States That Don't Tax Retirement Income (2026 Guide)

Where retirement income escapes state tax in 2026

Fourteen states leave most retirement income alone this year. Nine of them run no general income tax, so nothing gets taxed at the state level no matter the source, and the glance box above spells out exactly which ones. Five more keep a general income tax but carve out retirement income specifically: Illinois, Iowa (once you turn 55), Michigan (up to a dollar cap that took full effect this year), Mississippi and Pennsylvania.

Two changes moved the needle for 2026. Michigan finished a three-year phase-out of its tax on retirement income under a 2023 state law, so most pensions and IRA or 401(k) withdrawals are now exempt up to an indexed cap, no matter when the retiree was born. West Virginia finished its own three-year phase-out and now exempts all Social Security benefits, regardless of a recipient's other income.

Even outside those 14 states, most of the rest exempt at least part of a retiree's income, commonly Social Security or a capped slice of pension income. The gap between a tax-friendly state and a high-tax one can run $3,000 to $10,000 a year or more on identical retirement income. This guide walks through pensions, 401(k) and IRA withdrawals, Social Security, and annuity income one at a time, then gives you a full state-by-state reference table near the end.

States with no income tax on anyone, retired or not

The simplest scenario is a state with no general income tax. Move there and your pension, Social Security check, IRA withdrawal and annuity payments all pass through free of state tax, the same as anyone still working. As of January 2026, nine states fit that description:

Federal income tax still applies no matter which state you call home. A no-income-tax state only removes the state-level layer; see the section below on how Social Security is taxed federally.

States that don't tax pension income

Sixteen states leave pension income alone in 2026. The nine states with no general income tax cover part of that list, and seven more tax wages generally but carve out pensions specifically: Alabama, Hawaii, Illinois, Iowa, Michigan, Mississippi and Pennsylvania. Most of the remaining states still tax pension income but soften the hit with an age-based or income-based deduction, which the second table below covers.

The seven income-tax states that exempt pensions

States with partial pension exemptions

Pension rules vary further by whether the pension is government, military or private sector, so verify the specifics with your own state's revenue department. Separately, more than two dozen states carve out a full exemption for military retirement pay as of 2026, apart from their general pension rules. That list runs: Ohio, Wisconsin, New York, Michigan, Pennsylvania, New Jersey, Massachusetts, Maine, Connecticut, Illinois, Iowa, Missouri, Kansas, Kentucky, Arkansas, Louisiana, Mississippi, Alabama, Arizona, Oklahoma, North Dakota, South Carolina, North Carolina, West Virginia, Minnesota and Hawaii. If you served, check the military-specific exemption in your state, since it can be more generous than the general pension rule.

States that don't tax 401(k) and IRA withdrawals

When a 401(k), a 403(b) or a traditional IRA supplies most of your income, where you live carries extra weight, especially once mandatory withdrawals start. Required minimum distributions begin at 73 under current law, moving to 75 for anyone born in 1960 or later. Our RMD calculator can estimate your first few required withdrawals; the required minimum distribution glossary entry explains the mechanics.

States that fully exempt 401(k) and IRA withdrawals from state income tax:

• The nine states with no income tax at all, the same ones listed earlier in this guide
• Illinois, which waives tax on every dollar of qualified retirement distributions
• Iowa, once a resident turns 55
• Michigan, sheltering income up to $67,610 for a single filer and $135,220 for joint filers beginning in 2026
• Mississippi, once distributions start after age 59 and a half
• Pennsylvania, on the same after-59-and-a-half basis

That adds up to 14 states where a 401(k) or IRA withdrawal costs nothing in state tax. Everywhere else, 36 states plus D.C., the withdrawal counts as ordinary income and gets taxed at your state's marginal rate, running from roughly 2.5% in Arizona or North Dakota up to 13.3% in California.

Example: Picture a retiree named Walter, age 74, who takes a $45,000 required minimum distribution from his traditional IRA. If he lives in California, at the top marginal rate of 13.3%, he could owe more than $4,000 in state tax on that single withdrawal. If he lives in Illinois instead, the state tax on that same withdrawal is $0.

Which states skip tax on retirement income altogether

Zoom in on states that target retirement income specifically, and four qualify: Illinois, Mississippi, Pennsylvania, and Iowa once you hit 55. Layer in the nine states that skip income tax altogether, and 2026's count reaches 13 states where a retiree keeps retirement income free of any state tax bill. Michigan effectively makes it 14, since its exemption, capped at $67,610 for a single filer and $135,220 for joint filers, shields the typical middle-class retiree in full even though the break technically has a ceiling.

