Top 9 States That Don’t Tax Retirement Income

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A tax-free state is a dream for those taxpayers who end up submitting annual tax returns. How about knowing states that don’t tax retirement income? Let’s explore some of these states in this article. 

Life after retirement always seems to be rewarding for many retirees. While some may want to live close to their families, others may fear the financial burden of heavy taxes.

But what if I tell you about some states that levy no income tax on your retirement income? These states with no to low tax rates will help you manage your savings a lot better. 

This article covers everything about the nine tax-free states for your retirement income. However, few of these states also have different tax regimes, depending on the source of retirement income. 

Top 9 States That Don't Tax Retirement Income

States That Don’t Tax Retirement Income

If you want to live a luxurious lifestyle that doesn’t dig into your pockets, consider living in an income tax-free state. For the least known, the United States boasts about the nine best states that make up for an affordable cost of living. Notably for retirees who end up paying large sums of money in taxation.

However, it is only one of the many factors to consider before relocating to a new state. While these states provide a total exemption on a general or retirement income, they also derive benefits by charging high sales or property taxes. 

#1. Alaska

Retirement Income: 

The Last Frontier state is known for the best sightseeing and fishing adventures and bears the tag of being income-tax-free. With absolutely no tax imposition on the common retirement types, the state makes you save a lot of your wealth. 

Top 9 States That Don't Tax Retirement Income

Tax on Social Security Benefits: 

You are entitled to the social security benefits without paying any tax when you retire in Alaska. 

IRA, 401(k)s, and Pension Plans: 

With no tax filing, Alaska makes you receive the benefits of IRA, 401(k)s retirement withdrawals and pension income.

Other Factors To Consider: 

Inheritance and Estate taxes: Not applicable. 

Sales tax and Property taxes: While paying sales tax is not a burden; a golden-ager may have to worry about unstable property taxes. 

Top 9 States That Don't Tax Retirement Income

#2. Florida

Retirement Income: 

Famous for the name sunshine state, Florida is a significant hub for residents coming in from all over the country. Apart from being a tourist destination, the state does not cut taxes on retirement income. Individuals in their golden years have more spending options with no tax deductions. 

Tax on Social Security Benefits: 

You will never have to pay tax rates while deriving money from social security accounts. 

IRA, 401(k)s, and Pension plans: 

Traditional Individual Retirement accounts, 401(k)s, and pension withdrawals are tax-free. 

Other Factors to Consider:

Estate and Inheritance Tax: No 

Sales tax: There is a 8% sales tax, combined with state and local sales tax. 

Corporate tax: The state levies 5.5% of corporate tax on small to large businesses. 

Property Tax: Property tax of 0.98%, relatively lower than the average rates. 

You might also like to read: The Ultimate Guide To Planning And Paying For Your Retirement

#3. Nevada

Retirement Income:

A Gold-producing state, Nevada is a synonym for luxury with comfort. You will always be on the receiving end, from deserts to dazzling casinos and resorts. 

Tax on Social Security Benefits: 


IRA, 401(k)s, and Pension Plans: 

With no tax burden on any of your retirement accounts, Nevada is a suitable place to move in before the beginning of your retirement phase. 

Top 9 States That Don't Tax Retirement Income

Other Factors To Consider: 

No Inheritance and estate taxes: You are more likely to reap goodwill benefits. 

No corporate tax.

Sales tax: The state takes charge of goods and services sales by cutting down 8.23% of combined local and state sales tax.  

#4. New Hampshire

Retirement Income:

New Hampshire is another famous state that restricts the tax burden for senior citizens. With an emphasis on making the state tax-free, the residents get every bit of their hard-earned money. 

However, it is the only state in New England region to come up with massive relief for older people. 

No Tax on Social Security Benefits: 

New Hampshire makes sure that amounts from Social security accounts remain undisturbed for disabled people. 

IRA, 401(k)s, Pension Plans: 

Your money in these retirement accounts remain safe with no additional tax requirements during withdrawal. Instead, there is a 5% tax on interest and dividends, which will be repealed by 2027. 

Other Factors to Consider:

Inheritance and Estate taxes: Not applicable:

Sales tax: While most states charge at least a portion of sales tax from merchants, this state collects no revenue from sales. 

You might also like to read: What Is Considered Low Income for Senior Citizens?

#5. South Dakota

Retirement Income:

The state captures the interest of many visitors for its lively environment and grand monuments. Apart from that, South Dakota fits into the picture of an excellent economy with a low cost of living. One would never have to worry about dangerous tax bills after moving here. 

