states with no retirement tax are a bigger deal than most people realize, because a handful of them exempt nearly all retirement income from state levies. According to the Tax Foundation's 2025 State Individual Income Tax Rates and Brackets report, nine states impose no individual income tax at all, and several more carve out pensions and Social Security entirely.
The problem? The rules differ sharply by income type, age, and account structure, so a state that looks friendly on paper can still tax part of your nest egg. This guide breaks down which states qualify, what they actually exempt, and how to plan a move without surprises.
What Counts as a State With No Retirement Tax?
A state with no retirement tax exempts some or all retirement income from its income tax, but the scope varies widely. Some states have no income tax at all, while others tax wages yet exclude pensions, 401(k) withdrawals, or Social Security benefits. That distinction matters because "no retirement tax" is not a single legal category.
The Tax Foundation notes that state treatment of retirement income is fragmented, with policies changing almost every legislative session. You need to check three separate buckets:
- Social Security benefits — most states exempt these, but a few still tax them
- Pension and 401(k)/IRA withdrawals — often taxed unless a specific exclusion exists
- Age-based deductions — many states offer credits that phase out above certain income levels
A state that exempts Social Security may still tax your traditional IRA withdrawals at its full rate. Read the statute, not the headline.
How to apply this: Pull your state's individual income tax instruction booklet and search for "retirement income subtraction" to see the exact exclusion language.
A state with no retirement tax exempts some or all retirement income from its income tax, but the scope varies widely. States with no retirement tax range from those with zero income tax to those that tax wages yet exclude pension income.
The strongest states with no retirement tax fall into two camps: zero income tax states and targeted retirement exclusion states. Choosing among states with no retirement tax depends on whether your income comes from pensions or wages.
The 5 Best States With No Retirement Tax
The strongest no-tax states fall into two camps: those with zero income tax and those with targeted retirement exclusions. Both can work, but they suit different financial profiles.
According to the Tax Foundation, the nine states with no individual income tax include Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire phases out its interest and dividends tax, so retirees there face a shifting picture.
For a state with no retirement tax, these zero-income-tax states deliver the simplest math: nothing to file, nothing to exclude.
A second group exempts retirement income directly. Pennsylvania excludes pension distributions for retirees above a certain age, and Illinois does not tax retirement plan withdrawals. These states still collect tax on wages, so they appeal to people who keep working part-time.
Consider a retiree drawing $60,000 from a traditional 401(k) and $25,000 in Social Security. In Texas, that income faces no state tax. In a state with a 5% flat rate and no exclusion, the same retiree could owe thousands annually.
How to apply this: Build a simple spreadsheet listing each candidate state, your expected income by source, and that state's exclusion rules.
Planning a move around states with no retirement tax requires more than picking a warm climate. Residency rules, sourcing of income, and timing all shape what states with no retirement tax actually save you.
The strongest states with no retirement tax fall into two camps: zero income tax states and states with targeted retirement exclusions.
Which States Exempt Social Security and Pensions?
Social Security exemptions are broader than pension exemptions, and the gap is where retirees get caught. The Social Security Administration explains that federal taxation of benefits depends on combined income, but state rules are separate and often more generous.
Most states exempt Social Security entirely. A smaller group also excludes public and private pensions, sometimes with age or dollar caps. Pennsylvania, for instance, has long excluded retirement distributions for older filers. Illinois exempts retirement plan income without a tight age gate.
The trap is partial exemption. A state may exclude the first $20,000 of pension income, then tax the rest at its marginal rate. If your withdrawals are large, the effective benefit shrinks fast.
| Income source | Commonly exempt? | What to check |
|---|---|---|
| Social Security | Usually yes | Confirm state follows federal exclusion |
| Public pension | Often yes | Look for caps by age or amount |
| 401(k)/IRA | Sometimes | Find the subtraction line on the return |
| Annuity income | Rarely | Verify whether it counts as pension |
How to apply this: Call your target state's revenue department and ask specifically whether traditional IRA withdrawals qualify for an exclusion.
Several states with no retirement tax fully exempt military retirement pay, including Florida, Texas, and Pennsylvania, though others offer only partial exclusions.
Social Security exemptions are broader than pension exemptions, so states with no retirement tax may still tax some pension income.
