States That Don’t Tax Retirement Income: What to Know and How To Plan

Shawn Plummer

CEO, The Annuity Expert

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.

Find out how much guaranteed retirement income you can receive for the rest of your life with our retirement calculator.

States That Won’t Tax Your Social Security Income

The following states are exempt from income taxes on Social Security Benefits. The following states don’t have any income tax at all are:

  • Alaska
  • Florida
  • Georgia
  • Illinois
  • Mississippi
  • Nevada
  • New Hampshire
  • Pennsylvania
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

States That Won’t Tax Your Pension Income

The following states are exempt from income taxes on pension income:

  1. Alaska
  2. Florida
  3. Nevada
  4. South Dakota
  5. Tennessee
  6. Texas
  7. Washington
  8. Wyoming
  9. New Hampshire
  10. Alabama
  11. Illinois
  12. Hawaii
  13. Mississippi
  14. Pennsylvania

States That Won’t Tax Your TSP Income

The following states are exempt from income taxes on Thrift Savings Plan (TSP) Income:

  1. Alaska
  2. Florida
  3. Illinois
  4. Nevada
  5. New Hampshire
  6. South Dakota
  7. Tennessee
  8. Texas
  9. Washington
  10. Wyoming
  11. Illinois
  12. Mississippi
  13. Pennsylvania

Free Tool: Estimate Your Withdrawals With Our TSP Retirement Calculator

States That Don’t Have State Income Taxes

The following states are exempt from state income taxes.

  1. Alaska
  2. Florida
  3. Nevada
  4. New Hampshire (earned wages only)
  5. South Dakota
  6. Tennessee
  7. Texas
  8. Washington
  9. Wyoming

States That Won’t Tax Your 401(k) or IRA

The following states are exempt from income taxes on 401k, IRA, annuity, and pension income:

  1. Illinois
  2. Mississippi
  3. Pennsylvania
  4. Alaska
  5. Florida
  6. Nevada
  7. New Hampshire
  8. South Dakota
  9. Tennessee
  10. Texas
  11. Washington
  12. 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:

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.

Retirement Distributions Comparison

Now that you know where to maximize your retirement income, the next question is how to maximize distributions from retirement accounts. The table below compares withdrawals from various retirement plans (and does not include Social Security Benefits).

FeaturesAnnuity401(k)IRARoth IRA
Withdrawal Percentage5.20% – 6.55%4%4%4%
Can Income Increase?YesYesYesYes
Can Income Decrease?NoYesYesYes
How Long Will Money Last?Lifetime30 Years+30 Years+30 Years+
Annual Fees0 – 1.50%1% – 4%1% – 4%1% – 4%
TaxationTaxable/Tax-FreeTaxableTaxableTax-Free
Death BenefitAccount BalanceAccount BalanceAccount BalanceAccount Balance

Example: A 60-year-old retiree starts withdrawing immediately from their $1 million portfolio, they would receive:

Use our free annuity calculator to determine how much income you can generate from your IRA and 401(k) plans. Then request a quote.

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:

  1. Alabama
  2. Alaska
  3. Arizona
  4. Arkansas
  5. California
  6. Colorado
  7. Delaware
  8. Florida
  9. Georgia
  10. Idaho
  11. Indiana
  12. Iowa
  13. Kansas
  14. Kentucky (Estate Tax Only)
  15. Louisiana (Inheritance Tax only)
  16. Maryland (Taxes can be an exemption if requirements are met)
  17. Michigan
  18. Mississippi
  19. Missouri
  20. Montana
  21. Nebraska (Estate Tax Only)
  22. Nevada
  23. New Hampshire
  24. New Jersey (Estate Tax Only)
  25. New Mexico
  26. North Carolina
  27. North Dakota
  28. Ohio
  29. Oklahoma
  30. Pennsylvania (No Estate Tax. No Inheritance Tax Depending On Beneficiary)
  31. South Carolina
  32. South Dakota
  33. Tennessee
  34. Texas
  35. Utah
  36. Virginia
  37. West Virginia
  38. Wisconsin
  39. Wyoming

Helpful tip: Life insurance might be better if you want to leave money to your beneficiaries. 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:

  1. Alaska
  2. Delaware
  3. Montana
  4. New Hampshire
  5. 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

Next steps

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!

States That Don'T Tax Retirement Income, Pensions, Social Security, 401K, Ira, Estate

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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.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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