Thirteen states impose no state income tax on 401(k) withdrawals. Nine of them collect no personal income tax at all, and four more tax wage income but fully exempt retirement plan distributions. A handful of additional states allow exclusions large enough that most retirees with moderate withdrawals end up owing nothing at the state level either. The states that don’t tax 401(k) withdrawals fall into these clear tiers, and where you live when you take the money is what determines which rules apply.
The Nine States With No Income Tax
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming collect no broad-based personal income tax. Because the tax doesn’t exist, every dollar you pull from a 401(k) escapes state tax regardless of your age, the size of the withdrawal, or whether you take it as a lump sum or a stream of payments.
New Hampshire was the last state to join this group. It phased out its tax on interest and dividend income over several years and fully eliminated it on January 1, 2025, leaving it the only state with neither an income tax nor a sales tax at the state or local level.
Washington needs one footnote. The state enacted a capital gains tax on long-term investment gains above a threshold, but retirement account transactions are specifically excluded. The Washington Department of Revenue lists 401(k) plans, IRAs, Roth IRAs, and similar accounts as exempt.1Washington Department of Revenue. Frequently Asked Questions About Washington’s Capital Gains Tax Your distributions stay untouched.
The Four States That Fully Exempt 401(k) Distributions
Four states tax wages but carve out a complete exemption for retirement plan distributions. The practical result for a retiree is the same as living in a no-income-tax state.
Illinois
The Illinois income tax starts with your federal adjusted gross income, then subtracts retirement income received under qualified plans such as 401(k)s and IRAs. The deduction is written into the Illinois Income Tax Act and specifically references distributions taxable under IRC Sections 402(a), 403(a), 403(b), and 408.2Illinois Department of Revenue. General Information Letter IT-23-0005-GIL
Iowa
Starting with tax year 2023, Iowa fully excludes retirement income from state tax for residents who are 55 or older or who are disabled. Surviving spouses receiving retirement income from a qualifying individual also get the exclusion. There is no dollar cap, so a large 401(k) withdrawal is treated the same as a small one.3Iowa Department of Revenue. Individual Income Tax Provisions
Mississippi
Mississippi law exempts retirement plan trusts that qualify for federal tax-exempt status from state income tax. A 401(k) held in a trust under IRC Section 401(a) falls within that provision.4Justia. Mississippi Code 27-7-27 – Estates and Trusts
Pennsylvania
Pennsylvania defines taxable “compensation” narrowly and explicitly excludes payments recognized as old-age or retirement benefits paid to people who have retired after reaching a specific age or a stated period of employment. Distributions from eligible retirement plans after retirement age are listed as never taxable as Pennsylvania compensation.5Department of Revenue. Gross Compensation
These exemptions apply automatically when you file your state return. You do not need to apply for them or reach a particular age, except in Iowa, where the minimum is 55. In each of the four, the exemption covers the full amount of the distribution, not a capped portion.
States Where Exclusions Wipe Out the Tax for Most Retirees
A number of states stop short of a full exemption but offer exclusions generous enough that a typical retiree owes nothing on 401(k) income. Two are worth naming specifically.
Georgia
Georgia’s retirement income exclusion depends on age. Taxpayers 62 through 64 can exclude up to $35,000 per person. At 65 and older, the exclusion rises to $65,000 per person.6FindLaw. Georgia Code Title 48 Revenue and Taxation 48-7-27 A married couple both 65 or older can exclude up to $130,000 combined, which covers the full required minimum distribution for most retirees. The exclusion applies to retirement income from any source, including 401(k) plans, pensions, and annuities.
South Carolina
South Carolina’s retirement income deduction works in two layers. Under 65, you can deduct up to $3,000 of retirement income. At 65, the first-layer deduction rises to $10,000, and a separate provision adds up to $15,000 more, reduced by whatever you already deducted under the first layer. The net maximum is $15,000 per person at 65 and older, or $30,000 for a married couple filing jointly when both spouses are at least 65.7South Carolina Legislature. South Carolina Code of Laws Title 12 Chapter 6 – Section 12-6-1170
Other Notable Exclusions
Several other states offer retirement income deductions large enough to eliminate 401(k) taxes for many retirees, though the amounts are smaller. Colorado allows up to $20,000 for taxpayers 55 and older, rising to $24,000 at 65. New York lets some taxpayers 59½ and older deduct up to $20,000 of qualified retirement income. Kentucky allows a deduction of about $31,110 for retirement plan income. These thresholds shift periodically, so check your state revenue department before filing.
Roth 401(k) Distributions Are Tax-Free Everywhere
Roth 401(k) contributions go in after tax, so qualified distributions come out completely tax-free at both the federal and state level. A qualified distribution requires two things: you must have held the Roth account for at least five tax years, and you must be 59½ or older (or disabled, or the distribution goes to a beneficiary after death).8Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts
If you meet those conditions, the entire withdrawal, including all investment growth, is excluded from gross income. Every state then treats it as zero taxable income, whether or not that state exempts retirement income generally. The five-year clock starts with the first tax year you contributed to any designated Roth account in that employer’s plan, so a first contribution in 2026 makes the earliest qualified distribution year 2031.9Internal Revenue Service. 2025 Publication 575 – Pension and Annuity Income
Take a distribution before meeting those requirements and the earnings portion is taxable as ordinary income at the federal level, with most states following the federal treatment. The contribution portion of a nonqualified Roth withdrawal is not taxed, because you already paid tax on that money going in.
Federal Law Blocks Your Old State From Taxing You After You Move
Federal law provides a critical safeguard if you retire and move. Under 4 U.S.C. § 114, no state may impose income tax on retirement income paid to someone who is not a resident or domiciliary of that state.10Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income The statute covers 401(k) plans, IRAs, 403(b) plans, 457 plans, pensions, and government retirement programs.
Your old state cannot chase you for tax on 401(k) distributions taken after you establish residency elsewhere. If you worked 30 years in a high-tax state and moved to Florida before beginning withdrawals, the high-tax state has no claim to those payments. The protection applies automatically, but it hinges on your domicile at the time of each distribution.
Making the Move Stick
Moving on paper isn’t enough. Your former state’s revenue department has an interest in keeping you as a taxpayer, and inconsistencies in your records are the first thing auditors look for.
The strongest evidence of a domicile change comes from actions that are expensive or inconvenient to reverse: registering to vote in the new state, getting a new driver’s license, re-titling vehicles, and updating your address with banks, brokerages, and insurance companies. Consistency counts more than any single document. If your voter registration says Texas but your primary care doctor, dentist, and accountant are all still in New York, an auditor will notice.
Some states formalize the process. Florida allows you to file a sworn Declaration of Domicile with the county clerk, which serves as an official statement of your intent to make Florida your permanent home. Recording fees typically run between $10 and $65.
Auditors also look at where you actually spend your time. Several high-tax states apply a statutory residency test that can treat you as a resident even after you change domicile if you keep a home there and spend too many days in the state. New York treats you as a statutory resident if you keep a permanent place of abode in the state and spend more than 183 days there during the tax year, and the burden of proof falls on you. Auditors will ask for travel logs, credit card statements, toll records, and phone bills to verify your physical location.11New York State Department of Taxation and Finance. Nonresident Audit Guidelines Keep the documentation from day one, because a challenge can arrive years after the move.