How to Plan a Move to a No-Tax State
Planning a move around a state with no retirement tax requires more than picking a warm climate. Residency rules, sourcing of income, and timing all affect what you actually save.
Most states determine residency by domicile plus days present. If you keep a home, register a car, or vote in your old state, auditors may argue you never left. Keep a dated log of your move and update your driver's license and voter registration promptly.
Timing matters too. A large Roth conversion or business sale in your final year in a high-tax state can cost more than years of savings. Sequence big income events after you establish residency.
In one case, a couple sold a rental property before changing domicile and paid their old state's tax on the full gain — a cost that careful sequencing could have reduced.
How to apply this: Use a free tax calculator like the IRS Tax Withholding Estimator to model federal impact, then layer your state's rules on top.
Generally no, because Roth withdrawals are already tax-free federally and most states with no retirement tax follow that treatment.
Planning a move to states with no retirement tax requires attention to residency rules, income sourcing, and timing.
Common Mistakes With No-Retirement-Tax States
The biggest mistake is assuming a no-income-tax state means no taxes at all. Property taxes, sales taxes, and excise duties can offset income tax savings, especially for homeowners.
According to the Tax Foundation, states without income taxes often rely more heavily on property and sales taxes to fund services. Texas, for example, has no income tax but among the higher effective property tax rates nationally. A retiree with a large home may find the trade-off unfavorable.
Other frequent errors:
- Forgetting that a state may tax interest, dividends, or capital gains even when it exempts pensions
- Ignoring local income taxes layered on top of state rules
- Assuming a state with no retirement tax also has low healthcare or long-term care costs
A state with no retirement tax can still be expensive if you own property or carry significant investment income.
How to apply this: Compare total tax burden, not just income tax, using the Tax Foundation's State and Local Tax Burden rankings before you commit.
The biggest mistake is assuming states with no retirement tax also have no property, sales, or excise taxes.
Frequently Asked Questions About states with no retirement tax
What states have no retirement tax for military pensions?
Several states fully exempt military retirement pay, including Florida, Texas, and Pennsylvania. Others offer partial exclusions tied to age or service length. If you have a military pension, verify the specific statute, because a state with no retirement tax for civilians may treat military pay differently. Check your state's revenue site before filing.
Yes, several states with no retirement tax still tax capital gains and dividends, which matters if your income leans on a brokerage account.
Do states with no retirement tax tax Roth IRA withdrawals?
Generally no, because Roth withdrawals are already tax-free at the federal level and most states follow that treatment. However, a few states have historically taxed certain Roth conversions or earnings. Confirm your state's treatment of Roth distributions, especially if you converted recently, since rules can differ.
Generally no, because Roth withdrawals are already federally tax-free and states with no retirement tax usually follow that treatment.
Can I claim residency in a no-tax state while keeping my old home?
It is possible but risky. States audit domicile using factors like where you spend most nights, register vehicles, and hold a driver's license. Claiming residency in a state with no retirement tax while maintaining strong ties elsewhere can trigger back taxes and penalties. Document your move thoroughly.
Claiming residency in states with no retirement tax while keeping your old home is possible but risky under domicile audits.
How do part-year residents handle retirement income in these states?
Part-year residents typically file in both states and allocate income by residency period. Pension and IRA withdrawals are usually sourced to your state of residence when received. Keep a calendar of your move date, because a mid-year relocation can split your retirement income across two tax regimes.
Part-year residents in states with no retirement tax typically file in both states and allocate income by residency period.
Are there states with no retirement tax that still tax capital gains?
Yes. Several states exempt pensions and Social Security but tax investment income, including capital gains and dividends. If your retirement income leans on a brokerage account rather than a pension, model the capital gains rate carefully. A state with no retirement tax on pensions may still take a bite from your portfolio.
Yes, some states with no retirement tax still tax capital gains and dividends on investment income.
Conclusion
Choosing among states with no retirement tax comes down to matching your income mix to each state's actual rules. Keep these takeaways in mind:
- Zero-income-tax states like Texas and Florida are simplest, but property and sales taxes can offset gains
- Pension and Social Security exclusions vary, so read the subtraction rules line by line
- Residency and timing decisions can erase your savings if handled carelessly
- Total tax burden matters more than the income tax headline
Start by listing your income sources and modeling each candidate state against them this week. A few hours of planning now can protect a decade of withdrawals later.
