The best states to retire for taxes are the ones that leave your retirement income alone at every stage: no tax on Social Security, light or no tax on pension and IRA withdrawals, and a property and sales tax burden that doesn’t quietly reclaim what the income tax gave back. Nine states charge no income tax at all, and dozens more carve out generous exemptions for retirement-specific income. A retiree pulling $60,000 a year from a 401(k) could owe anywhere from $0 to several thousand dollars in state income tax depending only on their address.
Nine States With No Income Tax
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming impose no individual income tax.1USAFacts. Which States Have the Highest and Lowest Income Tax New Hampshire joined the group in 2025 after repealing its tax on interest and dividend income.2Tax Foundation. State Individual Income Tax Rates and Brackets, 2025 Every dollar from a pension, 401(k), IRA, or Social Security check arrives in these states without a state deduction.
Washington carries one caveat. It has no traditional income tax but imposes a 7% tax on long-term capital gains above a substantial deduction threshold (around $278,000 in 2025).3Washington Department of Revenue. Capital Gains Tax Most retirees selling a home or trimming a brokerage account won’t hit that ceiling, but anyone sitting on a concentrated stock position or a business sale should factor it in.
The value of a zero-income-tax state grows with the size of your traditional retirement accounts. In a state that taxes income, every required withdrawal from a traditional IRA or 401(k) gets taxed twice, once federally and once by the state.4Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Eliminating the second layer frees up real money for retirees whose balances are large enough to push distributions into higher brackets.
States That Exempt Retirement Income
Several states levy an income tax but exempt retirement-specific income so broadly that the practical result approaches zero for many retirees.
Pennsylvania is the strongest example. The state does not tax distributions from employer-sponsored retirement plans like 401(k)s and defined benefit pensions once the recipient has separated from service and reached retirement age. IRA distributions are similarly exempt as long as they aren’t subject to the federal early withdrawal penalty, which typically means you’re past age 59½. Social Security is fully exempt. A Pennsylvania retiree whose income comes entirely from these sources may owe the state nothing.
Mississippi exempts income from most qualified retirement plans, including pensions and annuities received after retirement. Early distributions don’t get this treatment and remain taxable.5Cornell Law Institute. 35 Mississippi Code R 3-02-07-104 The exemption also doesn’t cover investment income from stocks, bonds, or real estate, so retirees with substantial taxable brokerage accounts still owe some state tax there.
Georgia uses a broad retirement income exclusion instead. Residents 65 and older can exclude up to $65,000 per person from state income tax, and those 62 to 64 can exclude up to $35,000. The exclusion covers pensions, interest, dividends, capital gains, and up to $4,000 or $5,000 of earned income. A married couple filing jointly where both spouses qualify doubles those amounts, which effectively wipes out the state tax bill for most middle-income retirees.6Georgia Department of Audits and Accounts. Tax Incentive Evaluation: Retirement Income Exclusion
Age thresholds matter. Most state-level retirement exclusions kick in somewhere between 59½ and 65, so early retirees may not qualify right away. Someone retiring at 55 with a pension should check whether their destination state has a gap period before the exemption applies.
How States Tax Social Security
Most states leave Social Security alone. As of 2026, only eight tax it to any degree: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. West Virginia dropped off the list starting in 2026 after phasing out its tax over several years. Every other state either has no income tax or specifically exempts Social Security.
Even in those eight, the tax often doesn’t hit everyone. Most use income thresholds that shield lower- and middle-income retirees. Colorado allows residents 65 and older to fully deduct Social Security benefits regardless of income. Connecticut exempts single filers with adjusted gross income under $75,000 and married couples under $100,000, and caps the taxable portion at 25% of benefits above those levels. Minnesota provides full exemptions below certain AGI levels and partial breaks somewhat above them.
If Social Security is your primary income source, almost anywhere works. If it’s one slice of a larger pie that includes pensions, capital gains, and required IRA distributions, those eight states can add a meaningful hit on top of federal tax.
Property Tax and Senior-Specific Breaks
Once income taxes fall away, property tax often becomes the single largest annual tax bill for retirees who own their home. Effective rates vary enormously. Hawaii has the lowest at 0.29%, followed by Alabama at 0.37%.7Tax Foundation. Property Taxes by State and County, 2026 At the other end, New Jersey homeowners pay a median of over $9,000 annually.
Many states offer additional relief specifically for older homeowners:
- Enhanced homestead exemptions in states like Texas and Florida directly reduce the taxable value of the home for residents 65 and older.
