Do you know which states don’t tax retirement income? If not, then read on to find out! Many states have a law that states that they do not tax any source of retirement income. This includes income from IRAs, 401ks, pensions, and annuities. So it doesn’t matter how much money you make or where in the United States you live – if your state is one of these states, then your retirement income will be free of taxation.
- States That Won’t Tax Your Social Security Income
- States That Won’t Tax Your Pension Income
- States That Won’t Tax Your TSP Income
- States That Don’t Have State Income Taxes
- States That Won’t Tax Your 401(k), IRA, or Pension Distributions
- States That Won’t Tax Your Pension But Taxes 401(k)s and IRAs
- States That Won’t Tax Your Estate or Inheritance
- States That Don’t Have Sales Tax
- States That Don’t Tax Military Retirement Income
- Conclusion
- Learn How To Retire Comfortably In Each State
- Related Reading
- Frequently Asked Questions
States That Won’t Tax Your Social Security Income
The following states are exempt from income taxes on Social Security Benefits:
- Colorado
- California
- Connecticut (50% of Benefits)
- Florida (no state taxes)
- Kansas
- Minnesota (33% of Benefits)
- Missouri (Based on Annual Income Amount)
- Montana
- Rhode Island (Based on Annual Income Amount)
- Vermont
- West Virginia (Starting in 2022)
- New Jersey
States That Won’t Tax Your Pension Income
The following states are exempt from income taxes on pension income:
- Alaska
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
- New Hampshire
- Alabama
- Illinois
- Hawaii
- Mississippi
- Pennsylvania
Read this guide if you want to know how to spend your pension income without giving up control, keep up with inflation, and never run out of money.
States That Won’t Tax Your TSP Income
The following states are exempt from income taxes on Thrift Savings Plan (TSP) Income:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
- Illinois
- Mississippi
- Pennsylvania
States That Don’t Have State Income Taxes
The following states are exempt from state income taxes.
- Alaska
- Florida
- Nevada
- New Hampshire (earned wages only)
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
States That Won’t Tax Your 401(k), IRA, or Pension Distributions
The following states are exempt from income taxes on 401k, IRA, annuity, and pension income:
- Illinois
- Mississippi
- Pennsylvania
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
If you’re looking for a way to spend your 401(k) or IRA money without relinquishing control, keep up with inflation, and never run out of money, read our article: Empowering Retirement.
States That Won’t Tax Your Pension But Taxes 401(k)s and IRAs
The following states are exempt from income taxes on pension income but will be taxed on 401k and IRA income:
- Alabama
- Hawaii
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Keep up with inflation, avoid running out of money, and maintain control over your pension, 401(k), or IRA funds by reading our guide to guaranteeing your retirement.
States That Won’t Tax Your Estate or Inheritance
Even though there’s an estate tax on a federal level, the following states are exempt from “death taxes” such as estate taxes and/or inheritance taxes:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Delaware
- Florida
- Georgia
- Idaho
- Indiana
- Iowa
- Kansas
- Kentucky (Estate Tax Only)
- Louisiana (Inheritance Tax only)
- Maryland (Taxes can be an exemption if requirements are met)
- Michigan
- Mississippi
- Missouri
- Montana
- Nebraska (Estate Tax Only)
- Nevada
- New Hampshire
- New Jersey (Estate Tax Only)
- New Mexico
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Pennsylvania (No Estate Tax. No Inheritance Tax Depending On Beneficiary)
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Virginia
- West Virginia
- Wisconsin
- Wyoming
Helpful tip: If you want to leave money to your beneficiaries, life insurance might be better. In some cases, you don’t need to take a medical exam. Instead, compare instant life insurance quotes to determine if affordable coverage is available. Coverage starts at $9.37 per month. Proceeds are tax-free.
If you have a qualified retirement plan that you plan to leave to beneficiaries, read this guide on how to reduce the tax burden for your heirs.
States That Don’t Have Sales Tax
The following states are exempt from state sales taxes:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
States That Don’t Tax Military Retirement Income
States that don’t tax military retirement pay include:
- Alabama
- Arkansas
- Connecticut
- Hawaii
- Illinois
- Iowa
- Kansas
- Louisiana
- Maine
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- New Jersey
- New York
- North Dakota
- Ohio
- Pennsylvania
- West Virginia
- Wisconsin
Conclusion
If you’re nearing retirement or are already retired, it’s important to understand the tax laws in your state. Depending on where you live, you may be able to minimize the amount of taxes you pay on your retirement income. Request a quote from our team of experts, and we can help you find the best way to reduce your taxable income in retirement. Thanks for reading!
Learn How To Retire Comfortably In Each State
If you have any questions regarding how to spend your retirement funds wisely and retire comfortably, please do not hesitate to ask. Please do not inquire about which state you wish to retire in. I’m not a travel agent. 🙂
Related Reading
- Best Ways To Leave Money To Heirs
- How Long Will My Money Last?
- How Much Money Do You Need To Retire?
- annuity
Frequently Asked Questions
Which states don’t tax my 401K, social security benefits, and military retirement pay?
You have to pay federal taxes in every state. However, some states don’t have state income taxes. These states are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. Another state that doesn’t have income taxes is New Hampshire.
Do you pay taxes on Social Security?
Some individuals who receive Social Security must pay federal income taxes on their payments. However, no one pays taxes on more than 85 percent of their Social Security benefits. If you file a federal tax return as an “individual” and your “combined income” is greater than $25,000, you must pay taxes on your benefits.
What state has no income tax?
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming do not have a state income tax.