13 States Where Your Retirement Income Won't Face State Taxation

Securing your retirement savings extends beyond investment strategy—it also involves understanding where you live and how state tax policies affect your income streams. The good news? A significant portion of the United States offers substantial relief for retirees concerned about state-level taxation.

The Complete Tax Exemption Advantage

Thirteen states provide blanket protection for retirement income, meaning none of your retirement income faces state taxation in these locations. These jurisdictions include Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

What does this protection actually cover? Your withdrawals from retirement accounts—whether from 401(k) plans, IRAs, or traditional pensions—remain untouched by state tax collectors. Social Security retirement benefits also flow to your account tax-free at the state level. This comprehensive exemption applies to pension distributions and all forms of retirement income streams.

However, federal income taxes remain unavoidable. Regardless of which state hosts your retirement, the federal government collects income taxes on most retirement income categories.

Two Categories of Tax-Friendly Retirement States

These 13 states break down into two distinct groups, each with different advantages and considerations.

States with No Income Tax at All (9 states)

Nine of these retirement-friendly states take an even broader approach—they don’t levy state income taxes on any type of income. This group includes Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. For retirees, this means comprehensive financial freedom at the state level.

One notable exception exists within this category: Washington State taxes capital gains for certain high-value transactions. Despite voter initiatives in recent elections, this policy remains in place for the time being.

States with Targeted Retirement Tax Policies (4 states)

Illinois, Iowa, Mississippi, and Pennsylvania follow a different path. Rather than eliminating all state income taxes, these states specifically exempted retirement income from taxation through deliberate policy decisions. This targeted approach aims to attract retirees while maintaining revenue from other sources.

Retirees considering Mississippi or Pennsylvania should note one important detail: early withdrawals from retirement accounts may still face state taxation in these locations. This distinction matters for those under age 59½ accessing their retirement funds.

Expanded Tax Relief Beyond the Core 13

Even if your residence doesn’t appear on the primary list, substantial tax relief remains available. Numerous states exempt Social Security retirement benefits specifically, even when they tax other retirement income forms. This expanded group includes Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, Virginia, and Wisconsin.

Alabama extends this courtesy further by also protecting pension income from defined benefit retirement plans from state taxation. Hawaii provides similar consideration for distributions from private or pension plans funded through employer contributions rather than employee savings.

Understanding Federal Taxation on Retirement Income

While states offer generous exemptions, federal tax obligations require attention. The federal government does provide some relief for Social Security benefits, though the amount varies significantly based on your income level.

Your Social Security benefit taxation depends on your combined income—calculated by adding your adjusted gross income, any nontaxable interest, and half of your annual Social Security benefits. Filing status matters considerably:

For single filers, combined income below $25,000 results in zero federal taxation on Social Security. Between $25,000 and $34,000, up to 50% becomes taxable. Above $34,000, up to 85% faces federal taxation.

Married couples filing jointly experience different thresholds: $32,000 and $44,000 respectively mark the boundaries for the same three taxation tiers.

Those married but filing separately generally face taxation on up to 85% of their benefits regardless of income level.

Future Possibilities for Additional Relief

The retirement tax landscape continues evolving. Recent political campaigns have included proposals to eliminate federal taxation on all Social Security retirement benefits entirely. If enacted, such changes would provide retirees with even greater income preservation at the federal level, building upon the state-level protections already available in numerous jurisdictions.

Planning your retirement location around tax implications remains one of the most straightforward methods of maximizing your retirement income without requiring additional investments or complex financial strategies.