Thirteen states will not tax your 401(k) withdrawals, IRA distributions, pension checks, or Social Security benefits. Nine of them — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — impose no personal income tax at all.1Tax Foundation. State Individual Income Tax Rates and Brackets The other four — Illinois, Iowa, Mississippi, and Pennsylvania — do tax wages but carve retirement income out of the tax base. The savings are real, but before you pack a truck, look at how each state makes up the revenue through sales taxes, property taxes, and in two cases, taxes on your estate.
The Nine States With No Income Tax
The cleanest path to tax-free retirement income is a state that taxes no one’s income. In Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming, every dollar of retirement pay passes through untouched at the state level. There is no return to file, no age threshold, and no distinction between qualified plans and non-qualified plans.
New Hampshire joined this group most recently. The state never taxed wages, but it did tax interest and dividend income until that levy was repealed effective January 1, 2025.2New Hampshire Department of Revenue Administration. Repeal of NH Interest and Dividends Tax Now in Effect New Hampshire is now fully income-tax-free for residents.
Washington’s Capital Gains Wrinkle
Washington needs an asterisk. The state has no traditional income tax, but it does levy a 7% tax on long-term capital gains above roughly $278,000 a year, rising to 9.9% on gains above $1 million. Assets held inside 401(k)s and IRAs are specifically exempt.3Washington Department of Revenue. Capital Gains Tax The tax only catches retirees selling large positions from taxable brokerage accounts.
The Four States That Exempt Retirement Income
Illinois, Iowa, Mississippi, and Pennsylvania all tax wages, but each treats retirement income differently. The eligibility rules are where these states diverge, and the differences matter if you retire early or plan to work part-time.
Illinois
Illinois exempts a broad list of retirement income from its flat 4.95% income tax: 401(k) distributions, traditional and Roth IRA withdrawals, government pensions, military retirement pay, Social Security, and railroad retirement.4Illinois Department of Revenue. Does Illinois Tax My Pension, Social Security, or Retirement Income? There is no age requirement. If the money comes from a qualifying plan, it is exempt.
Iowa
Iowa eliminated its tax on retirement income starting with the 2023 tax year, but you must be at least 55 by December 31 of the tax year, or be disabled, to qualify.5Iowa Department of Revenue. Retirement Income Tax Guidance Surviving spouses of someone who qualified can also claim the exemption. For married couples, only the spouse who meets the age or disability test gets the exclusion — if you are 60 and your spouse is 52, only your retirement income is exempt. Iowa’s flat rate on non-exempt income is 3.8% for 2026.6Iowa Department of Revenue. IDR Announces 2026 Individual Income Tax and Interest Rates
Mississippi
Mississippi exempts retirement income, pensions, annuities, and Social Security from its 4.40% income tax, but only if you have met the retirement plan’s own requirements for distributions.7Mississippi Department of Revenue. Individual Income Tax Frequently Asked Questions Early distributions taken before you have satisfied those conditions are not treated as retirement income and can be taxed.
Pennsylvania
Pennsylvania excludes retirement plan distributions from its 3.07% flat income tax if you have reached the plan’s retirement age or qualify for a disability exemption.8Commonwealth of Pennsylvania. Personal Income Tax The state’s tax code defines retirement benefits as something other than “compensation,” which puts them outside the tax base.9Pennsylvania General Assembly. Pennsylvania Code 72 P.S. 7301 – Definitions One caveat: distributions from non-qualified deferred compensation plans are currently taxable in Pennsylvania.
What Actually Counts as Retirement Income
The phrase sounds obvious, but each exemption state draws the line in its own place. Distributions from 401(k)s, 403(b)s, traditional IRAs, and government pensions qualify in all four exemption states. Social Security is also exempt in every state on this list.
Early withdrawals are where retirees get caught. If you tap your 401(k) at 50 because you need cash, Mississippi will treat that as taxable income because you have not met the plan’s distribution requirements.7Mississippi Department of Revenue. Individual Income Tax Frequently Asked Questions Pennsylvania applies a similar rule tied to the plan’s retirement age. Iowa uses a bright-line test of 55.5Iowa Department of Revenue. Retirement Income Tax Guidance Illinois imposes no age requirement at all.4Illinois Department of Revenue. Does Illinois Tax My Pension, Social Security, or Retirement Income?
What About Part-Time Wages?
Moving to one of these thirteen states does not make all your income tax-free. The nine no-income-tax states protect wages, investment income, and retirement pay alike. But in Illinois, Iowa, Mississippi, and Pennsylvania, money from a part-time job, consulting work, or a small business is taxed at the regular state rate: 4.95% in Illinois, 4.40% in Mississippi, 3.8% in Iowa, and 3.07% in Pennsylvania. If you plan to keep working, the no-income-tax states offer a broader benefit than the exemption states.
