Key Takeaways:
• Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax.
• Illinois, Iowa, Mississippi, and Pennsylvania have income tax, but typically exclude common types of retirement income like Social Security, pensions, and withdrawals from IRAs or 401(k)s.
• Laws vary by state, retirement income type, and sometimes age.
A state’s laws can affect how much of each retirement dollar you actually get to keep, which is why many retirees move to states with no state income tax, like Florida, after leaving the workplace. For some, moving to a new state turns a tight budget into a more comfortable one, easing post-employment stress.
In this guide, you’ll learn which states have no income tax, which ones typically exempt retirement income while still taxing regular forms of income, factors you may want to consider before making a move, and how American Hartford Gold can add value to your retirement portfolio.
Why Do State Taxes Matter During Retirement?
Retirement income typically means Social Security benefits, pensions from public (and sometimes private) employers, and withdrawals from individual retirement accounts or workplace plans, like a 401(k). Some states also set conditions on income from annuities, the military, or survivor benefits (from a deceased spouse).
Where you live directly impacts your budget. If you withdraw $1,000 from a traditional IRA, a state with no income tax allows you to keep the full amount at the state level. In a state that taxes retirement income, a percentage of the amount is withheld or due at withdrawal.
Florida, Texas, and Tennessee
Many retirees are familiar with Florida, Texas, and Tennessee due to their climates, major airports, and varied housing markets. These states do not tax retirement income. Florida has a large community of retirees, making it one of the most popular retirement states.
Texas is another top choice due to its warm climate and affordability. Tennessee is attractive to retirees because of its central location, favorable weather, and top-rated healthcare options in major cities.
Other Factors That Matter
These states also stand out in other ways that matter to a retirement budget. Florida’s homestead laws for residents cap annual property assessment increases at 3% or at the change in the Consumer Price Index (CPI) (whichever amount is lower) for primary residences. This prevents taxes from going up due to high demand.
Texas property taxes are often higher, so keep that in mind if you are pricing properties there. Tennessee has seen rapid population growth in recent years, affecting housing availability and prices. When you compare your options, research neighborhoods, consider property tax bills, and estimate your monthly expenses.
Lifestyle Considerations
Lifestyle matters during retirement as well. Since you won’t be in an office all day, you will notice climate conditions more than you did before. Florida offers vibrant, coastal living, large retirement communities, and a variety of healthcare options.
Texas offers retirees plenty of open space, warm weather, and proximity to top medical centers in major cities like Houston and Dallas. Tennessee appeals to those who enjoy cooler-than-average winter months. The state also has an active music and sports scene, particularly in cities like Nashville.
Alaska, Nevada, South Dakota, and Wyoming
Alaska, Nevada, South Dakota, and Wyoming are also in the no-income-tax group. Alaska is a good fit for people who enjoy wide open landscapes, cool summers, and a strong sense of community. Nevada is perfect for those who enjoy mountain life, making it popular among active retirees.
South Dakota and Wyoming appeal to those who prefer low population density and also offer access to various national and state parks for those who like spending time in nature.
Other Factors That Matter
Other costs can also vary significantly from what you may be used to. Alaska has higher shipping and travel costs. Nevada’s housing markets vary widely between tourist-heavy areas and quieter towns. South Dakota and Wyoming handle property taxes in a way that may feel familiar if you are moving from the Midwest, but it’s still important to do your research.
Many retirees want to work part-time, and these four states make that easy to do at the state level since income taxes do not apply. If you take on seasonal work in Alaska or Nevada, for example, the state does not treat those paychecks any differently than retirement distributions.
If you own a small business, you should review how each state handles business licensing and sales taxes, which are separate from income taxes.
Lifestyle Considerations
Healthcare access is an important factor, no matter where you live. Alaska’s smaller population means confirming provider availability might be more complicated, especially for Medicare Advantage plan holders. Nevada, South Dakota, and Wyoming each have very good regional medical centers.
However, living in a rural area may mean longer drives to access specialty care, and Nevada, South Dakota, and Wyoming are among the most rural states in the country. You should research providers in the area you want to live and contact them before you move to confirm that your health needs can be met.