States that still tax Social Security benefits

For most retirees, Social Security is the biggest single income source, and about 42 states leave it untouched at the state level in 2026. Federal taxation is a separate question, covered in the next section, where up to 85% of a benefit can still be taxable depending on income.

The shorter list, states that still reach into at least part of a resident's Social Security benefit in 2026:

• Colorado, a full deduction of federally taxable Social Security once you turn 65; a $20,000 deduction applies from 55 to 64, and since 2025 the tax disappears entirely below $75,000 single or $95,000 joint in adjusted gross income
• Connecticut, no tax at all once adjusted gross income falls under $75,000 for a single filer or $100,000 for a married couple
• Minnesota, benefits fold into ordinary state tax, though a partial break softens it for lower incomes
• Montana, partially taxable, with a deduction that shrinks the bill for lower-income filers
• New Mexico, untaxed for lower-income filers, with a partial tax that phases in higher up the income scale
• Rhode Island, untaxed below a set income threshold
• Utah, a credit that leaves most lower-income retirees owing little or nothing
• Vermont, untaxed for lower-income filers, with tax kicking in as income climbs

West Virginia has dropped off this list entirely: its Social Security tax hit zero on January 1, 2026, the finish line of a three-year phase-out. If your state is not named above, it does not tax Social Security at all; double-check with your own state's tax agency or the Social Security Administration directly.

How Social Security is taxed at the federal level

Even a state that never touches Social Security cannot shield you from federal tax on it. The IRS bases federal taxation on your "combined income," defined as your adjusted gross income plus any nontaxable interest plus half of your Social Security benefit.

Congress locked those dollar cutoffs in back in 1984 and 1993 and has never indexed them to inflation, so a larger share of retirees crosses into taxable territory every year without actually getting richer. A married couple collecting $26,000 in Social Security plus $36,000 from a pension or IRA lands at $49,000 in combined income, their $36,000 plus half of the $26,000, which puts up to 85% of their benefit in the taxable range.

Even in a tax-free state, strategies like Roth conversions, timing IRA withdrawals or spacing out annuity income can reduce or eliminate federal tax on your Social Security benefit. Our Social Security tax calculator can estimate how much of your specific benefit is likely to be taxable.

The rest of the picture: property, sales and estate taxes

Income tax is just one slice of what retirees actually pay. Even a state with zero income tax can claw money back through high property or sales taxes, especially once you own a home free and clear.

Property taxes

Take a $350,000 home taxed at a 1.8% effective rate: that is $6,300 a year, easily erasing a chunk of what a no-income-tax state otherwise saves you. Many states offer relief aimed specifically at seniors, homestead exemptions, assessment freezes or deferral programs for residents past a certain age, so ask about these before ruling a state in or out.

Sales tax in the no-income-tax states

Despite charging no income tax, Washington and Tennessee post some of the steepest combined sales tax rates anywhere in the country. If your spending leans toward goods and services rather than housing, that can offset a meaningful share of your income tax savings.

Estate and inheritance taxes

The 2026 federal estate tax exemption sits at $15 million per individual, but several states apply their own estate or inheritance tax at a much lower threshold:

• States with an estate tax: Washington D.C., Oregon, Washington, Vermont, Rhode Island, New York, Minnesota, Massachusetts, Maryland, Maine, Illinois, Hawaii and Connecticut
• States with an inheritance tax: Pennsylvania, New Jersey, Nebraska, Maryland, Kentucky, and Iowa (phasing out)
• States with both: Maryland

Among the nine no-income-tax states, only Washington applies an estate tax, with a $3 million exclusion as of July 2025. The other eight have neither an estate nor an inheritance tax, which is worth weighing alongside income tax savings if leaving an inheritance matters to you.

How your state taxes annuity income

How an annuity payment gets taxed comes down to where the money originally came from. Fund a non-qualified annuity with money you already paid tax on, and only the growth on top of your deposit is taxable when it comes out, thanks to what insurers call the exclusion ratio. Fund a qualified annuity by rolling over a pre-tax IRA or 401(k), and every dollar that comes out is taxable, because none of it has ever been taxed.

• In the nine states with no income tax, annuity income of either kind passes through completely free of state tax.
• In Illinois, Iowa (55 and older), Michigan (up to its exemption cap), Mississippi and Pennsylvania, annuity income tied to a qualified retirement plan is typically exempt as well.
• Everywhere else, whatever portion counts as taxable, the gain on a non-qualified contract or the entire payment on a qualified one, gets folded into your ordinary state income tax bill.

