Which 13 States Don't Tax Retirement Income?

Key Points

• Social Security is a financial lifeline for retirees. Fortunately, most should be able to avoid paying taxes.

• Pensions are still an important source of income for many, and the tax treatment varies by state.

• Yes, 13 states don't tax retirement income, but there is far more to the discussion.

• The $23,760 Social Security bonus most retirees completely overlook ›

There's an old saying that goes something like this: The only two certainties in life are death and taxes.

But just because you'll pay taxes in life, doesn't mean you shouldn't try to minimize your tax burden. That can be especially important in retirement, when the traditional paychecks stop. Beyond the fact that almost nobody enjoys paying taxes, most people fail to adequately save enough for retirement, so saving even a little money on taxes each year can make a significant difference to retirees.

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Americans' tax treatment varies based on the state they reside in. Understanding how states tax your retirement income isn't the sole factor in where you may want to live, but it can influence your plans.

Here are the basics of how the different U.S. states tax retirement income, and 13 states that will leave your retirement income untouched.

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Most retirees won't pay taxes on Social Security

The median U.S. household saves just $200,000 by age 65. That's only enough to withdraw just $8,000 annually (adjusted for inflation) using the popular 4% rule. Therefore, Social Security is a financial lifeline for most retirees.

Fortunately, most states don't tax Social Security benefits. The only states that do are:

1. Colorado
2. Connecticut
3. Minnesota
4. Montana
5. New Mexico
6. Rhode Island
7. Utah
8. Vermont
9. West Virginia (phasing out its tax on Social Security after the 2025 tax year)

Remember that this list refers to the state level. You may still have to pay federal taxes on your Social Security. However, the recently passed One Big Beautiful Bill Act included an additional income deduction (tax break) for senior citizens that should apply to most Social Security recipients.

According to a study by the Council of Economic Advisers, approximately 88% of seniors who receive Social Security benefits will pay no taxes on them. Note that this provision expires after 2028.

But what about invested savings? These states don't tax pensions

If you do have retirement savings, you'll want to know how states tax income from various sources. For instance, pension plans aren't as prominent as they once were, but are still a crucial income source for many present and future retirees. There are currently 15 states that don't tax income from pensions, though they may tax your income from other types of retirement plans or sources:

1. Alabama (distributions from other retirement accounts could be subject to income tax)
2. Alaska
3. Florida
4. Hawaii (distributions from other retirement accounts could be subject to income tax)
5. Illinois
6. Iowa
7. Mississippi
8. Nevada
9. New Hampshire
10. Pennsylvania
11. South Dakota
12. Tennessee
13. Texas
14. Washington
15. Wyoming

These 13 states don't tax retirement income

If you want to avoid paying state taxes on your retirement income altogether, you may be in luck. In fact, these nine states don't tax income of any kind:

1. Alaska
2. Florida
3. Nevada
4. New Hampshire (as of 2025 tax year)
5. South Dakota
6. Tennessee
7. Texas
8. Wyoming

A ninth state, Washington, is practically on this list, too. It levies a 7% tax on capital gains beyond a certain threshold ($270,000 for the 2024 tax year). The state of Washington doesn't tax any other forms of income.

Lastly, there are four more states that don't tax Social Security or income from any retirement accounts, but may tax ordinary income that you earn or receive from investments in a brokerage account, for example:

1. Illinois
2. Iowa (ages 55 and older)
3. Mississippi
4. Pennsylvania

It's not all about the taxes

In a way, states compete with each other for people, jobs, and investments from the federal government and private sector. It's partly why income taxes vary so much between states.

For instance, Alaska doesn't tax anyone's income, but the prices of goods there are often more expensive than in many other parts of the U.S., and it's geographically isolated from the rest of the country. Florida has a lot of good things going on, but it's also prone to hurricanes and other severe weather conditions that have increased property taxes, home owner association fees, and insurance for many of its residents. The reality is that each state has pros and cons.

Also, someone might pay more income taxes in one state, but that could come with better public services and programs that can aid seniors, retirees, and other residents. In other words, it's always a good idea to get the whole picture about living in a state. Taxes are noteworthy, but are just the tip of the iceberg.

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