States That Don’t Tax Retirement Income

Where you live when you retire doesn’t have to be where you live when you are retired. If you’re considering a move, one crucial factor to think about is taxes.

This guide provides insights into tax considerations for retirees, including updates for 2025 that affect how Social Security benefits and military pensions are taxed in various states.

State income taxes can reach as high as 13.3%—unless you reside in a state that doesn’t tax retirement income. 😊

Nine states impose no income tax at all.

If you are a retiree, relocating to any of these states means you won’t pay state income taxes on your retirement income. However, the list extends beyond just these states. Many others selectively exempt income from certain retirement sources, such as Social Security, pensions, military pensions, and distributions from defined contribution retirement plans.

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9 States That Don’t Collect Income Tax

Nine states currently have no income tax, meaning they also do not tax retirement income. These states are:

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

* New Hampshire had a 3% income tax on interest and dividend income in 2024, but this tax has been repealed starting January 1, 2025.

13 States That Don’t Tax Defined Contribution Plan Distributions

Most states tax distributions from defined contribution plans, including traditional, SEP, and SIMPLE IRAs, as well as 401(k), 403(b), 457, and Thrift Savings Plans (TSPs). However, 13 states do not impose taxes on these distributions:

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

Additionally, these four states also do not tax defined contribution plan distributions:

• Illinois
• Iowa
• Mississippi
• Pennsylvania

What about Roth IRA distributions?

Generally, states follow the same tax treatment for Roth IRA distributions as the IRS. However, since each state has its own tax code, it’s essential to consult your tax preparer or software to determine if and when Roth IRA distributions can be taken tax-free.

* Note that we could not find a single authoritative source confirming that Roth IRA distributions are tax-free in all 50 states and the District of Columbia.

15 States That Don’t Tax Pension Income

A total of 15 states do not tax pension income. In addition to the nine states with no income tax, six more states impose no tax on pension income (also known as defined benefit retirement plans):

• Alabama
• Hawaii
• Illinois
• Iowa
• Mississippi
• Pennsylvania

35 States That Don’t Tax Military Pensions

As of 2025, over 35 states provide a complete exemption for military pensions. A few states offer partial exemptions or credits, while only Washington D.C. fully taxes military pension income. The states offering full exemptions include:

• Alabama
• Arizona
• Arkansas
• Connecticut
• Hawaii
• Illinois
• Indiana – fully exempts military retirement pay starting January 2025
• Iowa
• Kansas
• Louisiana
• Maine
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Nebraska
• New Jersey
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Pennsylvania
• Rhode Island
• Utah
• West Virginia
• Wisconsin

Additionally, 13 states provide partial exemptions from state income tax on military pensions:

• California – newly added to the partial list, exempting $20,000 of military retirement or survivor pay
• Colorado
• Delaware
• Georgia
• Idaho
• Kentucky
• Maryland
• Montana – allows up to 50% exemption with some qualifiers
• New Mexico
• Oregon
• South Carolina
• Vermont
• Virginia

Only one jurisdiction provides no exemption for military pensions—the District of Columbia.

41 States That Don’t Tax Social Security Income (Plus The District of Columbia)

A total of 41 states, along with the District of Columbia, exempt Social Security benefits from taxation. This includes 31 states (and D.C.) and the nine that impose no income tax:

• Alabama
• Arizona
• Arkansas
• California
• Delaware
• District of Columbia
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nebraska
• New Jersey
• New York
• North Carolina
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• Virginia
• Wisconsin

The remaining 13 states provide partial tax exemptions for Social Security income, based on age, income level, or other criteria:

• Colorado
• Connecticut
• Minnesota
• Montana
• New Mexico
• North Dakota
• Rhode Island
• Utah
• Vermont
• West Virginia – to be phased out in 2026

Is it Better to Live in a State that Doesn’t Tax Retirement Benefits?

In general, retirees are financially better off living in states that don’t tax retirement benefits. However, it’s essential to remember that not all factors are equal. While state income taxes are a significant consideration, they shouldn’t be the sole determinant of where you choose to spend your golden years.

Other taxes, such as sales and real estate taxes, also play a crucial role. For instance, New Hampshire has no income tax but some of the highest property taxes in the country. In such cases, the advantage of not paying income tax may be negated by higher property taxes.

Housing prices are another vital factor. Washington state has no income tax, but the median home price is $552,000, which could easily offset the benefits of tax-free retirement income.

Insurance costs also matter. Florida, a popular destination for retirees, has no income tax but the highest car insurance premiums in the nation, averaging $2,694 per year, along with the highest average homeowner’s insurance premiums at $10,996 per year.

In summary, while the impact of income tax on retirement is significant, it’s just one piece of a larger puzzle. Living in a state that doesn’t tax retirement income is a considerable advantage, but it can be offset by other unavoidable costs.