States vary widely in the way they tax retirement income so location is an important consideration in financially planning for retirement. Some states don’t levy income states on any sort of retirement income, while others tax IRA and 401(k) distributions, pension payouts and even social security payments like ordinary income. Income taxes are just part of the story, however, as some states with low or no income taxes have high property, sales and other taxes. Consider working with a financial advisor when you are planning for retirement to make sure you avoid any unnecessary taxes.

Retirement Income Tax Basics

Most retirement income can be subject to federal income taxes. That includes Social Security benefits, pension payments and distributions from IRA and 401(k) plans. Exceptions include distributions from Roth IRA and Roth 401(k) plans. Federal income taxes on Roth contributions are paid before the contributions are made. These contributions as well as any investment gains can be withdrawn free of federal income taxes after five years if you have reached age 59 1/2.

The situation is more complex when it comes to how states will tax your income. Many states have no income tax at all, so all retirement income, as well as other income, is state tax-free. Most states specifically exclude Social Security benefits from taxation. Some others also exempt retirement account distributions and pensions. Most have a mix of approaches to taxing retirement income.

Now that you have a good baseline knowledge of how retirement taxes work at the state level, let’s dive into the states that won’t tax you at all.

States That Don’t Tax Retirement Income

Eight states have no state income tax. Those eight – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming – don’t tax wages, salaries, dividends, interest or any sort of income.

No state income tax means these states also don’t tax Social Security retirement benefits, pension payments and distributions from retirement accounts. Even income from securities held in non-retirement brokerage accounts is free from any state income tax in these states. That means retired residents in these states have no worries about paying state income taxes on their income from any source.

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Another state, New Hampshire, has no state income tax on wages, salaries, retirement account withdrawals or pension payments. But New Hampshire does currently tax dividends and interest, which are likely to be sources of income for some retirees with assets outside retirement accounts.

The rest of the states take a variety of approaches to taxing retirement income. Some tax all retirement income, including Social Security. Others exempt Social Security but tax sources such as pensions and retirement account income if retirees’ income exceeds a certain cap. But the following states levy no tax on retirement income of any sort.

11 States That Don’t Tax Retirement Income 1. Alaska No state income tax 2. Florida No state income tax 3. Illinois Retirement income exempt, including Social Security, pension, IRA, 401(k) 4. Mississippi Retirement income exempt, including Social Security, pension, IRA, 401(k) 5. Nevada No state income tax 6. Pennsylvania Retirement income exempt, including Social Security, pension, IRA, 401(k) 7. South Dakota No state income tax 8. Tennessee No state income tax 9. Texas No state income tax 10. Washington No state income tax 11. Wyoming No state income tax

States With Small Retirement Tax Requirements

Some states that don’t appear on this list of those that don’t tax retirement income at all are still relatively generous when it comes to letting retirees off the tax hook. For instance, Georgia does not tax Social Security retirement benefits and also provides a deduction of up $65,000 per person on all other types of retirement income.

Also, in Pennsylvania all Social Security benefits and IRA and 401(k) income is exempt. And the Keystone State does not levy income tax on pension payments for those over 60. Clearly, state taxation of retirement income is somewhat complicated. One of the biggest differences between states is the variety of income caps to qualify for exemptions.

In addition, state taxation of retirement benefits is a moving target. State tax laws change over time. For instance, New Hampshire’s 5% tax on dividends and interest is due to be phased out by January 2027. Until then, the tax rate on dividend and interest income in New Hampshire declines every year until it reaches zero.

Bottom Line

Eleven states levy no income taxes on retirement income from any source. Others offer resident retirees varying degrees of exemptions from taxation on Social Security, retirement account distributions, pension payments and other types of retirement income. Some of the exemptions are generous enough that many retirees in those states won’t pay any income tax. Details such as the retiree’s income matter and vary by state, so it’s important to check with the state tax office for details before relocating to save on taxes.

Tips for Retirement

• A financial advisor can help you balance the tax and other considerations involved in selecting a place to retire. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• There is more to planning a secure and comfortable retirement than avoiding all state taxes on retirement income. States may not tax retirement income but have high taxes otherwise. Read more about retirement taxes.

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