- Assessment freezes lock in a senior’s assessed value so property tax doesn’t rise as local values climb.
- Tax deferrals in some states let seniors postpone payments until the home is sold, keeping cash available during retirement.
Colorado’s program is representative: qualifying residents 65 and older can exempt 50% of the first $200,000 in actual value from property tax.8Colorado Department of Local Affairs. Senior Property Tax Exemption These programs don’t make headlines the way income tax policies do, but they accumulate year after year for as long as you stay in the home.
Sales Tax on a Fixed Income
Sales tax hits spending rather than earnings, which matters on a fixed income where most of what comes in goes back out. Five states charge no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.9Tax Foundation. State and Local Sales Tax Rates, 2026 In those states, every purchase costs the listed price.
Combined state and local rates elsewhere top 9.5%. A couple spending $40,000 a year on taxable goods in a 9% area pays $3,600 in sales tax alone. The same couple in Oregon pays zero. Many states exempt groceries, prescription drugs, or both, which softens the blow on essentials, so the specifics of what’s actually taxed matter more than the headline rate.
Estate and Inheritance Taxes
If leaving wealth behind matters to you, the state where you die matters too. The federal estate tax exemption for 2026 is $15,000,000 per individual after Congress made the higher exemption permanent through the One, Big, Beautiful Bill Act signed in July 2025.10Internal Revenue Service. What’s New – Estate and Gift Tax That amount adjusts for inflation annually starting in 2027, and married couples can shelter up to $30,000,000 combined.
State estate taxes are separate. A handful of states impose their own with thresholds far below the federal level. Oregon’s kicks in at $1,000,000, Washington’s at approximately $2,193,000, and Connecticut’s at $13,610,000. A retiree with an estate between a state’s threshold and the federal threshold could owe nothing federally and still face a significant state bill.
Inheritance taxes fall on the person receiving the assets, with the rate depending on relationship to the deceased. Six states impose one: Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and Iowa (Iowa repealed its inheritance tax effective January 1, 2025). Spouses are universally exempt. Children and direct descendants face the lowest rates or none at all. Siblings, distant relatives, and unrelated beneficiaries face progressively higher rates, reaching 15% or 16% in some states.
Maryland is the only state that imposes both an estate tax and an inheritance tax.
Military and Federal Pension Treatment
Military retirement pay gets favorable treatment almost everywhere. Thirty-seven states either have no income tax or specifically exempt military retirement pay, meaning roughly three-quarters of the country fully protects this income. The list of states with targeted exemptions includes Alabama, Arizona, Illinois, Indiana, Kansas, Michigan, New York, North Carolina, and Pennsylvania. California and Washington, D.C. are the only places that fully tax military retirement pay as ordinary income.
A smaller group offers partial exemptions with dollar caps or age triggers. Georgia allows veterans to exclude up to $65,000 of military retirement pay starting in 2026. Colorado provides an exemption of up to $15,000 for those under 55, with a broader deduction at older ages. Delaware caps the exemption at $12,500 regardless of age.
Federal civil service retirees drawing CSRS or FERS annuities don’t always get the same treatment. State policies for federal pensions vary more widely: some states offer partial exemptions based on age or income, others tax them fully. The rules change often enough that federal retirees should verify their specific state’s current policy before relocating.
Look at the Total Picture, Not One Tax
Focusing on a single tax type is the most common planning mistake. A state with no income tax can sound perfect until property or sales taxes eat the savings back. Texas and New Hampshire have no income tax but rank among the highest in property taxes. Tennessee has no income tax but combined state and local sales tax rates above 9.5%.9Tax Foundation. State and Local Sales Tax Rates, 2026 Alaska has no income tax and no sales tax, but its remote location and high cost of living create their own financial pressures.
Some states that do levy an income tax compensate elsewhere. Alabama has a modest income tax alongside the second-lowest property tax rate in the country. The best state depends on your income mix. A retiree living mostly on Social Security and a small pension has different needs from someone drawing $150,000 a year from investment accounts and required IRA distributions.
States that consistently rank as the most expensive for retirees from a total tax perspective include California, Connecticut, Minnesota, Vermont, and Rhode Island. They tend to combine higher income tax rates with Social Security taxation and above-average property or sales taxes. Running your own income sources, spending patterns, and estate plans against two or three candidate states will give you a more useful answer than any generic ranking.