Washington and New Hampshire
Washington and New Hampshire complete the no-income-tax list. Washington offers a healthy mix of city life and nature that appeals to many retirees. New Hampshire is known for its low crime rate, beautiful mountain scenery, and tight-knit communities.
Other Factors That Matter
Washington’s largest cities have higher housing costs, and local taxes can feel unfamiliar if you are moving from the Midwest or the South. New Hampshire property taxes are among the highest in the country.
For some retirees, this could be a dealbreaker. As you build your budget, you should consider potential property tax obligations alongside housing, utilities, and healthcare costs in your preferred city.
Lifestyle and Other Taxes
Washington imposes a tax on certain types of capital gains, which is separate from income tax and typically does not affect IRA or 401(k) withdrawals. This may matter if you plan to sell appreciated assets or a business held in a taxable account, for example.
Transportation fees, local sales taxes in Washington, and property taxes in New Hampshire can majorly impact a fixed budget. Determine what living in either of these states could mean for your specific situation. Consider, for example, how living in a primarily rural (84%) state like New Hampshire could affect your access to emergency medical care.
What Income-Tax States Skip Retirement Income?
There are four states that tax wages and other earnings at the state level, but typically exclude the most common forms of retirement income.
Illinois, Iowa, Mississippi, and Pennsylvania
Illinois exempts retirement income like IRA withdrawals, 401(k) distributions, pensions, and Social Security benefits. Iowa excludes retirement income for many retirees, with specific age-based eligibility requirements.
Mississippi does not tax retirement funds, such as pensions, IRAs, annuities, and Social Security, when distributions are part of normal retirement income. Early withdrawals may not be tax-free.
Pennsylvania generally exempts retirement income like Social Security, pensions, military benefits, and workplace retirement plans if you have reached 59 ½ and the distributions meet state standards for retirement payments. Early withdrawals may not be tax-free.
Eligibility Rules And Documentation
Eligibility rules vary by state. In Iowa and Pennsylvania, reaching a certain age is a common condition for excluding IRA or 401(k) withdrawals from tax. Again, in Pennsylvania, the age is 59 ½. In Iowa, retirees must be 55 or older by the end of the tax year (December 31st) to qualify.
Mississippi treats early distributions differently from those taken as part of regular retirement, which is why they can be subject to state tax. The Illinois definition of retirement income is broad, but you should still confirm that your plan distributions qualify.
Keep statements that identify the type of account, the reason for the distribution, and whether it was taken as part of retirement. If you annuitize part of an account, keep the contract and document the start date.
This list of rules and state specifications may not be exhaustive. For Illinois, Iowa, Mississippi, and Pennsylvania, eligibility for tax-free withdrawals varies, and certain conditions must be met. Do your research before moving to any of these four states to ensure you meet the necessary criteria.
Add Gold To Your Retirement Portfolio With AHG
A state’s tax requirements can be the difference between having extra room in your budget for more expensive months and having very little left over at all. This is why many retirees choose to move to no-income-tax states like Texas. Consider your budget, healthcare needs, and desired lifestyle, then perform detailed research before making any moves.
If you’re looking for ways to safeguard your finances, consider a Gold IRA to protect the value of your savings with eligible gold pieces.
FAQs
Which states do not tax any retirement income?
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not impose state income tax.
Do all states that do not tax retirement income also skip tax on part-time wages?
No. There are four states that do not tax retirement withdrawals but still tax other forms of income — Illinois, Iowa, Mississippi, and Pennsylvania. These states broadly exempt retirement income, but still tax wages, business income, and taxable investment income.
Should taxes be the only factor when choosing a state for retirement?
No. Taxes are easier to measure than many other factors, but you should also consider housing costs, property and sales taxes, healthcare needs, insurance premiums, and proximity to family. For some retirees, these factors could outweigh cost.
Do extensive research on the state you are thinking about relocating to, as this will help ensure it aligns with your desired lifestyle.
Sources:
How Annuities Work And What You Should Know | Bankrate
Save Our Homes – Assessment Cap on Homesteaded Property | City of Jacksonville
Property taxes by state: Ranked from highest to lowest in 2025 | Rocket Mortgage
Thread: A Roadmap to Rescue Rural Healthcare | Topics | Dartmouth Health
