15 States That Do Not Tax Retirement Income (2024)

States vary widely in the way they tax retirement income so location is an important consideration in financial planning for retirement. Some states don’t levy income states on any sort of retirement income, while others tax IRA and 401(k) distributions, pension payouts and even Social Security payments like ordinary income. Income taxes are just part of the story, however, as some states with low or no income taxes have high property, sales and other taxes. You may also want to consider working with a financial advisor when you’re planning for retirement.

Retirement Income Tax Basics

Most retirement income can be subject to federal income taxes. That includes Social Security benefits, pension payments and distributions from IRA and 401(k) plans. Exceptions include distributions from Roth IRA and Roth 401(k) plans. Federal income taxes on Roth contributions are paid before the contributions are made. These contributions as well as any investment gains can be withdrawn free of federal income taxes after five years if you have reached age 59.5.

The situation is more complex when it comes to how states will tax your income. Many states have no income tax at all, so all retirement income, as well as other income, is state tax-free. Most states specifically exclude Social Security benefits from taxation. Some others also exempt retirement account distributions and pensions, but most have a mix of approaches to taxing retirement income.

Only 10 states actually tax Social Security in some capacity: Colorado, Connecticut, Kansas, Minnesota, Montana, Nebraska, New Mexico, Rhode Island, Utah and Vermont. Every other state exempts Social Security, but may tax sources such as pensions, 401(k)s, IRAs and other forms of retirement income if retirees’ income exceeds a certain limit.

9 States That Don’t Tax Any Income at All

Nine states have no state income tax on individual income at all. Eight of them – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming – don’t tax wages, salaries, dividends, interest or any sort of income.

New Hampshire, the ninth state, has no state income tax on wages, salaries, retirement account withdrawals or pension payments. But until 2027 when it fully repeals this policy, New Hampshire does tax dividends and interest, which could be sources of income for some retirees with assets outside retirement accounts.

No state income tax means these states also don’t tax Social Security retirement benefits, pension payments and distributions from retirement accounts. That means retired residents in these states have no worries about paying state income taxes on their income from any source, with the specific exceptions of interest and dividends in New Hampshire.

The rest of the states across the country take a variety of approaches to taxing retirement income. Some tax all retirement income, including Social Security, while others tax all or parts of retirement income.

Which States Don’t Tax Some or All Retirement Income?

Not including the aforementioned nine states that don’t tax any income (besides interest and dividends in New Hampshire), the following 32 states levy no taxes on either all retirement account or pension income, only certain types of it or only on a reduced portion of it:

States With Small Retirement Tax Requirements

Some states that don’t appear on this list of those that don’t tax retirement income at all are still relatively generous when it comes to letting retirees off the tax hook. For instance, Georgia does not tax Social Security retirement benefits and also provides a deduction of anywhere from $35,000 to $65,000 per person (depending on your age) on all other types of retirement income.

Also, in Pennsylvania, all Social Security benefits and IRA and 401(k) income is exempt, and the state does not levy income tax on pension payments for those over 60. Clearly, state taxation of retirement income is somewhat complicated. One of the biggest differences between states is the variety of income caps to qualify for exemptions.

In addition, state taxation of retirement benefits is a moving target. State tax laws change over time. For instance, New Hampshire’s tax on dividends and interest is due to be phased out by 2027. Until then, the tax rate on dividend and interest income in New Hampshire declines every year until it reaches zero.

Bottom Line

Nine states levy no income taxes on retirement income from any source, outside of interest and dividends in New Hampshire. Others offer resident retirees varying degrees of exemptions from taxation on Social Security, retirement account distributions, pension payments and other types of retirement income. Some of the exemptions are generous enough that many retirees in those states won’t pay any state income tax. Details such as the retiree’s income matter and vary by state, so it’s important to check with the state tax office for details before relocating to save on taxes.

Tips for Retirement

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