Unless you have most of your nest egg stashed away in Roth accounts, Uncle Sam is generally going to take his cut when you withdraw funds once you retire.
But depending on where you live, you might find some consolation in knowing there are several states that won’t tax your retirement income. Which ultimately means you get to keep a little more of your Social Security benefits, pension distributions, and retirement account withdrawals.
If you’re a current or soon-to-be retiree, you might be planning on a change of location. Well, in addition to weather, infrastructure, proximity to family, and other considerations, you might want to spend a few minutes getting caught up on your potential new home state’s tax situation.
Today, I’m going to dive into which states don’t tax retirement income, which includes a number of states that don’t tax individual income period.
Taxes in Retirement
The good news? There’s an 82% chance you’ll end up living somewhere that won’t touch your Social Security benefits—only nine states tax Social Security at the moment.
The bad news? Far fewer states keep their paws off retirement income from pensions, 401(k)s, IRAs, and other sources. A baker’s dozen, to be specific.
If you do live in one of those states, the lack of retirement income taxes could be a significant boon for your bottom line. But you’ll want to consider a state’s broader tax picture—after all, overly high property and sales taxes, for instance, could eat away much of what you saved by not coughing up part of your retirement income up front.
That’s why, in my look at the 13 states that don’t tax retirement income (and, in some cases, individual income of any sort), I’m going to provide you with information on other important state-level taxes, as well as what you might expect from local sales taxes, which can be more substantial than you’d think. I’ll also include any special property tax breaks for older adults, which are fairly commonplace.
State and local sales tax rates are from Tax Foundation data as of July 1, 2024. Each state’s property tax rates are from the World Population Review’s 2024 figures.
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States With No Income Tax at All
Some states choose not to tax their residents’ income and instead generate income solely through other types of taxes that both locals and visitors may pay.
In short: These states won’t tax your retirement income because they’re not taxing anyone’s income.
1. Alaska
Alaska is one of the tax-friendliest states in the nation, especially for seniors.
Not only does it have no state income tax, but it also has no statewide sales tax. True, individual localities are allowed to impose their own sales levies, up to 9.5% no less, but Alaska still has the lowest average combined sales tax rate at 1.82%.
The Last Frontier does collect a 1.16% property tax that ranks in the upper half of all states’ property taxes, but there is a tax break for seniors on that front. Homeowners who are at least 65 years old (or 60+ for surviving spouses) are exempt from the initial $150,000 of the assessed value of their house. Some younger residents may be eligible to have some of the value (up to $75,000) exempt as well.
Lastly, if you plan on living in Alaska long-term, the state itself will likely help offset some of your tax payments. That’s because it pays a yearly stipend, called the Permanent Fund Dividend, to residents who have lived in the state for a minimum of one year. In case you’re curious, the 2024 Permanent Fund Dividend was $1,702 per person.
Related: Federal Tax Brackets and Rates
2. Florida
Retiring to Florida is so commonplace that it has become a cliché, but it has its perks.
Hate shoveling? South Florida hasn’t seen snow since 1977. Love beaches? The state’s surrounded by them. Detest taxes? Good news there, too—the Sunshine State doesn’t tax personal income.
Florida does have a 6% statewide sales tax that’s higher than the median, and localities can tack on up to an additional 2%; the average combined rate is a hair above 7%, putting it around the middle of all 50 states. That said, many necessities are tax-exempt, including groceries and feminine products (which unfortunately still fall subject to the “pink tax“).
Florida’s property tax rate is roughly at the national median at 0.82%, and it also offers property tax breaks to retirees. Residents who are at least age 65, and meet other necessary criteria, can get an additional homestead exemption from certain city and country governments (income limitations apply).
Related: How to File a Tax Extension [Postpone Your Taxes]
3. Nevada
Thinking of rolling the dice as a Nevada retiree? Well, risky roulette players in Vegas bet on double zero—the same amount of personal income tax that the state’s residents have to pay.
Better still? The Silver State has one of the lowest real estate property tax rates in the nation, at 0.5%. It doesn’t offer any property tax exemptions that are explicitly for seniors, but you might qualify for exemptions if you’re a veteran, blind, or a surviving spouse.
Nevada does charge a high 6.85% state sales tax, however, and local taxes add another 1.39%, on average. Groceries and prescription drugs are exempt, which helps.
Related: How Are Social Security Benefits Taxed?
4. New Hampshire
The Granite State’s personal income tax is a rock-bottom zero, too. Historically, New Hampshire has levied a tax on dividends and interest, but the tax has been phasing out over the past few years, and it disappeared entirely at the start of 2025.
The sales tax situation is also ideal—there is none! And you won’t find any local sales taxes, either!
The shoe drops with New Hampshire’s property tax rate, which is one of the highest at 1.89%. However, each municipality has adopted an elderly exemption, each of which has its own asset and income limits for eligibility. The dollar amount also may differ depending on age.
Related: Does My Child Have to File a Tax Return?
5. South Dakota
If you decide to spend your retirement years rooting on the Jackrabbits, you’ll be treated to an abundance of football talent … and a complete absence of state income tax.
