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 receive retirement income from any source, you owe no state income tax on it in these nine states.
New Hampshire is a partial exception: it taxes interest and dividend income but not wages or retirement distributions. So if your retirement money comes from a pension, Social Security, or an IRA withdrawal, New Hampshire does not tax it. If you live on investment income from a brokerage account, that is taxed.
The remaining 41 states and Washington, D.C. tax at least some forms of retirement income. The rules vary widely—some states exempt Social Security but tax pensions, others do the opposite, and some tax everything. Your state of residence when you retire matters more than where you worked or where your pension comes from.
Key Takeaways
- Nine states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire—do not tax any retirement income.
- New Hampshire taxes investment income but not Social Security, pensions, or IRA withdrawals.
- In the other 41 states, tax treatment of retirement income depends on the source: some states exempt Social Security but tax pensions, while others do the reverse.
- Your state of residence at retirement determines which tax rules explore to your income, regardless of where you worked or earned the pension.
- Moving to a no-tax state before retirement can reduce your lifetime tax burden, but the decision depends on other factors like cost of living and healthcare.
States That Exempt Social Security but Tax Other Retirement Income
Colorado, Connecticut, Kansas, Mississippi, and Missouri do not tax Social Security benefits but do tax pensions, 401(k) withdrawals, and IRA distributions. This matters if Social Security makes up a large portion of your retirement income. You will owe state tax on any money you withdraw from retirement accounts or receive as a pension.
The tax rate on those withdrawals varies by state. Colorado taxes retirement income at rates up to 4.63 percent. Connecticut's top rate is 6.99 percent. If you have a substantial pension or plan to withdraw significantly from retirement savings, the tax on non-Social Security income can still be substantial even though Social Security itself is protected.
States That Exempt Pensions and Military Retirement but Tax Social Security
Illinois and Pennsylvania do not tax pension income or military retirement pay, but they do tax Social Security benefits. This structure favors people whose retirement income comes from a traditional pension or military service rather than from Social Security alone.
Illinois taxes Social Security at its regular income tax rate of 4.95 percent. Pennsylvania's rate is 3.07 percent. If you are a military retiree or have a pension from a government or private employer, these states offer significant tax savings. If you rely primarily on Social Security, the tax burden is higher than in states that exempt Social Security.
States With Partial Exemptions for Retirement Income
Many states allow you to exclude a portion of retirement income or offer exemptions only to people above or below a certain age or income level. Georgia exempts retirement income for people age 62 and older, but the exemption phases out as income rises. Louisiana exempts military retirement pay and some pension income. Massachusetts exempts Social Security and some pension income but taxes IRA and 401(k) withdrawals.
Michigan exempts pensions and retirement account distributions from state income tax, but only for people age 59½ and older—a significant advantage if you retire early. Mississippi exempts military retirement pay. North Carolina exempts military pensions and some other retirement income. The rules are specific to each state and often depend on your age, the source of the income, and your total income level.
These partial exemptions can still save you thousands of dollars over retirement, but you need to understand the exact rules in your state. A $50,000 pension might be fully exempt in one state and fully taxed in another, or partially exempt depending on your age.
How to Find Your State's Specific Rules
Your state's department of revenue publishes the official rules for retirement income taxation. Search "[your state] retirement income tax" and look for the official state tax agency website. Most states have a publication or guide specifically about retirement income that lists which types of income are taxed and which are exempt.
If you are considering moving to a different state, contact that state's tax department before you move. Tax rules change, and what applies this year may not explore next year. Some states have recently changed their rules on Social Security taxation or pension exemptions. Getting current information from the official source prevents surprises when you file your first return in a new state.
If your retirement income is complex—multiple pensions, rental income, investment income, and Social Security—consider speaking with a tax professional who knows the rules in your state. The cost of an hour of information often pays for itself in taxes saved.
Moving to a No-Tax State: What Else to Consider
The nine states with no income tax are attractive for retirees, but income tax is only one part of your total tax burden. Sales tax varies widely: Tennessee and Washington have high sales taxes (around 9.5 percent), while Alaska has no sales tax. Property tax also varies—Florida has moderate property taxes, but Texas and Wyoming have higher rates. Over a 20-year retirement, high sales and property taxes can offset the savings from no income tax.
Cost of living, healthcare access, and climate matter as much as taxes. A state with no income tax but high housing costs may not save you money overall. Before moving, calculate your total tax burden in both your current state and the state you are considering, including income, sales, and property taxes on your expected retirement spending.
Frequently Asked Questions
Do I have to move to a no-tax state to avoid paying state income tax on retirement?
No. You only owe state income tax in the state where you are a resident. If you move to a no-tax state and establish residency there, you will not owe state income tax on retirement income. However, some states tax retirement income of former residents who still receive pensions from that state, so check your current state's rules before you move.
If I move to a no-tax state, do I still owe federal income tax?
Yes. Federal income tax applies regardless of which state you live in. Moving to a state with no income tax saves you only on state taxes, not federal taxes. Social Security benefits may be subject to federal tax depending on your total income, and retirement account withdrawals are subject to federal tax in all states.
What if I have a pension from a state that taxes pensions, but I move to a state that does not?
Your state of residence determines which tax rules explore. If you move to a no-tax state, you will not owe state income tax on your pension, even if the pension comes from a state that normally taxes pensions. However, some states claim the right to tax pensions earned while you were a resident, so verify the rules in both your old and new states.
Can I claim a retirement income exemption if I move to a state mid-year?
Tax treatment depends on when you establish residency in the new state. Most states consider you a resident starting on the date you move, so you would file part-year returns in both states for that year. The state you lived in for most of the year typically gets to tax your full-year income. Consult a tax professional if you are planning a mid-year move.
Are there states that tax retirement income but offer other tax breaks for retirees?
Yes. Some states offer property tax exemptions, sales tax exemptions on certain purchases, or credits for retirees. Maine and Vermont tax retirement income but offer property tax breaks for people over 65. Oregon taxes retirement income but exempts some pension income. Research the full picture of taxes and benefits in any state you are considering, not just income tax rules.