Example: Consider a retiree named Denise, age 67, who annuitized a MYGA she bought with after-tax savings and now receives $18,000 a year. Under her exclusion ratio, $11,000 of each year's payment is a tax-free return of principal, and $7,000 is taxable interest. Florida charges Denise nothing on that $7,000 of taxable interest. A state running a flat 5% income tax would instead cost her about $350 a year on the same income. A straight partial withdrawal, one taken without annuitizing, works differently: growth is deemed to come out ahead of principal, so it is taxed in full until the gain runs dry.

Hold an annuity inside an IRA or 401(k) and it simply inherits whatever tax rules apply to that account type. A non-qualified annuity carries a separate advantage worth remembering: the exclusion ratio treats part of every payment as a tax-free return of your own money, which keeps it relatively tax-efficient even in states that only partially exempt retirement income. To see how a hypothetical annuity would perform with your own numbers and your state's specific rules, our annuity quote process runs the math with a licensed strategist at no cost.

Complete state-by-state retirement tax reference for 2026

This table compares all 50 states plus D.C. on the four things that matter most: whether the state has an income tax, and whether it taxes Social Security, pensions, and 401(k)/IRA withdrawals, plus whether it applies an estate tax.

Rows with more "No" answers are generally more tax-friendly for retirees. "Partial" means an exemption applies with income limits or dollar caps. Data reflects January 2026 rules; verify against your own state's revenue department before making a decision.

Is moving to a tax-friendly state worth it?

For a lot of retirees, moving pays off, though the answer hinges on your income bracket and the complete tax picture in both the old and new state, not the income tax rate alone.

Rough annual state tax savings from moving to a no-income-tax state, using flat hypothetical rates for comparison:

These numbers are simplified, flat-rate illustrations only. What you actually owe depends on your deductions, your filing status, and the specific brackets and exemptions your state applies, so run your real numbers by a tax professional before deciding.

Over a full retirement, those numbers compound. A retiree earning $120,000 a year who swaps an 8%-tax state for a no-tax state like Florida keeps about $192,000 more over a 20-year retirement, money that would otherwise never reach an investment account at all.

A few more things belong in the decision before you pack:

• Property taxes. Texas runs high despite having no income tax.
• Sales taxes. Tennessee and Washington sit near the top nationally.
• Cost of living, which varies as much within a state as it does between states.
• Healthcare access, including which Medicare Advantage plans serve the area.
• Proximity to family.

Tax savings matter, but they are one input into a much larger relocation decision.

What to check before you relocate for tax reasons

Before you commit to a move, run through this checklist:

• Prove you actually left. States run sophisticated residency audits. Spend more than half the year in your new home, swap over your license and voter registration, and file whatever domicile paperwork your new state asks for. High-tax states like New York, California and New Jersey are known for chasing down people who claim to have relocated without fully cutting ties.
• Watch for source-state rules on pensions. Federal law generally bars a state from taxing the retirement income of a non-resident, but if you have not fully cut ties elsewhere, your old state may push back. Work 30 years in California, move to Nevada, and make sure California actually agrees you are gone.
• Federal tax follows you everywhere. No state tax is not the same as no tax at all. Federal rates on ordinary income run from 10% to 37% depending on your taxable income, and the standard deduction, plus the extra amount available once you turn 65, apply no matter where you settle.
• Estate planning may need a second look. Moving to a state that runs its own estate tax, Washington, Oregon and Massachusetts among them, changes your plan. Moving away from one can benefit your heirs considerably. Loop in your estate attorney before you relocate.
• Healthcare costs are not uniform either. Medicare pays for the same baseline services nationwide, yet Advantage plan choices, Medigap pricing and drug costs shift by location. A state with low taxes and thin healthcare options can end up costing more once you add it all up.

Loop in a tax professional who works specifically with retirees relocating across state lines before you sign a lease or list your home.

How each state taxes annuity income

Most retirement tax overviews lump annuity income in with "other retirement income" and stop there, but the real rule turns on whether the contract is non-qualified, funded with money already taxed, or qualified, funded by rolling over a pre-tax IRA or 401(k). A non-qualified contract only owes tax on its growth, since your own after-tax deposit always comes back to you free and clear. A qualified contract owes tax on the entire payment, because it was funded with money that skipped tax the first time around. When a state exempts IRA and 401(k) withdrawals, that break usually carries over to qualified annuities too, though it does not always stretch to cover non-qualified ones.

The dollar column is a rough illustration only, a fully taxable $50,000 qualified annuity distribution taxed at the state's top rate shown. A non-qualified annuity would owe less, since only the gain portion is taxable. Rates and exemptions shown are for 2026 and are illustrative; confirm current figures with a CPA or your state's revenue department before deciding where to retire.