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

Source The Motley Fool

You spend your entire working life saving and investing for retirement. But once you clock out for the last time, the game changes. Now, it's about stretching your nest egg for as long as you need it. Taxes are a part of life, but that doesn't mean you shouldn't try to minimize your tax bill.

Each U.S. state taxes its residents differently, including 13 that don't tax retirement income at all.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Factors such as location, the real estate market, and other taxes at the state or local levels can impact your cost of living from state to state. But if you want to help stretch your retirement savings as much as possible, income tax laws could affect where you might want to live.

Below is an overview of how different U.S. states tax your retirement income as of 2025.

8 states don't tax your retirement income whatsoever

Your retirement income may come from multiple sources, including retirement accounts such as a 401(k) or IRA, a pension, or Social Security. Or, you might generate investment income from a brokerage account, which could be dividends, interest, or capital gains when you sell an asset.

These states have no income tax of any kind:

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

New Hampshire had previously taxed income from dividends and interest, but officially repealed this tax as of January 1, 2025. Therefore, residents will no longer pay this tax starting with the current tax year.

1 state with a minor exception

  • Washington

Washington levies a 7% income tax on capital gains exceeding a certain threshold ($270,000 for the 2024 tax year). Other than that, there are no state income taxes to speak of.

These 4 states don't tax retirement income, but do tax other types

A small handful of states tax earned and/or investment income, but exempt income from retirement accounts and Social Security benefits:

  • Illinois
  • Iowa (ages 55 and older)
  • Mississippi
  • Pennsylvania

These states do not tax retirement income in a practical sense; however, they may tax nonqualified retirement income, such as distributions taken from a pension, 401(k), or other retirement plan before the required age.

What about Social Security?

Unfortunately, most Americans don't save as much as they should for retirement. The typical U.S. household has just $200,000 saved for retirement at age 65.

Millions of retirees depend on Social Security benefits for survival. Fortunately, Social Security is exempt from state income taxes in most states, 41 to be precise:

  • 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
  • West Virginia
  • Wisconsin
  • Wyoming

Washington, D.C., is not technically a state, but it's part of the above group.

On the other hand, Social Security is subject to income taxes in nine states. Those are the states of Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. West Virginia is phasing out its income tax on Social Security and will join the above list after the 2025 tax year.

And pensions?

Pensions are not as prevalent in the private sector as they once were, but they remain a vital retirement vehicle for government employees and many others. Fortunately, 15 states do not tax pension income, although they may tax income from other sources, including certain retirement accounts. Those states are:

  • Alabama
  • Alaska
  • Florida
  • Hawaii
  • Illinois
  • Iowa
  • Mississippi
  • Nevada
  • New Hampshire
  • Pennsylvania
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

Distributions from some other retirement accounts are subject to state income tax in Alabama and Hawaii.

The fine print and federal taxes

The tax code is complex, and people fund their retirements in various ways. Individuals must learn how state income tax laws apply to their financial situation. Living in a state with income taxes does not guarantee that you will pay taxes on your retirement income. For instance, some states that tax Social Security benefits only do so beyond certain income limits.

Additionally, state and federal income taxes are separate matters entirely. Your tax bill could be lower in one state versus another, but federal tax laws apply no matter which state you call home.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Gold Price Forecast: XAU/USD declines below $4,050 on USD strength and hawkish Fed comments Gold price (XAU/USD) extends the decline to around $4,030 during the early Asian session on Tuesday. The precious metal edges lower as traders dialed back expectations of a US interest rate cut next month.
Author  FXStreet
Nov 18, Tue
Gold price (XAU/USD) extends the decline to around $4,030 during the early Asian session on Tuesday. The precious metal edges lower as traders dialed back expectations of a US interest rate cut next month.
placeholder
Top 3 Price Prediction: Bitcoin, Ethereum, Ripple – BTC, ETH and XRP Look for a Foothold After a Sharp ShakeoutBitcoin trades near $92,600 after a dip below $90,000, while Ethereum around $3,118 and XRP near $2.21–$2.23 sit on key support zones, as BTC, ETH and XRP all try to turn a sharp correction into a tradable rebound rather than a deeper slide.
Author  Mitrade
Nov 19, Wed
Bitcoin trades near $92,600 after a dip below $90,000, while Ethereum around $3,118 and XRP near $2.21–$2.23 sit on key support zones, as BTC, ETH and XRP all try to turn a sharp correction into a tradable rebound rather than a deeper slide.
placeholder
Could XRP Really Catch Ethereum? Analysts Revisit the Question as ETF Tailwinds BuildAs US spot XRP ETFs roll out and issuers like Canary Capital and Franklin Templeton step in, analysts say XRP’s market cap could climb on growing utility and ETF accumulation—but overtaking Ethereum’s $373 billion smart-contract powerhouse remains a long-shot, at least for now.
Author  Mitrade
Nov 20, Thu
As US spot XRP ETFs roll out and issuers like Canary Capital and Franklin Templeton step in, analysts say XRP’s market cap could climb on growing utility and ETF accumulation—but overtaking Ethereum’s $373 billion smart-contract powerhouse remains a long-shot, at least for now.
placeholder
Bitcoin's Drop to $86K Approaches 'Max Pain' Zone, Yet Presents Potential Buying OpportunityAnalysts identify the $84,000 to $73,000 range as Bitcoin's likely "max pain" territory where capitulation may occur.
Author  Mitrade
Yesterday 03: 35
Analysts identify the $84,000 to $73,000 range as Bitcoin's likely "max pain" territory where capitulation may occur.
placeholder
Market Meltdown: BTC, ETH, and XRP Capitulate as Bears Seize ControlBitcoin trades around $85,900 after breaking below $86,000, with Ethereum under $2,791 and XRP below $1.99 as BTC, ETH and XRP extend weekly losses of 8–10%, forcing traders to focus on supports at $85,000, $2,749 and $1.77 for clues on whether this sell-off has further to run.
Author  Mitrade
Yesterday 04: 15
Bitcoin trades around $85,900 after breaking below $86,000, with Ethereum under $2,791 and XRP below $1.99 as BTC, ETH and XRP extend weekly losses of 8–10%, forcing traders to focus on supports at $85,000, $2,749 and $1.77 for clues on whether this sell-off has further to run.
goTop
quote