States that do not tax retirement income can help retirees keep more of their Social Security, pension and retirement account money, but the rules differ. Some states exempt only certain types of income, while others have no broad income tax. Federal taxes and other state taxes can still apply.
At a Glance
- Forty two states do not tax Social Security income, and 37 do not tax most military retirement pay.
- Sixteen states exempt pension income, while nine states have no income tax.
- State rules can apply differently to pensions, annuities, IRA withdrawals and early distributions.
- Federal income tax may still apply, and required minimum distributions start at age 73.
How states that do not tax retirement income differ
A state tax break is rarely a blanket exemption for every kind of retirement money. One state may leave Social Security untaxed but tax investment income. Another may exempt pension and account withdrawals only after a certain age. The details matter if your retirement income comes from several sources.
The figures offer a useful starting point: 42 states do not tax Social Security income, 37 do not tax most military retirement pay, and 16 exempt pension income. Nine states have no income tax. Those broad counts do not mean every retiree in each state will have the same tax bill.
State income tax is also only one part of the calculation. Property and sales taxes may still affect household costs, and some states have estate or inheritance taxes. Compare the rules that apply to your own income and assets rather than choosing a destination from a single exemption.
State exemptions and important limits
The state examples below show why the type of income and the conditions attached to an exemption deserve a close read. Iowa’s age rule, for example, is different from Pennsylvania’s broad exemption for retirement account distributions. A tax break on one income source does not automatically cover another.
| State | Retirement income treatment | Other details |
|---|---|---|
| Arkansas | Exempts up to $6,000 a year from public and private employer pension plans and traditional IRA distributions received after age 59½, or because of death or disability. Social Security and military retirement pay are not taxed. | No estate or inheritance tax. |
| Illinois | Exempts pension income, 401(k) and IRA withdrawals, Social Security and military retirement pay. | Other investment earnings are taxed. Estate and inheritance taxes apply. |
| Iowa | Since January 2023, residents over age 55 have not paid state tax on pension, annuity or IRA income. | On January 1, 2025, the state moved more broadly to a 3.8% flat tax and eliminated its inheritance tax. |
| Mississippi | Exempts retirement plan distributions, pensions, annuities, Social Security and military retirement pay. Early plan distributions generally do not qualify. | No estate or inheritance tax. |
| New Hampshire | Does not tax Social Security or pension income. It has no income tax on earned wages. | Its tax on interest and dividends ended January 1, 2025. No estate or inheritance tax. |
| Pennsylvania | Does not tax Social Security, pension income or retirement plan distributions. | Has a flat income tax rate and a property tax and rent rebate program for older adults. |
| South Carolina | Does not tax Social Security or military retirement pay. | The stated exemptions do not cover every type of retirement income. |
Pay attention to wording such as “most” or “generally.” In Mississippi, for instance, an early withdrawal may not receive the same treatment as a regular retirement distribution. Arkansas also caps its stated pension and traditional IRA exemption at $6,000 a year, with age and other qualifying conditions for the distribution.
Nine states with no broad income tax
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no broad state income tax on retirement income. Washington is an exception to a simple description of “no income tax”: it taxes capital gains for high earners only.
That list can simplify the state income tax question, but it does not establish which place will cost less overall. Property and sales taxes may still be part of the household budget. New Hampshire, for example, also has no estate or inheritance tax, while other state tax rules can vary. Check the taxes that match your spending, home and assets before comparing locations.
Federal taxes and retirement income planning
There is no age at which pension income automatically stops being subject to tax. Many pensions remain subject to federal income tax, and state treatment depends on where you live and the type of payment. State exemptions do not remove a federal tax obligation.
Social Security benefits can also be taxable at the federal level. For a single filer with combined income from $25,000 to $34,000, up to 50% of benefits may be taxable; above $34,000, up to 85% may be taxable. For married couples filing jointly, the corresponding ranges are $32,000 to $44,000 and above $44,000. These percentages refer to the share of benefits that may be included in taxable income, not the tax rate.
Required minimum distributions from tax deferred accounts begin at age 73. One planning approach described for retirees is to draw first from taxable accounts, then from tax deferred accounts such as 401(k)s and traditional IRAs, allowing tax advantaged savings to remain invested longer. That sequence will not fit every household, so account balances and income sources matter.
Other choices can affect when income is recognized. Converting some traditional IRA money to a Roth IRA before required distributions begin may reduce future taxable withdrawals; Roth IRAs are not subject to required minimum distributions. Delaying Social Security until age 70 increases benefits and can keep income lower earlier in retirement. Charitable giving and eligible medical deductions may also affect taxes. Review the effect of each move on your full tax picture before acting.
Which tax breaks matter most for your retirement budget?
Start by listing expected income by source: Social Security, pension payments, annuities, retirement account withdrawals and investment earnings. Then check how each state treats those categories, including age rules, distribution limits and early withdrawal exceptions. Compare property, sales, estate and inheritance taxes as well as income tax.
Tax laws can change, and a state with a clear retirement exemption may still be a poor fit for other budget reasons. A careful comparison can show whether a move or a different withdrawal schedule is likely to make a meaningful difference. For a decision involving several accounts or income sources, a financial adviser can help assess the trade offs.