States That Won't Tax Your Retirement Income in 2025

Living in one of these states that don’t tax retirement income may sound exciting. Not only could you pay fewer taxes in retirement, but you may save by not paying any state income tax. However, some states still tax certain earnings, so you may want to consult a tax professional depending on your type of taxable income.

But if your retirement income includes Social Security benefits, distributions from a 401(k) or IRA, or a pension, read on: you won’t see a tax bill from any of the states listed below.

States with no retirement taxes

While these states don’t tax “traditional retirement income,” you may still have to pay tax on other income types you earn in retirement, like wages, interest, and dividends.

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Not to mention, some states on this list have relatively high sales taxes, and several may have estate and inheritance taxes, too. These factors can influence how much money you could save as a resident of these states and may affect future outlays to your heirs.

Plus — don't forget: federal income tax applies in these states.

Alaska

Alaska income tax

Alaska has no state income tax, meaning you won’t have to pay state taxes on:

• Social Security benefits or pension income.
• 401(k) and IRA distributions.

Some more good news? Alaska is one of the states with no inheritance or estate tax. And you could also get paid to live in the state through Alaska’s Permanent Fund Dividend, which is $1,702 this year.

Here are a few other things to keep in mind about paying Alaska tax:

• While there isn’t necessarily an Alaskan sales tax, businesses could pay excise taxes and pass these along as fees to their consumers.
• Local sales taxes in Alaska can reach as high as 7.85% in some areas, according to the Tax Foundation.

Florida

Florida income tax

Sunshine and sandy beaches aren’t the only reasons people retire in Florida. The state also offers hefty tax breaks, like no state taxes on:

• Pension distributions.
• 401(k)s, 403(b)s, and IRA distributions.
• Estate or inheritance tax.

Floridians pay a state sales tax. However, many essentials (like groceries) are tax-exempt. And property taxes are relatively low compared to other states.

See also: The 10 Cheapest Places To Live in Florida.

Illinois

Illinois state income tax

Illinois has a flat income tax rate of 4.95%. However, the state doesn’t tax retirement income, meaning Social Security benefits, pensions, IRA, and 401(k) distributions are state tax-exempt.

However, Illinois does tax:

• Investment income.
• Gas (Illinois has one of the highest gas taxes in the U.S.).
• Estates worth more than $4 million.
• Groceries (Illinois is one of the few states that still tax groceries, but will eliminate the 1% grocery tax on many foods next year).

Additionally, the Prairie State has one of the highest sales taxes in the country.

Iowa

Iowa state income tax

Iowa is one of the most tax-friendly states for retirees. That’s largely because the state does not tax retirement income for retirees 55 and older.

Tax-exempt retirement income in Iowa includes:

• Roth conversion income.
• Distributions from qualified 401(k), 403(b), and 457(b) plans.
• SEP plans.
• SIMPLE retirement plans.

Note: For a complete list of all types of tax-exempt retirement income, visit the state’s Department of Revenue website.

Regardless of age, Social Security benefits are not taxed in Iowa. Additionally, the state recently moved to a flat 3.8% tax rate on other types of income (like wages and investment income).

MIssissippi

Mississippi income tax on retirement

Mississippi exempts Social Security benefits, pensions, 401(k), and IRA distributions from state income tax, making the Hospitality State the most tax-friendly state for retirement.

However, you’ll still pay a flat income tax rate of 4.4% on all other types of income that exceed $10,000.

Here are a few more things to know about Mississippi tax:

• Mississippi taxes groceries at a 5% tax rate.
• There is no estate or inheritance tax in Mississippi.
• Mississippi’s income tax rate is set to decrease to 4% in 2026.

Nevada

Nevada income tax

Nevada has no income tax, which means the following types of earnings are state-tax-free:

• Retirement income.
• Investment income.
• Wages.

Additionally, Nevada has no estate or inheritance taxes. But, not everything is tax-free in Nevada:

• Homeowners still have to pay property taxes in Nevada, although the state has some of the lowest property taxes in the country.
• The Nevada sales tax rate is 6.85%, which is higher than in most states.

New Hampshire

New Hampshire income tax

New Hampshire exempts retirement income from tax since the state doesn’t have a regular income tax. This means that you won’t have to pay tax on:

• Social Security benefits.
• Pensions.
• IRAs.
• 401(k) and other distributions.

