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States With No Tax on Retirement Income
Move a $70,000 retirement income stream from a 6% tax state to a zero-tax state and the difference is about $4,200 a year — $84,000 over two decades, before touching a single investment decision. Nine states currently levy no broad income tax on wages, retirement distributions, or investment gains alike.
The Nine States
- No income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
New Hampshire and Washington deserve an asterisk: New Hampshire long taxed interest and dividends — fully repealed as of 2025 — and Washington applies its capital gains excise tax to large gains, currently above roughly $270,000, though retirement account distributions remain untaxed. Alaska uniquely pays residents an annual oil-fund dividend instead of collecting income tax.
States That Exempt Retirement Income Selectively
Several high-profile retirement states exempt substantial retirement income without going fully zero: Illinois and Mississippi exempt most retirement plan distributions; Pennsylvania excludes 401(k) and IRA payouts; Alabama exempts defined-benefit pensions. Rules are per-state and change with legislatures, so verify current law before a move — and note that some states tax pensions but not 401(k)s, or vice versa.
Income Tax Is Not the Whole Bill
Property taxes in Texas can exceed the saved income tax for a homeowner with a $500,000 house. Sales taxes run high in several no-tax states. And four states — currently including Colorado, Minnesota, and others — tax Social Security benefits in some form. Healthcare access, distance from family, and climate shift more real-world retirement satisfaction than the tax line. The strongest cases treat the state decision as one input in a moving budget: the savers who benefit most are those with large IRA and 401(k) balances funding most of their spending.
This article is general educational information only, not financial, tax, investment, accounting, or legal advice, and is not a recommendation to buy, sell, or hold any product or security. Figures reflect published IRS, HMRC, and Social Security Administration guidance for 2026 and are subject to change and annual indexing; always confirm current thresholds with the official source before acting. Rules differ by country, state, and personal situation, and nothing here creates a fiduciary or advisory relationship. This site is supported by advertising, which does not influence our editorial conclusions. For any decision with real financial consequences, consult a licensed fiduciary advisor or tax professional.