Where Can You Retire Without State Taxes? 13 States Offer Complete Retirement Income Relief

When planning retirement, one crucial factor retirees often overlook is how state income taxes can erode their savings. The good news? Thirteen states have eliminated state income taxes on retirement income entirely, allowing you to keep more of what you’ve earned. Understanding which states offer these benefits—and how they compare—is essential for strategic retirement planning, especially if you’re considering relocating.

The States Where Retirement Income Faces No State Taxation

Nine states stand out by having no state income tax whatsoever:

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

Additionally, four states—Illinois, Iowa, Mississippi, and Pennsylvania—have implemented targeted tax exemptions specifically for retirement income, even though they maintain state income taxes on other earnings.

Together, these 13 jurisdictions create a powerful incentive for retirees seeking tax relief on:

• Social Security benefits
• 401(k) plan withdrawals
• Individual Retirement Account (IRA) distributions
• Pension payments from any source

Important Caveats: Not All Tax-Free States Are Equal

While Washington appears on the no-tax list, there’s an important distinction. The state exempts most retirement benefits but imposes a capital gains tax—a consideration for investment-heavy retirees.

In Mississippi and Pennsylvania, early withdrawals from retirement accounts face state taxation despite the general retirement income exemptions. This nuance matters significantly for those accessing funds before reaching retirement age thresholds.

Partial Relief: States Offering Limited Retirement Tax Breaks

Beyond the 13 complete-exemption states, many others provide selective tax relief. Over 30 additional states exclude Social Security benefits from taxation. Alabama distinguishes itself by exempting both Social Security and defined benefit pension income. Hawaii takes a different approach, excluding distributions from private or pension plans when contributions weren’t made by the retiree themselves.

The California Question: Social Security and State Taxes

For those considering California retirement, understanding the state’s approach is critical. Does California tax Social Security? No—the state does not tax Social Security retirement benefits. However, California does tax other retirement income sources including 401(k) withdrawals, IRA distributions, and pension income. This partial exemption makes California less attractive than the 13 full-exemption states but still preferable to states with comprehensive retirement income taxation.

Federal Taxation: Where the IRS Still Collects

Escaping state taxes doesn’t mean complete tax freedom. Federal income taxes apply nationwide, and Social Security benefits face particular scrutiny. The taxability of your benefits depends on combined income—calculated by adding Adjusted Gross Income (AGI), nontaxable interest, and half your Social Security benefits.

Federal Social Security Tax Rates by Filing Status:

This framework means higher-income retirees face substantial federal taxation on Social Security—a reality that strategic state selection can only partially mitigate.

Looking Ahead: Potential Changes in Federal Retirement Taxation

During recent political campaigns, proposals have emerged to eliminate federal taxation on Social Security benefits entirely. Should such legislation pass, retirees in the 13 retirement-friendly states could achieve near-complete tax exemption on their primary income source—a significant financial advantage.

The Retirement Tax Strategy

For retirees seriously considering relocation, selecting a state without retirement income taxation could preserve tens of thousands of dollars over a decade. While federal taxes remain unavoidable, eliminating state income taxes on Social Security, pensions, and retirement account withdrawals creates substantial savings, particularly for those with substantial retirement assets or multiple income streams. Whether you’re eyeing Florida’s beaches, Texas’s affordability, or another no-tax state, the financial mathematics strongly favor such planning when feasible.