While paying taxes is part of civic responsibility, many retirees look for ways to keep their income intact without unnecessary deductions. Lucky for some retirees, there are a handful of states where you won’t have to pay income tax on your retirement funds. While moving to one of these states solely to lower your tax bill might not be the only thing you should consider, it’s certainly worth factoring into your long-term plans.
States that won’t tax your retirement income
As of 2025, there are nine states that don’t collect any income tax from retirees, or anyone else for that matter. These states fund their budgets through other means like sales taxes and property taxes, rather than imposing an income tax. The states are as follows:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
While New Hampshire did previously tax dividend and interest income, this tax has been lifted as of 2025. This makes New Hampshire a truly state-tax-free home for all its residents, including retirees. It is important to remember that retirees may still be subject to federal taxes and, in some cases, local city or county taxes, but these states are still attractive to those in their retirement years who are looking to pay the least amount of tax possible.
States with some exceptions for retirees
While some states completely forgo taxing retirement income, others still tax income but make exceptions for retirees. These states have specific rules that allow certain types of retirement income to be excluded from taxation. These exemptions are as follows:
- Illinois: Distributions from 401(k) plans, pensions, and Social Security payments are not taxed.
- Iowa: If you’re 55 or older, withdrawals from 401(k) plans and IRAs, along with Social Security income, aren’t subject to tax.
- Mississippi: The state doesn’t tax income from 401(k)s, IRAs, or Social Security, as long as you meet the retirement plan requirements.
- Pennsylvania: While work-based wages are taxed, income from IRAs, 401(k)s, and Social Security benefits isn’t taxable. Pension income is also exempt from taxes if you’re at least 60 years old.
States that tax social security income
Most states don’t tax Social Security benefits, but there are a few where those benefits are subject to state-level taxation. These states include:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
However, it’s worth noting that West Virginia has been gradually lowering its tax burden on Social Security income, and by 2026, it will have completely phased out state taxes on these benefits. Retirees living in West Virginia can expect tax relief in the coming years.
While avoiding state income taxes can significantly benefit a retiree’s budget, it’s important to consider all factors before making a big move. Other costs, such as property taxes and the cost of living, have risen in some of these states. Online realtor Redfin reports that property taxes in Tampa, Florida, have surged by 60% since 2019, and the median home price in Tennessee has jumped from under $250,000 to nearly $390,000 in that same time.
Before packing up and relocating to a state with no income tax, take some time to do a cost comparison. What will it cost to live where you currently reside versus where you might want to move? Also, consider visiting your prospective new home for an extended period to get a feel for the area. Doing the math now will help you make an informed decision when planning your retirement lifestyle. Many of these states who do not charge income tax make up for it by increasing taxes and prices elsewhere. Make sure that you do your research before committing to relocating for retirement.
