For retirees, maximizing income by minimizing taxes is an important consideration. As of 2025, nine U.S. states do not collect income tax on retirement funds—or any income at all. While relocating to a tax-free state might not be the only factor to consider when planning your retirement, it can play a significant role in protecting your savings and income.
States With No Income Tax
The following nine states do not impose income taxes on retirement income—or any other income:
| State | Additional Notes |
|---|---|
| Alaska | No state income tax, but higher living costs due to its remote location. |
| Florida | Popular with retirees for its warm weather and no state income tax, but rising property taxes are a factor. |
| Nevada | Offers no income tax, though its reliance on tourism and gambling can lead to higher sales taxes. |
| New Hampshire | Previously taxed dividend and interest income, but as of 2025, this tax has been eliminated entirely. |
| South Dakota | Low overall tax burden, but healthcare options may be more limited in rural areas. |
| Tennessee | No state income tax, but housing costs have increased significantly in recent years. |
| Texas | No state income tax, but property taxes are among the highest in the nation. |
| Washington | No income tax, though high property values and sales taxes offset some savings. |
| Wyoming | No income tax and low population density, making it attractive for those seeking a quiet retirement. |
New Hampshire
New Hampshire previously taxed dividend and interest income but eliminated this tax in 2025, making it completely state-tax-free for all residents, including retirees.
Special Retirement Tax Exemptions
While some states impose income taxes, they provide significant exemptions for retirement income, including:
| State | Exemptions for Retirees |
|---|---|
| Illinois | No tax on 401(k), pension distributions, or Social Security benefits. |
| Iowa | For those 55+, withdrawals from 401(k)s, IRAs, and Social Security are exempt from tax. |
| Mississippi | 401(k), IRA distributions, and Social Security income are tax-free if retirement requirements are met. |
| Pennsylvania | Pension income, IRA distributions, 401(k) withdrawals, and Social Security benefits are all tax-free for retirees aged 60 and older. |
Social Security Benefits
Although most states don’t tax Social Security benefits, there are a few exceptions:
| State | Notes |
|---|---|
| Colorado | Taxes Social Security, but retirees may qualify for partial exemptions. |
| Connecticut | Imposes taxes on Social Security, though retirees with lower incomes may be exempt. |
| Minnesota | Fully taxes Social Security but offers income-based deductions. |
| Montana | Includes Social Security as taxable income. |
| New Mexico | Taxes Social Security but offers phased-out exemptions based on income. |
| Rhode Island | Taxes Social Security, though income thresholds determine the extent. |
| Utah | Taxes Social Security but provides a non-refundable tax credit for certain retirees. |
| Vermont | Fully taxes Social Security, though lower-income retirees may receive partial exemptions. |
| West Virginia | Gradually phasing out Social Security taxes and will eliminate them completely by 2026. |
Important Considerations
While avoiding state income taxes can save retirees money, other financial factors need to be taken into account:
1. Property Taxes
States with no income tax often rely heavily on property taxes for revenue. For example:
- Florida: Property taxes in Tampa have surged by 60% since 2019.
- Texas: Property taxes rank among the highest in the nation.
2. Cost of Living
Housing prices have risen significantly in several states with no income tax:
- Tennessee: Median home prices increased from $250,000 to nearly $390,000 since 2019.
- Washington: High property values offset the lack of income tax savings.
3. Access to Healthcare
In rural states like Wyoming and South Dakota, healthcare options may be limited, which is an important consideration for retirees with medical needs.
4. Visit Before Moving
Spend time in potential relocation states to evaluate their cost of living, amenities, and overall livability.
For retirees looking to stretch their savings, states without income tax or those with exemptions for retirement income can be financially beneficial. However, it’s essential to consider the full picture, including property taxes, healthcare access, and cost of living, before making a move.
By doing thorough research and possibly consulting a financial advisor, retirees can make informed decisions to maximize their income and enjoy a comfortable retirement.
FAQs
Which states have no income tax for retirees?
Nine states, including Florida, Texas, and New Hampshire, have no income tax.
Does New Hampshire still tax dividend and interest income?
No, as of 2025, New Hampshire has eliminated its tax on dividend and interest income.
Are Social Security benefits taxed in all states?
No, only a few states, like Vermont and Minnesota, tax Social Security benefits.
What should retirees consider before moving to a tax-free state?
Consider property taxes, cost of living, healthcare access, and overall quality of life.
Which states offer exemptions on retirement income?
States like Illinois, Pennsylvania, and Mississippi exempt certain retirement incomes from taxes.