Yes, you’ll pay state sales taxes, but its core state sales tax of 4.2% is on the lower side, and even after you factor in an average local sales tax of 1.91%, the combined 6.11% levy is also in the lower third of the nation. But you won’t get a break on essentials such as prescription drugs and groceries.
Conversely, property taxes are on the higher side, at 1.14%.
The Mount Rushmore State also grants an assessment freeze to the elderly and disabled, reducing the assessed value of the homeowner’s property. Among other eligibility requirements, you must be at least 65 years old or disabled (as defined by the Social Security Act), have resided in the single-family dwelling for at least 200 days of the previous calendar year, and fall below certain income and property value limits.
Related: Tax Preparation Checklist [Get Your Tax Documents In Order]
6. Tennessee
Tennessee residents also pay no income tax, but the sales taxes are pretty high. In addition to a statewide sales tax of 7%, localities add 2.56% … and shoppers pay an additional state tax of 2.75% on any single-item purchase above $1,600. The tax is applied to the amount in excess of $1,600, but less than or equal to $3,200.
Indeed, Tennessee’s state sales tax rate is second only to California, and its combined tax rate is second only to Louisiana.
On the plus side, the Volunteer State has a lower-than-average property tax rate of 0.58%, and there are ways to avoid that levy altogether.
For one, Tennessee has a property tax relief program reimburses adults age 65 or older, as well as some veterans with disabilities and surviving spouses, for taxes paid on a primary residence, as long as their income falls under specific limits.
The state also has a property tax freeze program. Residents with a primary residence within a participating city or county, who are at least 65 years old by the end of the tax year and whose income falls within the annual limit, can have the tax-assessed value of their home frozen.
Related: Capital Gains Tax: What Is It, Rates, Home Sales + More
7. Texas
The Lone Star State is income tax-free, too, but you pay for it in other ways.
Texas’ 6.25% sales tax sits in the top third of all states, as does the combined 8.2% sales tax rate. (Texas allows localities to levy up to 2%.) The good news? Prescription drugs, over-the-counter medications, and groceries are all exempt.
Its 1.63% property tax rate is also among the richest in the nation.
Retirees get something of a break, however. Residents who are least 65 years old (55 for surviving spouses), have a disability, or are a veteran may qualify for several homestead exemptions on their principal residence.
The general residence homestead exemption applies to school taxes—if the exemption is granted, school taxes are calculated based on $100,000 less than your home’s appraised value. Some local governments have additional homestead exemptions for school taxes based on a percentage of the home’s value. Elderly and/or disabled adults may also be eligible for an additional $10,000 school tax exemption (or higher) and receive at least a $3,000 homestead exemption for county taxes for flood control and farm-to-market road maintenance.
Related: 11 Ways to Avoid Taxes on Social Security Benefits
8. Washington
Washington is an interesting case. It doesn’t charge a state-level personal income tax, but it does levy a 7% tax on the sale or exchange of long-term capital assets, such as bonds, stocks, business interests, or other investments and tangible assets.
But the important thing to note here is that the capital gains tax doesn’t apply to those actions when they’re made through retirement savings accounts such as 401(k)s and individual retirement accounts (IRAs). However, in the event that you have taxable events outside of such an account, several deductions (including the annual standard deduction) and exemptions may reduce one’s taxable amount.
Meanwhile, Washington has a lofty 6.5% state tax rate, and localities use a lot of their generous 4.1% cap, with an average local tax rate of 2.95%. As a result, Washington’s combined average tax rate of 9.45% is fourth-highest in the nation … though groceries and prescription drugs are exempt.
The Evergreen State is also pricey for real estate owners, with a top-10 property tax rate of 0.88%.
Washington has a property tax exemption program that can both reduce overall property taxes, and freeze the home’s taxable value, preventing property-tax hikes in the future. Interestingly, while most states with property tax exemptions have a minimum age of 65, Washington’s is lower, at 61 (and 57 for surviving spouses of a qualified participant). To qualify, you must not exceed the county’s combined disposable income threshold and must have lived in the home for at least half a year.
The state also offers temporary relief in the form of a property tax deferral program in which Washington pays the property tax on the homeowner’s behalf, and those taxes (plus 5% interest) must be repaid when the owner moves, sells the home, or passes away. The program is eligible to people age 60 and older with disposable income below their county’s threshold.
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
Related: What Is the Standard Deduction?
9. Wyoming
Wyoming is the final state in this list that has no state income tax—and as it turns out, the Cowboy State is pretty darn tax-friendly on several fronts.
The state’s sales tax is 4.00%. The max local tax rate that can be added is 2%, though currently local taxes add 1.44%. The combined rate of 5.44% is sixth-lowest in the country right now, and that tax doesn’t even apply to groceries and prescription drugs.
Meanwhile, Wyoming’s property tax rate of 0.58% is in the bottom third of all states. And seniors get a break, too. Wyoming’s property tax deferral program lets homeowners delay payment of up to half of all property taxes owed on a primary residence as long as it sits on fewer than 40 acres of land. Qualifying homeowners must be older than 62 or disabled, and must have bought the property at least 10 years before applying for the deferral.
