in your former state. If you move to Florida but keep a home in New York and spend three months a year there, New York may still consider you a resident and tax your income. The rules vary by state, and disputes can be expensive to resolve.
The financial benefit of moving depends on your income level and the specific states involved. A person with $30,000 in annual retirement income may save little by moving, while someone with $100,000 in annual income could save thousands per year. Calculate your estimated tax in both states before deciding.
Frequently Asked Questions
Does moving to a no-tax state mean I pay zero taxes on retirement income?
Yes, if you establish residency in one of the nine no-income-tax states, you will not owe state income tax on retirement income. However, you will still owe federal income tax on most retirement withdrawals. You may also owe property tax, sales tax, or local taxes in your new state.
If I move to Florida, do I have to live there year-round?
No. Florida has no residency requirement—you do not have to live there any particular number of days per year. However, you must establish residency by obtaining a Florida driver's license, registering to vote, and listing a Florida address as your primary residence. Other states have different rules.
Does Social Security count as income for state tax purposes?
It depends on your state. Nine states do not tax it at all. Fourteen other states exempt Social Security but tax pensions and retirement account withdrawals. Most other states tax Social Security the same as other income, though some offer deductions for lower-income retirees.
Can I reduce my state taxes by timing when I withdraw from my IRA?
In states that tax retirement income, withdrawals are taxed in the year you take them, so timing matters. In states with no income tax, timing does not affect state taxes. Consult a tax professional about federal tax implications and your specific situation.
What if I have a pension from one state and now live in another?
Most states tax pension income based on where you currently live, not where you earned the pension. However, a few states allow you to exclude pension income earned while you worked there. Check both your current state and the state where you earned the pension for their specific rules.