It's True: These 13 States Don't Tax Retirement Income

Many retirees fear taxes, and for good reason. Taxes tend to go up regularly, after all, and these folks are often living on fixed or at least limited incomes. Some retirees are so concerned about taxes in retirement that they consider relocating.

If you're worried about your future tax bills in retirement, learn more about the taxes you'll face where you live, and factor that information into your retirement planning. Remember, too, that there are different kinds of retirement income, such as from pensions, Social Security, annuities, and retirement account withdrawals -- and the tax hits may be different for each of them.

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Here's a look at how various states tax retirement income.

The nine states that don't tax income

When it comes to the taxation of income, you're in luck if you live in one of the following states, because they don't tax income:

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

There are a few little exceptions, though, that will only apply to relatively few people: Washington state does feature a state capital gains tax, but only for high earners. And New Hampshire has levied a 3% tax on dividends and interest on investment income, but that's going away beginning in 2025.

The four states that don't tax retirement income

The next-best states to live in as a retiree, at least in regard to income taxes, are the following four, because while they do sport income taxes, they do not tax retirement income:

• Illinois
• Iowa
• Mississippi
• Pennsylvania

The 41 states that don't tax Social Security

Here are the 41 states that don't tax Social Security benefits:

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• South Dakota
• Tennessee
• Texas
• Virginia
• Washington
• Wisconsin
• Washington, D.C.
• Wyoming

The nine states that do tax Social Security benefits

Here are the nine states that do tax Social Security benefits. Don't freak out if your state is in this short list, because many residents of these states will pay little to nothing on their Social Security benefits to the state, because there are often income or age thresholds. And those who are taxed may face a low tax rate, too. Consider Minnesota, for example, where, if Social Security is your only income, it's tax-exempt.

• Colorado
• Connecticut
• Minnesota
• Montana
• New Mexico
• Rhode Island
• Utah
• Vermont
• West Virginia

Also, this list has been shrinking in recent years, so by the time you retire, your state may no longer tax Social Security.

What to keep in mind

As you plan for your retirement, take some time to look up just how your state taxes various forms of retirement income. And remember to not focus too much on income taxes, because states simply need money to function, so if they're not collecting taxes on income, they'll likely be making up for that via taxes on properties, sales, or other things.

Check out your state's full taxation picture, and think about how it applies to you. If, for example, property taxes are high, but you're a renter, that's good. If sales taxes are high, that will mainly be an issue if you're a major consumer.

Remember, too, that living in a state that doesn't tax any retirement income won't mean no taxes. There's still the federal government, which does tax some Social Security benefits.

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