Quick Answer
Nine states have no state income tax on any retirement income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Additionally, 14 other states don't tax Social Security benefits, and several states offer special exemptions for retirement account distributions or pension income.
Best Answer
Sarah Chen, Payroll Tax Analyst
Best for traditional employees researching retirement-friendly states for tax planning
The 9 states with no income tax on retirement income
Nine states impose no state income tax whatsoever, meaning all retirement income — Social Security, 401(k) withdrawals, pensions, and investment income — is completely exempt from state taxes.
The no-tax states are:
*New Hampshire taxes interest and dividend income above $2,400 (single) or $4,800 (married), but not wages, retirement account distributions, or Social Security.
States that don't tax Social Security benefits
Twenty-three states don't tax Social Security benefits at all. This includes the 9 no-tax states plus these 14 additional states:
Example: $60,000 retirement income comparison
Let's compare the state tax impact for a retiree with $60,000 in annual income: $25,000 from Social Security, $25,000 from 401(k) withdrawals, and $10,000 from a pension.
Florida (no state tax): $0 in state taxes
Pennsylvania: $0 on Social Security and pension, approximately $725 on 401(k) withdrawals (2.9% rate)
Illinois: $0 on all retirement income (doesn't tax retirement distributions)
California: $0 on Social Security, approximately $1,050 on other income (varies by total AGI)
Connecticut: Could owe $1,000-2,000+ depending on total income and filing status
States with partial retirement income exemptions
Several states offer meaningful exemptions for certain types of retirement income:
Illinois: No tax on Social Security, retirement account distributions, or most pensions
Pennsylvania: No tax on Social Security or pension income, but taxes 401(k)/IRA distributions at 2.9%
Alabama: No tax on Social Security; up to $6,000 pension exemption for those 65+
Georgia: No tax on Social Security; up to $65,000 retirement income exemption for those 65+
South Carolina: No tax on Social Security; significant deductions for retirement income for those 65+
States to potentially avoid in retirement
Some states are particularly unfriendly to retirement income:
Minnesota: Taxes Social Security for higher earners and has rates up to 9.85%
Vermont: Taxes Social Security and has rates up to 8.75%
Rhode Island: Taxes Social Security and retirement income with limited exemptions
Connecticut: High rates (up to 6.99%) with limited retirement exemptions
Key factors beyond income taxes
When evaluating retirement-friendly states, consider:
What you should do
Start by calculating your potential state tax liability in your current state versus tax-friendly alternatives. If you're considering a move, visit potential states during different seasons and research healthcare options, cost of living, and proximity to family. Use our paycheck calculator to model different scenarios and see the real dollar impact of various state tax policies on your retirement budget.
Key takeaway: Nine states have no income tax on retirement income, potentially saving retirees thousands annually. An additional 14 states don't tax Social Security, and several others offer significant retirement income exemptions for those 65 and older.
Key Takeaway: Nine states have no income tax on retirement income, and 23 states total don't tax Social Security benefits, potentially saving retirees $1,000-5,000+ annually depending on income level.
Retirement tax treatment by state category
| State Category | Social Security | 401(k)/IRA | Pensions | Example Annual Savings* |
|---|---|---|---|---|
| No income tax (9 states) | Not taxed | Not taxed | Not taxed | $2,000-6,000+ |
| No SS tax only (14 states) | Not taxed | Usually taxed | Usually taxed | $800-2,500 |
| Partial exemptions | Varies | Some exempt | Some exempt | $500-3,000 |
| Full tax states | Often taxed | Taxed | Taxed | $0 (baseline) |
More Perspectives
Sarah Chen, Payroll Tax Analyst
Best for location-flexible workers who can strategically choose their retirement state
Strategic state selection for remote workers
As someone with location flexibility, you can optimize your retirement by choosing a state based purely on financial and lifestyle factors, not employment constraints.
Top retirement tax havens for remote workers
Florida: No state income tax, no estate tax, homestead exemption protects home value from property taxes. Popular areas like Sarasota and Naples offer cultural amenities.
Texas: No state income tax, business-friendly environment, major metropolitan areas like Austin and Houston. Property taxes can be high but offset by no income tax.
Tennessee: No income tax on wages/retirement, low cost of living, no estate tax. Nashville and Chattanooga offer urban amenities at lower costs than coastal cities.
Nevada: No state income tax, no inheritance tax, relatively low property taxes. Las Vegas and Reno provide entertainment and healthcare infrastructure.
Establishing residency strategically
To capture tax benefits, you must establish bona fide residency:
High-tax states like California may challenge residency changes, especially for high earners. Keep detailed records of your time in each state.
Beyond taxes: total cost analysis
Consider the complete financial picture:
Housing costs: A $400,000 home in Tennessee might cost $800,000+ in California
Healthcare: Medicare Advantage plan availability and quality vary by state
Transportation: Some low-tax states require more driving, increasing transportation costs
Family proximity: Travel costs to visit family should factor into decisions
Calculate total annual costs, not just tax savings, when comparing states.
Key Takeaway: Remote workers have unique flexibility to choose tax-optimized retirement states, with proper residency planning potentially saving $2,000-8,000+ annually while considering total living costs.
Sources
- IRS Publication 915 — Social Security and Equivalent Railroad Retirement Benefits
- IRS Publication 17 — Your Federal Income Tax (For Individuals)
Related Questions
Reviewed by Sarah Chen, Payroll Tax Analyst on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.