US Retirement Tax
Best States for Retirees With Pensions (2026)
Fifteen US states that either fully exempt pension income or offer meaningful retirement-income exclusions. Includes the 9 no-income-tax states plus 6 standout income-tax states with unusually retiree-friendly rules.
Ranking uses a composite score weighing public-pension exemption, private-pension treatment, 401(k)/IRA withdrawal taxation, Social Security tax, and retirement-income exclusions.
Alaska
No state income, sales, Social Security, or estate tax. Residents also receive an annual Permanent Fund Dividend ($1,702 in 2024).
Florida
The U.S. retiree-tax haven: no state income tax, no tax on Social Security or retirement income, no estate or inheritance tax, Save Our Homes 3% assessment cap, and easy domicile establishment. Homeowners insurance (not taxes) is the real retirement cost to model.
Not applicable — Florida has no state income tax
Illinois
Fully exempts all retirement income (SS, pensions, 401k/IRA). Offset by second-highest property taxes in the nation and a low-threshold estate tax ($4M).
All qualified retirement income (SS, pensions, 401k, IRA) is exempt — one of only three states to fully exempt 401(k)/IRA withdrawals
Iowa
All retirement income fully exempt at age 55+ as of 2023, inheritance tax repealed in 2025 — dramatically more retiree-friendly than a few years ago.
Retirement income (SS, pensions, 401k/IRA) fully exempt for residents age 55+ as of 2023
Mississippi
One of the three states (with IL and PA) that fully exempt all retirement income — SS, pensions, and 401(k)/IRA withdrawals.
All qualified retirement income (SS, pensions, 401k, IRA) fully exempt
Nevada
One of only four 'full freedom' tax-free states for retirees along with FL, TX, and WY: no income tax, no Social Security or retirement-income tax, no estate or inheritance tax. Property tax is low (0.55%) and capped at 3% annual growth. Combined sales tax is ~8.23%.
Not applicable — Nevada has no state income tax
New Hampshire
No income, sales, estate, or inheritance tax. Interest/dividends tax fully repealed in 2025. Third-highest property tax rate in the nation is the main cost.
Pennsylvania
Fully exempts all retirement income once age-eligible and has one of the lowest flat income tax rates. Inheritance tax applies to most non-spouse heirs.
All retirement income (SS, pensions, 401k, IRA) fully exempt once age-eligible (typically 59.5+)
South Dakota
No state income tax, no Social Security or pension tax, no estate or inheritance tax. Property tax is moderate.
Tennessee
Genuine no-income-tax state since the Hall Tax was eliminated in 2021. No tax on SS, pensions, 401(k)s, IRAs, capital gains, or interest. Low property tax (0.63%) with senior relief programs. High combined sales tax (~9.55%) is the one meaningful retiree cost.
Not applicable — Tennessee has no state income tax of any kind
Texas
One of the most tax-friendly states for retirees: no income tax, no Social Security tax, no retirement-income tax. Property tax is the real cost (1.68% effective, 6th-highest) but the senior homestead exemption and school-tax freeze significantly limit it.
Not applicable — Texas has no state income tax
Washington
No state income tax but a 7% capital gains tax on >$270K/yr gains and a low-threshold estate tax (~$2.2M). Attractive for retirees below the CG and estate thresholds.
Wyoming
No state income tax, no Social Security or retirement income tax, no estate or inheritance tax, very low property and sales tax. Consistently ranked #1 or #2 most tax-friendly state for retirees.
Alabama
One of the most retiree-friendly states: no Social Security tax, pensions fully exempt, and the lowest property taxes in the country.
Pensions fully exempt; first $6,000 of other retirement income excluded age 65+
Hawaii
Lowest property tax rate in the nation, pensions exempt, capital gains at a favorable 7.25% flat rate. Offset by high income tax brackets and the nation's highest cost of living.
All employer-funded pensions exempt; 401(k)/IRA withdrawals from employee contributions are taxable
Frequently asked questions
Which states don't tax pension income?
States that fully exempt all pension income include Illinois, Mississippi, and Pennsylvania (all three also exempt 401(k)/IRA withdrawals), plus Alabama (pensions exempt), Hawaii (employer-funded pensions exempt), and the 9 no-income-tax states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming — which tax no income of any kind).
Are public pensions taxed differently than private pensions?
Yes. Many states exempt state/federal government pensions (public pensions) but tax private-employer pensions. Examples: North Carolina's Bailey Settlement fully exempts pre-1989-vested government pensions. New York fully exempts state/NYC/federal pensions. Michigan, Illinois, and Pennsylvania exempt both public and private pensions.
What is a retirement-income exclusion?
A retirement-income exclusion is a per-taxpayer dollar amount of pension, IRA, or 401(k) income that's exempt from state tax. Georgia has a $65,000 exclusion at age 65+ (highest in the US). Kentucky offers $31,110, Michigan $56,000 (phasing up), South Carolina stacks $15K + $15K ($30K total) at 65+. These effectively zero-out state tax for most middle-income retirees in those states.
What about Social Security?
Only 9 states currently tax Social Security (Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, West Virginia — many with income-based phaseouts). The other 41 states + DC do not. West Virginia's SS tax phases to 0% by 2026. See our individual state guides for exact treatment.
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Educational content only. Retirement and tax planning involve significant uncertainty; consult a qualified fiduciary advisor before acting on any plan.