Top 9 States That Don't Tax Retirement Income

Tax on Social Security Benefits: 

The tax-free social security makes the impaired utilize their money more efficiently. 

IRA, 401(k)s, and Pension Schemes: 

The state levies no tax imposition on all or one of the three retirement benefits. 

Other Factors To Consider:

No Estate tax or Inheritance tax 

Sales tax: South Dakota earns local and state sales tax revenue. With a low rate of 4.5%, the state only tries to achieve a better economy. 

#6. Tennessee

Retirement Income:

Carrying a reputation of being a low-tax state with no general income tax and retirement taxes. The state government of Tennessee makes sure that a significant portion of revenue comes from State sales tax. Property taxes are another criterion for distributing large sums of money for states’ development. 

Social Security Benefits: 

The state considers social security part of a regular income to avoid taxes. 

IRA, 143(k)s, and Pension Benefits: 


Other Factors To Consider:

There is no Inheritance tax on goodwill.

Sales Tax: Unlike most states with reasonable tax rates, the state makes you charge 9.25% of Sales tax for local and state governments. 

You might also like to read: Benefits of Volunteering After Retirement

#7. Texas

Retirement Income: 

You will make large sums of money when you choose Texas to receive the best retirement benefits. The state is an achiever which enjoys being a low tax state. Popularly known as a lone star, the state is ideal for escaping heavy tax duties. 

Top 9 States That Don't Tax Retirement Income

Tax on Social Security Benefits: 

Absolutely Nil. 

IRA, 143(k)s, Pension Benefits: 


Other Factors To Consider: 

No Inheritance tax and Estate tax: You will always safeguard your right to heirs.

Sales Tax and Property tax: Collects revenue from 6.25% sales tax and 1.69% property taxes, ultimately bringing the income to a peak position. 

#8. Washington

Retirement Income:

Washington is a living example of how states should initiate the process of tax structure for making retirement a sustainable living.

Tax on Social Security Benefits: 

No tax is collected from social security accounts. 

IRA, 143(k)s, Pension Benefits: 

It is best to segregate your retirement money into 143(k)s and pension accounts in your golden years. While it works for most senior citizens, it will also help you avoid increased tax rates. 

Top 9 States That Don't Tax Retirement Income

Other Factors To Consider:

No Inheritance and Estate taxes.

Sales Tax and Property Tax: The state restricts the sales by imposing a 6.5% sales tax, with local taxes varying depending on the location. It also makes about 0.93% from homeowners’ property, reducing tax out of retirement pay. 

You might also like to read: How Long Will One Million Dollars Last You In Retirement?

#9. Wyoming 

Retirement Income:

The equal state became the first to allow women to vote and elect a female governor. Wyoming knows how to take care of its residents by allowing total tax exemption from retirement income. 

Tax on Social Security Benefits: 

No tax on social security benefits. 

IRA, 143(k)s, and Pension Income: 

The most common types of retirement income bear no tax, which adds up to the retiree’s considerable savings. 

Other Factors To Consider:

No Inheritance Tax but limited Estate Tax.

Sales Tax and Property Tax: Wyoming’s sales tax reaches 5.22% with limited property taxes. There are other taxes in the name of use tax, but these are so little to suit the spending. The state also provides relief for senior citizens with 50% delayed tax payment in property taxes. 

Top 9 States That Don't Tax Retirement Income

Frequently Asked Questions

#1 Does Illinois tax retirement income?

Yes. Illinois charges tax on the payment of a resident. However, Illinois’ flat income tax rate is a significant advantage for people to assess the amount of tax to be paid in advance. Currently, the state charges a fixed 4.95% income tax on all kinds of income. 
Also, charge estate tax for estates more than $4 million. 

#2 Does Colorado tax military retirement pay?

While some states charge no taxes on military retirement income, other states consider military retirement as regular income. The Colorado state partially exempts up to $24,000 of retirement income from military retirees regarding the military retirement fund taxable. Moreover, the exemption stays valid for people aged 65 or older. 
The state also sets a tax break of $20,000 exemption for people retiring between 55-and 64 years old and $7500 for people under 55. 

You might also like to read: How to Decide Where to Live in Retirement

A Few Final Words

Living a tax-free life is no less than a luxury, especially if you have high-income sources. Nevertheless, it is essential to keep yourself updated with other tax forms, which indirectly add to the cost of living. 

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