States that don't tax retirement income: what the phrase actually covers

Nine states levy no individual income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. In those states no retirement income is taxed by the state, because no income is. Everywhere else, "doesn't tax retirement income" is shorthand for a much narrower set of exemptions, and the shorthand is where people get caught.

The phrase hides four separate questions. Does the state tax income at all? Does it tax Social Security? Does it tax pension and retirement-account withdrawals? And what does it charge instead? A state can answer favourably on one and badly on another, and the combination that suits a retiree with a large 401(k) is not the combination that suits one living mainly on Social Security.

Question one: is there a state income tax at all

The nine no-income-tax states are the only unconditional answer. Two points about the list are worth knowing.

New Hampshire is a recent addition in the full sense. It never taxed wages, but it did tax interest and dividend income, and that tax finished phasing out at the start of 2025. Washington has no broad income tax but does levy a tax on certain long-term capital gains above a threshold, which is not a retirement-income tax but can matter to a retiree selling appreciated assets.

Everywhere else, the state has an income tax and the question becomes which retirement income it chooses to exempt.

Question two: does the state tax Social Security

This is the question where the map has moved fastest, and where old articles mislead.

Most states with an income tax fully exempt Social Security benefits. As of the 2026 tax year, roughly eight states still tax benefits in some form: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont. West Virginia completed a three-year phase-out and no longer taxes benefits from 2026.

Two qualifications matter more than the list itself.

Almost all of these states use income thresholds. A retiree below the threshold is generally fully exempt; the tax bites on higher incomes, and several of these states have raised their thresholds in recent years. Being resident in one of the eight does not mean paying state tax on your benefits.

The list changes. It has shrunk in each of the last several years as states have legislated phase-outs. Treat any published list, including this one, as a starting point to verify against your state's department of revenue rather than a settled fact.

Whatever your state does, the federal question is separate and applies everywhere. Up to 85% of benefits can be included in federal taxable income depending on provisional income, under thresholds fixed by statute in 1983 and 1993 and never indexed. That is covered in is Social Security taxed after age 70.

Question three: does the state tax pensions and retirement-account withdrawals

This is the question that decides the outcome for most people with meaningful savings, and it is the one the headline phrase obscures.

Three states with an income tax broadly exempt qualified retirement distributions — pensions, 401(k) withdrawals and IRA withdrawals — rather than only Social Security: Illinois, Mississippi and Pennsylvania. The conditions differ and they are not trivial. Pennsylvania's exemption depends on the distribution being taken after reaching retirement age or separating from service under the plan's terms, so an early withdrawal can be taxable. Mississippi's exemption applies to qualified retirement income, with early distributions treated differently. Illinois excludes qualified retirement income from its base without an age test.

Beyond those, a large number of states offer partial relief rather than exemption, and the design varies enormously:

Type of relief	How it works	What to check
Flat retirement-income exclusion	A fixed dollar amount of pension or retirement income excluded per person	Whether it covers IRA withdrawals or only employer plans
Age-conditioned exclusion	Exclusion available from a stated age, often 59½, 62 or 65	Whether it steps up at a later age
Income-tested exclusion	Exclusion phases out above an income level	The definition of income used for the phase-out
Source-specific exemption	Military, federal or state government pensions exempted where private ones are not	Whether your specific plan qualifies

The last row catches people out constantly. A state that "doesn't tax pensions" may mean it does not tax its own public-employee pensions, which is no help to someone arriving with a corporate plan.

There is no substitute here for reading the actual rule for your specific income sources. Two retirees in the same state with the same total income can face materially different state tax bills depending on whether the money comes from Social Security, a pension, an IRA or a taxable brokerage account.

Question four: what does the state charge instead

States fund themselves. A state that forgoes income tax raises the money elsewhere, and for a retiree the substitutes can be larger than the tax avoided.

Property tax. Usually the biggest one. Several no-income-tax states have high effective property tax rates, and a retiree who owns a home pays that bill every year regardless of income. Many states offer homestead exemptions, senior freezes or circuit-breaker credits — worth checking, because they can change the arithmetic substantially.

