15 States That Do Not Tax Retirement Income

The main sources of retirement income are pensions, social security, retirement accounts, and annuities. Some states tax these income sources, but some don’t. For example, the following states are exempt from state income taxes on pensions in 2023:

• Alabama
• Alaska
• Florida
• Hawaii
• Illinois
• Iowa
• Mississippi
• Nevada
• New Hampshire
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

Tax laws can massively impact your retirement lifestyle. Incomes usually shrink in retirement, but life doesn’t get less expensive. If you work to minimize your taxes, your retirement savings will last longer, and you will worry less about running out of cash.

The federal government taxes most retirement income, but states differ significantly from one to the other, which can make planning for retirement confusing.

Here, you’ll find a full guide to the retirement-friendly states that do not levy taxes on the various types of retirement income.

Disclaimer: We work hard to make sure that the information in our articles is accurate when we publish them. But tax laws change regularly, especially at the state level. If you find that this article is out of date or missing key information, please let us know, and we’ll update it.

Different Kinds of Retirement Income Taxes

Part of the complicated story of retirement taxes is that different types of income are taxed differently. Here’s a quick guide to income taxes for common streams of retirement income.

Pension Income

Pensions (a.k.a. defined benefit plans) are employee benefit plans where your employer makes regular contributions to a pool of money. That money is then distributed to employees after they retire.

The federal government taxes both private and government pension payments as ordinary income in the year you receive them. Your tax rate depends on your income level. The higher your income, the higher your tax bracket, and the higher the marginal tax rate.

Social Security Income

Social security is a program run by the federal government that provides income payments to retirees. Most American workers are eligible to receive these benefits.

The federal taxes apply to some social security income, depending on how much total retirement income you and your spouse receive and whether you file joint or separate tax returns. For detailed information on social security income taxes and social security benefits, see here.

IRA or 401(k) Income

Individual retirement accounts (IRAs) and 401(k)s are both retirement accounts that hold retirement savings and investments.

Withdrawals from traditional IRAs and 401(k)s are taxable as ordinary income tax. With the Roth versions of these products — funded with after-tax dollars — you only owe taxes on earnings, not the principal.

Note that withdrawals taken from these accounts before 59½ years old are generally charged a 10% penalty in addition to the regular tax.

Annuities

Withdrawals from annuity accounts are taxed as ordinary income in the year you receive the distributions. How you’re taxed depends on the type of annuity you have.

• Qualified annuities are annuities funded with pre-tax dollars. When you receive a distribution from a qualified annuity, you pay taxes on the entire amount.
• Non-qualified annuities are funded with after-tax dollars. When you receive a distribution from a non-qualified annuity, you only have to pay taxes on income earned — not the principal.

See here for more details on annuity taxation rules.

States that Do Not Tax Annuity Income

The federal government taxes annuity payments, and so do some states. Here are the states that do not tax annuity income payments:

• Alaska
• Florida
• Illinois
• Iowa
• Mississippi
• Nevada
• New Hampshire
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

Note that Iowa’s law to exclude retirement income is new. It applies to eligible taxpayers for tax years beginning on or after January 1, 2023.

Also note that, in addition to the above states that do not charge tax on annuity income, many others give generous deductions. For example, Georgia provides a deduction of $65,000 per person on all types of retirement income. Similarly, New York excludes $20,000 of annuity or retirement benefits.

Finally, remember that the above states do not tax annuity income when it’s received after you turn 59½, but you may face a tax penalty from the federal Internal Revenue Service (IRS) if you withdraw money from your annuity before you turn 59½.

On top of that, early withdrawals from annuities can result in surrender charges. Surrender charges are fees levied by an annuity company, not taxes.

States that Do Not Tax Pension Income

Pensions are less and less common, but they still make up an important source of income for many retirees in the U.S. Here are the states that don't consider your pension payments as taxable income:

• Alabama
• Alaska
• Florida
• Hawaii
• Illinois
• Iowa
• Mississippi
• Nevada
• New Hampshire
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

There are a few notable caveats on the above list.

In Hawaii, both public and private pension income is tax-exempt as long as you didn’t make personal contributions to the plan. If you did, the portion of your pension that you contributed yourself is taxable.

In Mississippi and Pennsylvania, public and private pension income is tax-exempt as long as it isn’t taken for early retirement (before age 59½).

States that Do Not Tax Social Security Income

Most states don’t tax social security benefits. Here’s the full list of those that don’t:

• Alabama
• Arizona
• Arkansas
• Alaska
• California
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Nevada
• New Hampshire
• New Jersey
• New York
• North Carolina
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• South Dakota
• Tennessee
• Texas
• Virginia
• Washington
• Wisconsin
• Wyoming

Note that even in the remaining states that do levy some taxes on social security income, those taxes may not apply to everyone.

For example, New Mexico changed tax rules in 2022 to make social security income exempt for singles with less than $100,000 in income or married couples with less than $150,000 in income.

Since many single retirees earn less than $100,000 and many married couples earn less than $150,000, there are many people in New Mexico that won’t have to pay taxes on social security income.

States that Do Not Tax TSP Income

The Thrift Savings Plan (TSP) is a retirement plan specifically for federal government employees. TSP benefits are similar to what private companies offer their employees under 401(k) plans. The retirement income you receive under a TSP depends on how much money you contribute during your working years and the earnings you accumulate over time.

Here are the states that don’t tax TSP income:

• Alaska
• Florida
• Illinois
• Iowa
• Mississippi
• Nevada
• New Hampshire
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

States that Do Not Tax IRAs or 401(k)s

Here are the states that don’t tax income from retirement accounts like IRAs and 401(k)s:

• Alaska
• Florida
• Illinois
• Iowa
• Mississippi
• Nevada
• New Hampshire
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

Again, note that Iowa’s exemption for retirement income taxation only began in the 2023 tax year.

States that Don’t Tax Pensions but Will Tax IRAs and 401(k)

There are a few states that do not tax pension income but do tax other retirement plans. Those are:

• Alabama
• Hawaii

States without Income Tax

Finally, some states have no income tax at all, including on retirement income. Those states currently are:

• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming

Deciding Where to Retire

One of the exciting things about retirement is that you’re often more flexible with where you live. You might be tied to a particular city while you’re working, but retirement gives you a new kind of freedom in that respect.

If you’re going to move, why not consider a state with a more friendly retirement income tax environment? Sure, you can’t escape federal income taxes, but you can absolutely minimize your tax burden from state governments so you can keep more of your income in retirement for yourself.

Want to learn more about maximizing your retirement income? Check out the 6-step guide to creating a retirement income plan.