Federal Taxes Do Not Go Away
State residency has no effect on your federal return. Traditional 401(k) and IRA distributions are taxed as ordinary income by the IRS regardless of where you live. Roth withdrawals are federally tax-free if the account has been open at least five years and you are over 59½.
Social Security has its own federal formula. The IRS uses “combined income” — adjusted gross income plus nontaxable interest plus half your benefits — to decide how much of your Social Security is taxable. Single filers under $25,000 in combined income owe nothing. Between $25,000 and $34,000, up to 50% of benefits become taxable. Above $34,000, up to 85%. For married couples filing jointly, the thresholds are $32,000 and $44,000. These numbers are not indexed for inflation, so they pull in more retirees each year.
Sales Taxes and Property Taxes Fill the Gap
States that give up income tax revenue usually collect more through sales and property taxes. Combined state and local sales tax rates as of January 2026 vary widely among the no-income-tax states:10Tax Foundation. State and Local Sales Tax Rates
- Tennessee: 9.61%, the highest combined rate in the country
- Washington: 9.51%
- Nevada: 8.24%
- Texas: 8.20%
- Florida: 6.98%
- South Dakota: 6.11%
- Wyoming: 5.56%
- Alaska: 1.82% (no state sales tax; local rates only)
- New Hampshire: no sales tax at all
A retiree spending $40,000 a year on taxable goods in Tennessee pays roughly $3,800 in sales tax that would have stayed in their pocket in New Hampshire.
Property taxes are the other pressure point. Illinois has one of the highest effective property tax rates in the country at roughly 1.88%, and Pennsylvania sits around 1.26%. Texas has high property taxes despite its lack of an income tax, and New Hampshire leans heavily on property taxes to replace the revenue it does not collect elsewhere. On a $300,000 home, that can mean $3,800 to $5,600 a year.
Estate and Inheritance Taxes
Income tax savings can be undone at the end. Most of the thirteen states impose no estate or inheritance tax. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, and Texas are free of both.11AARP. 9 States With No Income Tax Two states on the list are exceptions.
Washington imposes an estate tax on estates above $3,076,000 in 2026, with rates starting at 10%.12Washington Department of Revenue. Estate Tax That threshold is well below the federal estate tax exemption, so some estates that owe the IRS nothing still owe Washington.
Pennsylvania levies an inheritance tax rather than an estate tax, and the rate depends on who inherits:13Commonwealth of Pennsylvania. Inheritance Tax
- Surviving spouse: 0%
- Children and direct descendants: 4.5%
- Siblings: 12%
- Everyone else: 15%
A $500,000 inheritance passing to an adult child would cost $22,500 in Pennsylvania tax. If your plan is to pass wealth to family, that number belongs in the decision.
Establishing Residency the Right Way
Buying property in a tax-friendly state does not make you a resident of it. Your former state’s tax authority can challenge a move that looks like tax avoidance, and it often does. Establishing legal domicile means proving the new state is genuinely your permanent home.
Most states use some version of a 183-day test: spend more than half the year inside the state’s borders and you are generally treated as a resident. Physical presence alone is not enough if the rest of your life still points to the old state. A few administrative steps carry real weight during an audit:
- Get a driver’s license and register your vehicles in the new state. Many states require this within 20 to 60 days of moving.
- Register to vote in the new state and cancel your old registration.
- File Form 8822 with the IRS to change your address of record.14Internal Revenue Service. Address Changes
- Update your address with every bank, brokerage, insurer, and payer that sends you tax documents.
Florida offers an extra tool: a formal Declaration of Domicile filed with the local clerk of court, which creates a public record of your intent to make Florida your permanent home.15Clerk of the Circuit Court and Comptroller, Palm Beach County. Declaration of Domicile It is not required, but it helps during a residency audit.
The common mistake is changing addresses on paper while keeping your life in the old state. If your doctors, your grandchildren, your house of worship, and your social ties all remain in New Jersey while you claim Florida residency based on a winter condo in Naples, an aggressive state auditor will build a case against the move. Consistency across every part of your life is what makes a residency change hold up.
Local Taxes to Check Before You Move
Even in the four exemption states, local governments sometimes add their own taxes. Pennsylvania is the clearest example: municipalities across the state impose a local earned income tax that can run 1% to 3% or more. These local taxes typically apply to wages and business profits, not retirement distributions, but they matter if you plan to keep working.
The no-income-tax states generally have no local income taxes either, because there is no state framework for local governments to piggyback on. Alaska is a partial exception — boroughs and municipalities set their own sales tax and property tax rates, which vary widely across the state.
Before committing to a city or county, check the local property tax rate, any special assessment districts, and any local sales tax add-ons. Those numbers can swing a retiree’s annual bill by several thousand dollars within the same state.