Sales tax. Combined state and local rates vary widely, as does what is taxed. Whether groceries, prescriptions and services are included matters more to a retired household than the headline rate.

Estate and inheritance tax. A minority of states levy one or both, with exemption thresholds far below the federal level. An inheritance tax is charged on the recipient and can apply to a beneficiary living elsewhere.

Local income tax. Several states permit municipal or county income taxes on top of the state rate.

A worked comparison makes the point. Suppose a couple draws $95,000 a year: $45,000 of Social Security, $35,000 from an IRA and $15,000 from a pension. In a no-income-tax state with 2.0% effective property tax on a $450,000 home, they pay $0 in state income tax and $9,000 in property tax. In a state with a 4.5% flat income tax that exempts Social Security and all qualified retirement income, and 0.9% property tax on the same home, they pay $0 state income tax and $4,050 in property tax.

These figures are illustrative only, built on stated assumptions to show the shape of the comparison. They are not a forecast for any real state, rates and exemptions change every year, and you should verify current figures with the relevant state department of revenue before acting.

The point is not that one is better. It is that the income tax line is often not the biggest number.

Residency is a question of fact, not preference

Moving for tax reasons only works if the move is real, and high-tax states audit this.

Domicile is determined on facts: where you spend your days, where your home is, where you are registered to vote and licensed to drive, where your doctors and bank accounts are, where your family is. Many states apply a day-count test alongside the domicile test — commonly 183 days — and keeping a home in the former state while claiming residency in a new one is the pattern most likely to produce a challenge.

Two related points. A part-year move splits the year and both states may tax part of it. And source rules mean some income stays taxable where it was earned, though federal law generally prevents a state from taxing the retirement income of a former resident once they have genuinely left.

Where this fits in the wider plan

State tax is one input among several, and it is usually not the largest. The federal levers — bracket management, conversion timing, the order in which accounts are drawn down — typically move more money, and they interact with the state question rather than replacing it.

Three interactions worth planning around:

• Roth conversions are taxed by the state you live in when you convert. Converting before a move to a no-income-tax state hands the origin state a bill that a later conversion would not. Converting after arrival avoids it. The federal side is in the Roth conversion guide.
• Qualified charitable distributions keep RMD income out of AGI, which usually flows through to the state calculation as well as the federal one. See qualified charitable distributions.
• State treatment rarely mirrors federal treatment exactly. Municipal bond interest is often exempt federally and from the issuing state but taxable in others; a state may start from federal AGI, federal taxable income, or its own base entirely.

For the sources that are genuinely untaxed at federal level, tax-free retirement income covers what qualifies, and retirement tax strategies covers the sequencing.

Frequently asked questions

Which states have no income tax at all?

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. New Hampshire completed the phase-out of its interest and dividends tax at the start of 2025. Washington has no broad income tax but taxes certain long-term capital gains above a threshold.

Which states don't tax 401(k) or IRA withdrawals?

The nine no-income-tax states, plus Illinois, Mississippi and Pennsylvania, which broadly exempt qualified retirement distributions. Conditions apply in the latter three — Pennsylvania's exemption generally depends on retirement age or separation from service, and early distributions can be taxable. Many other states offer partial exclusions rather than full exemption.

Is it worth moving states to save tax in retirement?

Sometimes, but the income tax line alone rarely decides it. Property tax, sales tax, estate or inheritance tax, healthcare costs and proximity to family often add up to more than the income tax saved, and residency has to be genuine to survive an audit by the state you left. Run the whole comparison, not just the headline rate.

Does my state tax my Social Security benefits?

Probably not — most states with an income tax fully exempt them, and around eight still tax benefits in some form as of 2026, almost all with income thresholds that exempt lower and middle incomes. The list has shrunk each year, so verify with your own state's department of revenue rather than relying on any published list. The federal tax on benefits applies regardless of state.

This article is general education, not personal tax advice. State tax rules, exemptions and thresholds change every year and vary by individual circumstances; verify current rules with the relevant state department of revenue and your own adviser before acting.