How much you’ll pay in taxes during your retirement depends on where you live. There are 13 states where retirement income isn’t taxed; and, for many people, this is a key reason to relocate once they’ve retired. A recent article from USA Today, “Which 13 states don’t tax retirement income?” looks closer at the pros and cons of these baker’s dozen states.
Alaska doesn’t levy a state income tax, so your Social Security benefits, pension income and 401(k) and IRA distributions aren’t taxed. However, some areas in Alaska do have high local sales taxes—nearly 8% in some areas—so check this out before moving north.
Florida is popular among retirees due to its numerous tax breaks. There are no taxes on retirement accounts, pension distributions, no estate tax and some essentials, like groceries, are tax free. However, homeowners’ insurance is expensive in Florida, and there is little public transportation.
Illinois has a flat income tax rate of 4.95% and doesn’t tax retirement income. However, investment income, estates valued at more than $4 million, and groceries are taxed, and the sales tax is one of the highest in the country.
Iowa does not tax any Social Security benefits or retirement income for residents 55 and older.
Mississippi exempts Social Security benefits, pensions, 401(k) and IRA distributions from taxes. There is a flat state income tax of 4.4% on income exceeding $10,000. However, there is no estate or inheritance tax.
Nevada doesn’t tax wages, retirement, or investment income. Property taxes aren’t bad, but the sales tax of 6.85% is high.
New Hampshire doesn’t levy any income tax, which includes Social Security, pensions, or retirement distributions. There’s also no sales tax—but winters can be long and cold.
Pennsylvania has a flat income tax rate of 3.07%, and no taxes are levied on IRA or 401(k) distributions, Social Security, or pensions. The state does have an inheritance tax, which is something to keep in mind.
South Dakota doesn’t tax personal income, so all retirement income is 100% tax-free. There’s no inheritance or estate taxes, and no taxes on dividends or interest payments.
Tennessee doesn’t tax personal income of any kind. However, the sales tax is the second highest in the country.
Texas doesn’t tax personal income, retirement income, or inheritances. The sales tax can be high, depending on where you live.
Washington state doesn’t tax personal income. The sale of assets, such as stocks and bonds, is taxed, but not Social Security, pension, 401(k), or IRA distributions. You do have to like rain and coffee to live there.
Finally, Wyoming doesn’t tax wages, investment earnings, retirement and pension income. There’s no tax on interest and dividend income, personal or corporate income, or inheritances.
If the idea of moving from a heavily-taxed state to a tax-free state is a consideration, remember that, when you move from one state to another, your estate planning documents should be reviewed. It may be beneficial to update to your current estate plan to align with the new state’s laws.
Reference: USA Today (June 20, 2025) “Which 13 states don’t tax retirement income?”
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