Related: How to Give Stocks as a Gift in a Tax-Efficient Way
States That Specifically Don’t Tax Retirement Income
A few states have a general income tax but don’t tax retirement income, such as 401(k) or IRA withdrawals or pension payments.
Like with the states above, residents of the states below would still owe any applicable federal taxes on retirement income.
10. Illinois
Illinois doesn’t tax retirement income including qualified employee benefit plans, IRAs, government retirement plans, military pensions, Railroad Retirement benefits, and Social Security.
That said, even if you don’t apply to the state’s individual income tax, which is 4.95% regardless of how much you earn, a life in Illinois generally has a high overall tax burden.
Illinois’ 2.11% property tax rate is the nation’s second highest, behind only New Jersey (2.33%). Retirees might qualify for certain property tax breaks, however.
Illinois offers a general homestead exemption that applies to a person’s principal home, and it’s available regardless of age. The exemption amount is the increase in the current year’s equalized assessed value (EAV) above the 1977 EAV, with a maximum $6,000 exemption for most counties, but a $10,000 max for Cook County and an $8,000 max for counties continuous to Cook.
Additionally, retirees can also take advantage of a homestead exemption specific to seniors age 65 and older. The maximum amount of reduction in equalized assessed value is $8,000 in Cook and contiguous counties, and $5,000 in all other counties. Those age 65 and older with total household income of $65,000 or lower may also qualify for a real estate assessment freeze and a real estate tax deferral.
Sales taxes are high, too. The Land of Lincoln’s statewide 6.25% rate is in the top third of all states. It also allows localities to add levies of up to 4.75%, though right now the average rate is 2.62%. The combined rate of 8.87% is seventh-highest in America. Essentials, meanwhile, are usually still taxed, but at lower rates. (Example: The tax on prescription drugs is just 1%.)
Related: What Does the Average 55- to 64-Year-Old Have in Retirement Accounts?
11. Iowa
Iowa’s state income tax just changed, with a flat income tax of 3.8% across the state as of 2025. But the Hawkeye State won’t tax retirement income as long as the taxpayer is at least 55 years old, which covers all but the most fortuitous of early retirees.
What taxes do apply?
Iowa’s state sales tax is a moderately high 6%. It allows localities to add up to 2%, but they currently average less than half of that, at 0.94%. The average combined rate of 6.94% is in the bottom half of the U.S. Essentials such as groceries are tax-exempt. In short: not bad.
Iowa’s property tax does crack the top 10, however, at 1.49%. The state does have a homestead tax credit for a homeowner that occupies the homestead any six months of the year (but must reside there as of July 1). This credit reduces the taxable value of the property of up to $4,850. But in 2023, Iowa added an additional homestead tax exemption for people 65 and older on or before Jan. 1 of the assessment year, for $6,500 of taxable value.
Related: 10 Things Original Medicare Doesn’t Cover
12. Mississippi
Like Iowa, Mississippi also has a flat state income tax rate, which was 4.7% in 2024 but is dropping to 4.4% in 2025 and 4.0% at the start of 2026. And like Iowa, the Magnolia State gives retirees a break on their income, opting not to tax 401(k) and IRA distributions, pension income, Social Security benefits, or annuities, assuming the recipient meets retirement plan requirements. (However, early distributions might be subject to taxes.)
Mississippi’s state sales tax rate is 7%, which is tied with Tennessee for second highest in the nation. Mississippi does allow for an additional 1% in local sales taxes, but only two cities (Jackson at 1%, and Tupelo at 0.25%) do. The result is a low 0.06% average local rate that brings its average combined rate to a much more reasonable 7.06% that sits closer to America’s middle. Essentials are taxable, however.
The state’s property tax rate is 0.76%, so in the bottom half of all states. All eligible taxpayers may qualify for a homestead exemption, however, limited to the first $7,500 of assessed value and $300 in actual exempted tax dollars. If you’re over 65, you may qualify for an additional exemption for another $7,500 of assessed value.
Related: When Should You Take Social Security?
13. Pennsylvania
The last state on our list, Pennsylvania, also has a flat individual income tax (3.07%), but it doesn’t tax distributions from 401(k)s or IRAs, pensions, Social Security, or Railroad Retirement benefits. Also, any income from private employers or government and military retirement plans paid after a worker qualifies to retire is exempt from taxes.
The Keystone State’s sales tax of 6% is on the high side, but it has an extremely low average local rate of 0.34%, for a combined rate of 6.34% that sits right around the bottom third of all states. Also, some products, such as diapers and prescription drugs, are tax-exempt.
Pennsylvania’s real estate property tax rate is a fairly high 1.41%, but older adults may qualify for tax breaks, and not only if they’re homeowners. People might qualify for property tax or rent rebates of up to $1,000 through the Property Tax / Rent Rebate Program if one of the following apply:
- They are at least 65 years old
- They are at least 50 years old and a widow or widower
- They are at least 18 years old and have a disability
To qualify, one’s household income can’t exceed $46,520.
Related: How Long Will My Savings Last in Retirement? 4 Withdrawal Strategies
