When your working days come to an end, many retirees will face a decision on where to spend their golden years. Figuring out the cost of living in different areas is an important part of the decision making process, and taxes are a key consideration. Not all states treat retirement income, such as pension payouts or distributions from 401(k) plans and IRAs, the same way.

Here’s what you need to know about how different states tax retirement income, including the states where you won’t pay taxes at all.

States with no income tax

Retirement distributions from 401(k) plans or IRAs are considered income for tax purposes.

Fortunately, there are several states with no income tax:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

In addition to those eight states, New Hampshire also doesn’t have an income tax, but it does tax interest and dividend payments, which are a staple of many retirement portfolios. You could avoid this tax by holding income-producing assets within a tax-advantaged plan such as an IRA, and then taking a distribution from the plan. Because the distribution would qualify as income, New Hampshire won’t tax you on it.

States that don’t tax retirement income

In addition to the nine states above that don’t have an income tax at all, four states do not tax retirement income: Illinois, Iowa, Mississippi and Pennsylvania. Here’s what you should know about each one.


Illinois charges a flat state income tax of 4.95 percent, but all retirement income is exempt from paying the tax. This includes pension payments as well as distributions from plans such as 401(k)s and IRAs. Social Security payments are also exempt.


Beginning in 2023, Iowa residents over the age of 55 are no longer  taxed on their retirement income thanks to a 2022 law. Iowa state income tax rates range from 4.4 percent to 6 percent in 2023, but the range will be narrowed each following year until a flat rate of 3.9 percent is implemented in 2026.


Mississippi state income tax rates range from 0 percent to 5 percent, but retirement income is not taxed as long as you’ve met the plan requirements. This means that early distributions from retirement plans may not qualify as retirement income and could be subject to tax and a penalty.


Pennsylvania charges personal income tax at a flat rate of 3.07 percent. Retirement income is not taxed in Pennsylvania as long as plan requirements are met. Withdrawals from retirement plans such as IRAs prior to reaching the necessary age (59 1/2) may result in taxes.

States that don’t tax Social Security

Thirty-nine states plus the District of Columbia do not tax Social Security income for retirees.

West Virginia is the most recent state to join the list. It started phasing out a tax on Social Security in 2020, and no longer levied the tax starting in the 2022 tax year. Several other states are either in the process of phasing out the tax or are exploring eliminating the tax entirely.

Here are the 39 states that don’t tax Social Security income:

  1. Alabama
  2. Alaska
  3. Arizona
  4. Arkansas
  5. California
  6. Delaware
  7. Florida
  8. Georgia
  9. Hawaii
  10. Idaho
  11. Illinois
  12. Indiana
  13. Iowa
  14. Kentucky
  15. Louisiana
  16. Maine
  17. Maryland
  18. Massachusetts
  19. Michigan
  20. Mississippi
  21. Nevada
  22. New Hampshire
  23. New Jersey
  24. New York
  25. North Carolina
  26. North Dakota
  27. Ohio
  28. Oklahoma
  29. Oregon
  30. Pennsylvania
  31. South Carolina
  32. South Dakota
  33. Tennessee
  34. Texas
  35. Virginia
  36. Washington
  37. West Virginia
  38. Wisconsin
  39. Wyoming

The 11 states that tax Social Security benefits include: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah and Vermont.

Other retirement income tax issues

While the states listed above don’t tax retirement income at all, there are other states that provide some exemptions. Several states don’t tax military retirement pay, while other states treat pension income differently than distributions from retirement plans such as 401(k)s or IRAs.

Be sure to understand the tax implications of living in a state before deciding where to retire. Taxes on retirement income are one element of the equation, but you’ll also want to consider things like sales and property taxes to get a complete picture. You may ultimately decide that paying more in taxes is worth it to you if a state offers other benefits that make up for the higher cost.

Bottom line

If you’re looking to avoid paying state taxes on your retirement income, you’ll have 13 states to choose from, while many others offer exemptions of some sort. Make sure to understand the tax situation in a state before deciding to relocate there. While lowering your tax bill may help you enjoy a more comfortable retirement, it’s not the only factor worth considering.