State income tax withholding on 401k distributions varies widely: nine states withhold nothing because they impose no income tax, a handful more exempt retirement distributions from tax entirely, about sixteen states require mandatory withholding at rates between 3% and 8% of the distribution (or a percentage of the federal withholding), and the rest treat state withholding as voluntary. The chart below shows the 401k state tax withholding rates by state, along with which states let you opt out.
States That Withhold Nothing
If you live in one of these nine states, no state income tax applies to your 401k distribution and your plan administrator withholds nothing for state taxes:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
A second group taxes wages and investment income but specifically exempts qualified retirement distributions. As of 2026, these include Illinois, Iowa, Mississippi, and Pennsylvania. Illinois excludes 401k and IRA distributions from its income tax base. Iowa exempts pension and retirement distributions entirely. Mississippi does not tax distributions from qualified retirement plans. Pennsylvania treats retirement distributions as tax-free once you reach age 59½.
Michigan joins this group for the 2026 tax year after phasing out its income tax on most retirement and pension benefits.1Michigan Department of Treasury. State Individual Income Tax Rate for 2026 Tax Year Determined Even though the distribution is not taxable, Michigan’s withholding system may still apply a default deduction unless you file the proper exemption paperwork with your plan administrator. Confirm your election before taking a distribution so money isn’t withheld unnecessarily.
Mandatory Withholding States and Rates
In these states, your plan administrator must withhold state tax on nonperiodic 401k distributions at a set rate. In most, you can file paperwork to opt out; where you can’t, the default applies no matter what. Periodic payments (regular monthly installments over more than a year) may instead follow state wage tables, which produce a different amount based on filing status and allowances.
- Arkansas: 3% of the distribution (opt-out available)
- California: 10% of the federal tax withheld (opt-out available)
- Delaware: 5% of the distribution (opt-out available)
- Iowa: 5% of the distribution
- Kansas: 5% of the distribution (no opt-out)
- Maine: 5% of the distribution
- Maryland: 7.75% of eligible rollover distributions
- Massachusetts: 5% of the distribution
- Minnesota: 6.25% of the distribution (opt-out available)
- Missouri: 4.8% of the distribution
- Nebraska: 5% of the distribution
- North Carolina: 4% of the distribution (opt-out available)
- Oklahoma: 4.75% of the distribution (opt-out available)
- Oregon: 8% of the distribution (opt-out available)
- Vermont: 30% of the federal tax withheld
- Virginia: 4% of the distribution
These rates change when legislatures adjust their tax codes. Confirm the current figure with your plan administrator or state revenue department before you take a distribution.
California and Vermont: A Percentage of Federal Withholding
Most mandatory states apply a flat percentage to the distribution amount. California and Vermont base state withholding on the federal withholding amount instead. California withholds 10% of whatever went to the IRS; if federal withholding on your distribution is $5,000, California takes another $500 unless you opt out. Vermont withholds 30% of the federal amount on nonperiodic distributions, the most aggressive calculation of any state.2Vermont Department of Taxes. Instructions – Vermont Department of Taxes
Because the state amount is tied to the federal amount in these two states, adjusting your federal election automatically moves your state withholding in the same direction.
Oregon’s 8% Rate
Oregon requires payers of nonperiodic distributions to withhold 8% of the distribution. The withholding is mandatory by default, but Oregon lets you elect no withholding under certain circumstances, and that election stays in effect until you revoke it.3Oregon Secretary of State. OAR 150-316-0305 – Withholding Income Taxes on IRAs, Annuities
Voluntary Withholding States
The remaining states with an income tax leave state withholding to you. If you file no election, the plan administrator sends nothing to the state. New York, Ohio, Colorado, Arizona, Georgia, and most other states not listed above fall into this group. You can still request a specific dollar amount or percentage to be withheld from each payment.
The flexibility puts the full burden on you. If you take $80,000 in distributions during the year and live in a state with a 5% effective rate, doing nothing leaves roughly $4,000 owed at filing time, plus a possible underpayment penalty. Setting a modest voluntary rate spreads that liability across the year.
Distributions That Skip State Withholding
Two situations bypass state withholding entirely.
Qualified Roth 401k distributions are excluded from gross income federally, so there is no taxable amount for the state to withhold against. To qualify, the distribution must occur at least five years after your first Roth contribution to the plan and after you turn 59½, become disabled, or die.4Internal Revenue Service. Retirement Topics – Designated Roth Account Some mandatory withholding states may still apply their default rate unless you affirmatively certify the distribution is a qualified Roth distribution, so ask your plan administrator how to flag it.
Direct rollovers move money from your 401k straight to another eligible retirement plan or IRA without touching your hands. No federal withholding applies, and no state withholding applies either.5Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions The moment the check is instead cut in your name, 20% federal mandatory withholding kicks in on the eligible rollover amount, and your state’s mandatory rate follows if you live in one of the states above.6Office of the Law Revision Counsel. 26 U.S.C. 3405 – Special Rules for Pensions, Annuities, and Certain Other Deferred Income
Changing or Opting Out of State Withholding
Your federal election runs on IRS Form W-4P (periodic payments) or Form W-4R (nonperiodic and eligible rollover distributions).7Internal Revenue Service. 2026 Form W-4R State elections are usually handled through the same plan administrator workflow, though some states require their own form. New York, for instance, uses Form IT-2104-P, which asks for a specific dollar amount to withhold from each payment.8New York State Department of Taxation and Finance. IT-2104-P – Annuitant’s Request for Income Tax Withholding
Fidelity, Vanguard, Empower, and most other plan administrators let you update federal and state elections in the same “Tax Withholding” section of your online account. If your state requires a separate form, the portal will typically let you upload it. Changes take effect within a few business days and appear on your next distribution and year-end Form 1099-R.
To opt out in a mandatory state that allows it, file the state-specific election form or check the opt-out box on the withholding form your plan provides. If you do nothing in a mandatory state, the default rate applies. In a voluntary state, doing nothing means zero withholding, which works only if you’re making estimated payments or your total liability will be small.
If You Moved After Retiring
Only your current state of residence can withhold or tax your 401k distribution. Under 4 U.S.C. § 114, no state may impose income tax on retirement income paid to a nonresident, and the protection covers 401k plans, IRAs, 403(b) plans, 457 plans, and most other qualified arrangements.9Office of the Law Revision Counsel. 4 U.S.C. 114 – Restriction on Taxation of Retirement Income If you worked 30 years in New York and retired to Florida, New York cannot touch your 401k money. Keep your current address on file with your plan administrator, because state withholding is generally determined by your address of record.