Although paying taxes is part of being a good citizen, many retirees look for ways to keep their income intact without unneeded deductions.
Lucky for some retirees, there are a few of states where you won’t have to pay income tax on your retirement money.
Although relocating to one of these states just to reduce your tax burden may not be the only thing you should take into account, it is definitely something to keep in mind when making plans for the future.
States that do not impose taxes on your retirement income
As of 2025, there are nine states that do not collect any income tax from retirees or anybody else, for that matter. Instead of imposing an income tax, these states pay their budgets through other ways, such as sales taxes and property taxes.
The following are the states:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
New Hampshire used to tax dividend and interest income, but this tax was removed in 2025. This provides New Hampshire a true state-tax-free home for all its residents, including seniors.
It is crucial to keep in mind that retirees may still be required to pay federal taxes and, in certain cases, local municipal or county taxes. However, these states are still appealing to retirees who want to minimize their tax burden.
States that have a few exclusions for retirees
Some states do not tax retirement income at all, while others do tax it but create allowances for retirees. Certain sorts of retirement income can be excused from taxation in certain states because they have unique rules that allow for this.
The following are the exemptions:
- Illinois: Payments from 401(k) plans, pensions, and Social Security are not subject to taxation.
- Iowa: If you are 55 years old or older, you do not have to pay taxes on money you take out of your 401(k) or IRA, or on your Social Security income.
- Mississippi: If you meet the qualifications for a retirement plan, the state does not tax income from 401(k)s, IRAs, or Social Security.
- Pennsylvania: Income from IRAs, 401(k)s, and Social Security benefits is not taxed, but wages from work are taxed. If you are at least 60 years old, you do not have to pay taxes on your pension income.
States that impose taxes on social security income
While the majority of states do not impose taxes on Social Security benefits, there are a small number of states that do tax these benefits at the state level. The following states are included:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
That said, it is important to point out that West Virginia has been steadily reducing the amount of taxes that it collects on Social Security income, and by 2026, the state will no longer collect any taxes on these payments. In the years to come, retirees who live in West Virginia can look forward to a reduction in taxes.
Although avoiding state income taxes might be a huge advantage for a retiree’s budget, it is necessary to take all variables into account before making a major decision. In several of these states, other expenses, like property taxes and the cost of living, have increased.
According to Redfin, an online real estate company, property taxes in Tampa, Florida, have increased by 60% since 2019. During the same period, the median home price in Tennessee has risen from less than $250,000 to around $390,000.
Before you pack your things and move to a state that does not have an income tax, take some time to compare the costs. How much will it cost to live in your current location compared to where you might wish to move?
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Additionally, think about spending a longer amount of time at your potential new house so that you may get a better sense of the neighborhood.
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