Additionally, the Granite State is one of five states with no sales tax. But while the interest and dividends state tax has also been repealed, some New Hampshire mobile home and Condo property taxes have recently tripled.

Pennsylvania

Pennsylvania taxes on income

Pennsylvania’s flat income tax rate is 3.07%. But you won’t be taxed on certain types of income:

• Pensions.
• Distributions from IRAs and 401(k)s.
• Social Security.

You will be taxed on investment income and wages in Pennsylvania. Also, there are local income taxes, so you may not save as much as you think on your tax bill.

On top of that, Pennsylvania levies a hefty inheritance tax:

• Children over 21 years old pay an inheritance tax of 4.5% in Pennsylvania.
• All other heirs may face a tax rate of up to 15%.

Note: Children 21 and younger are exempt from Pennsylvania’s inheritance tax.

Related: Pennsylvania Property Tax and Rent Rebate: Will You Get One?

South Dakota

South Dakota taxes for retirees

Because South Dakota doesn’t tax personal income, your retirement income is safe from state taxes. You’ll also pay no state tax on:

• Income from dividends or interest in South Dakota.
• South Dakota inheritance or estate taxes.

…But, your groceries may be a little pricier. Here’s some information on the South Dakota grocery tax:

• Groceries are taxable at a rate of 4.2%.
• South Dakota doesn’t offer a grocery tax credit to offset the tax, unlike some other states.

Tennessee

Tennessee taxes for retirees

Like many states on the list, Tennessee doesn’t tax personal income, and that includes retirement income like Social Security benefits, pension, and 401(k) or IRA plan distributions.

However, not all taxes in the Volunteer State are low. You still pay Tennessee tax on:

• Groceries, at a tax rate of 4% (plus local sales taxes).
• Other goods and services at a 7% state sales tax rate (Tennessee has one of the highest sales tax rates in the country).

But, if you’re thinking of passing on a sizeable estate to your heirs, you may be in luck: Tennessee doesn’t enact a state inheritance or estate tax.

Texas

Texas income tax

A lack of personal income tax makes Texas one of the top ten most tax-friendly states. Here are just a few income types Texas does not tax:

• Retirement income.
• Wage income.
• Estate or inheritance tax.

Plus, the Texas homestead property tax exemption is $200,000 for homeowners 65 and older. However, the Lone Star State imposes a sales tax, which can be as high as 8.2% in some areas.

See also: Ten Cheapest Places to Live in Texas.

Washington

Washington state income tax

There is no Washington income tax on retirement income such as Social Security, pension income, 401(k), or IRA distributions. This is because Washington does not have a personal income tax.

However, the Evergreen State taxes the sale of some capital assets (like stocks and bonds) at a hefty rate of 7%. But only for gains that exceed $270,000 annually. Yet recently, Washington state also approved a new capital gains tax increase for 2025. Gains over $1 million are now charged an additional 2.9% tax, bringing the total effective rate on those capital gains to 9.9%.

The new tax law also impacted Washington’s estate tax:

• Washington’s 2025 estate tax exemption is $3 million.
• Tax rates for estates that exceed the threshold range from 10% to 35%.

Wyoming

Wyoming income tax

Wyoming is one of the states that don’t tax pension income. Additionally, there’s no state tax on:

• Income from interest and dividends.
• Personal or corporate income.
• Estate or inheritance taxes.

Also, the combined state and local sales taxes don’t exceed 6%, making Wyoming one of the best states for middle-class families.

FAQs

What states don't tax military retirement?

For retired veterans, none of the above-listed states taxes military retirement pay. However, if you're a veteran retiree, you may still be taxed on other types of income, like capital gains or interest. Veterans may keep more of their retirement pay by avoiding high-tax states for retired service members.

Which states don't tax 401(k) withdrawals?

All the above states, including Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming, exempt 401(k) withdrawals from state taxes.

But your retirement income, including 401(k) withdrawals, may still be included in federal taxable income. Also, many states tax 401(k) distributions that are taken too early. Consult your state's Department of Revenue website for more information.

Are there pension-friendly states?

There are several states in the U.S. that don't tax pension income. While many are on this list, there are others that may be considered "pension-friendly." For instance, Alabama retirees don't pay state taxes on defined benefit retirement plans. And Hawaii doesn't tax pension income if your employer was the only one contributing to your plan. Talk to a trusted tax professional about how your pension may or may not be taxed in your state.

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