Thirteen States with Tax-Free Retirement Income: A Complete Guide for Future Retirees

Planning retirement involves more than just saving money—understanding where you’ll live can significantly impact your income. Tax policy varies dramatically by state, and some retirees find themselves in far more favorable positions simply by understanding which jurisdictions exempt certain income sources. This guide maps out the landscape of state-level taxation for those approaching or already in retirement.

The Nine States Offering Complete Income Tax Exemption

The simplest starting point is identifying states with no income tax whatsoever. If you currently reside in or are considering relocating to one of these jurisdictions, you’ll enjoy substantial tax relief across all income categories:

No-income-tax states: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Eight of these states maintain zero income tax policies across the board. New Hampshire operates differently—historically, it has exempted wages while taxing investment gains, though this distinction is disappearing. Beginning in 2025, New Hampshire residents will face no taxation on dividends and interest income either, creating a complete exemption status.

However, states without income taxes typically compensate through alternative revenue streams. Sales taxes, property taxes, and other levies can be substantially higher, so evaluating the full tax picture remains essential before relocating.

Selective Retirement Income Exemptions: Four States’ Special Treatment

Beyond the nine no-income-tax states, four additional states have adopted a more targeted approach. These jurisdictions do collect income taxes but specifically exempt retirement income:

Retirement-income-exempt states: Illinois, Iowa, Mississippi, and Pennsylvania.

This distinction matters significantly for retirees whose primary income flows from pensions, retirement account withdrawals, or similar sources rather than ongoing employment.

The Broad Coalition: Forty-One States Exempting Social Security

Social Security constitutes a critical retirement income stream for millions of Americans. The average monthly benefit recently stood at $1,979—approximately $23,750 annually—and protecting this income from taxation becomes increasingly important given discussions about benefit sustainability.

Forty-one states plus Washington D.C. currently do not tax Social Security benefits. This expansive list includes most major states across every region: Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, and Washington D.C.

Setting up a “my Social Security” account through the Social Security Administration enables individuals to review personalized benefit projections, helping with retirement income planning.

The Outliers: Nine States That Do Tax Social Security

Nine states still impose taxation on Social Security benefits: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.

The burden, however, often remains manageable. Many of these states structure their tax codes with income thresholds or age-based exclusions, meaning lower-income retirees and those of advanced age frequently pay minimal or zero taxation on their benefits. Additionally, this list has contracted over time—as recently as 2016, thirteen states taxed Social Security. The trajectory suggests continued shrinkage.

The Elite Group: Thirteen States with Comprehensive Retirement Tax Relief

Combining all these exemptions yields thirteen states that offer complete protection across all retirement income types. These jurisdictions exempt Social Security, pension distributions, investment income, and all other retirement-related earnings from state taxation:

Fully tax-free retirement states: Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Residents in these states enjoy unmatched protection for their retirement income streams. That said, federal taxation still applies in most cases, and state property or sales taxes may remain substantial.

Building a Comprehensive Retirement Strategy

Tax geography represents just one component of retirement planning. A robust retirement strategy requires estimating total financial needs, identifying appropriate withdrawal rates from retirement accounts, and ideally developing multiple income streams. These might include dividend-yielding stocks, traditional pensions, Social Security, annuities, and structured retirement account withdrawals.

Understanding where you pay taxes and where you don’t provides a valuable foundation, but it should anchor a broader financial plan rather than drive location decisions in isolation.