Which states don’t tax retirement income?

3 mins readLast updated October 4, 2023by Rachel Carey

Taxation laws on retirement vary across the US. Here are 11 states that won’t touch your precious retirement income.

Naturally, you want to retain as much of your retirement income as possible, so it pays to know which states will levy taxes on it and which won't. These are the states that go easy on taxing retirement income or won't tax you at all, and also set down the basic rules to clarify retirement income tax from the start.

Understanding the basics

When considering tax in retirement it’s essential to understand the general rules about federal retirement income tax.

Most retirement income can be subject to this, including pension payments and distributions from IRA and 401(k) plans and Social Security benefits. This excludes distributions from Roth IRA and Roth 401(k) plans, where you can withdraw contributions and investment gains tax-free after five years, once you’ve reached 59½ years of age.

Things start to get complicated when you consider retirement income tax state-by-state. Quite a few states levy zero income tax, which would include your retirement income, while many exclude Social Security benefits. Then there are the states that specifically exclude retirement income from taxation.

11 states that don’t tax retirement income

In a mixed picture across the US, these are the 11 states that don’t tax your retirement income. Some here levy no state income tax of any kind:

  • Alaska No state income tax.

  • Florida No state income tax.

  • Illinois No retirement income tax, including Social Security, pension, IRA, and 401(k).

  • MississippiNo retirement income tax, including Social Security, pension, IRA, and 401(k).

  • NevadaNo state income tax.

  • PennsylvaniaNo retirement income tax, including Social Security, pension, IRA, and 401(k).

  • South DakotaNo state income tax.

  • TennesseeNo state income tax.

  • Texas No state income tax.

  • Washington No state income tax.

  • Wyoming No state income tax.

Some states adopt a light touch when it comes to income taxation. Georgia, for example, takes no tax on Social Security benefits and provides a deduction of up to $65,000 per person on all other types of retirement income. To make things more complicated, the rules and laws change with time. New Hampshire currently charges a five percent tax on dividends and interest, but this will be phased out by 2027 and is set to decline each year to that point.

Which states do tax retirement income?

This depends on your individual status and income, because the rules vary from state to state, and the situation is too complex to generalize.

However, 12 states will tax you on some or all of your Social Security benefits. These are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.

Choosing the right state for you

With the 11 states that don’t tax your retirement income at all the story is clear enough, but other states offer different degrees of exemption.

For example, many don’t tax Social Security, as we mentioned, while others make retirement account distributions, pension payments, and other forms of retirement income exempt. Often the exact amount of exemption will be influenced by your individual financial status, so you’ll need to check with the state tax office in your chosen location before committing to any move.

Essentially, there’s a whole lot more to good retirement planning than avoiding state taxes on your income — some of these states might levy high taxes in other ways after all. A financial advisor can help you strike a balance between tax and other factors when it comes to building a happy, secure retirement.

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.