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.
Please 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
- 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) or IRA
- States That Won't Tax Your Pension But Tax 401(k)s and IRAs
- Retirement Distributions Comparison
- States That Won't Tax Your Estate or Inheritance
- States That Don't Have Sales Tax
- States That Don't Tax Military Retirement Income
- Retirement Tax Calculator By State
- Next steps
- Learn How To Retire Comfortably In Each State
- Frequently Asked Questions
- Related Reading
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
- Iowa
- 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:
- Alaska
- Florida
- Iowa
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
- New Hampshire
- Alabama
- Illinois
- Hawaii
- Mississippi
- Pennsylvania
States That Won’t Tax Your TSP Income
The following states are exempt from income taxes on Thrift Savings Plan (TSP) Income:
- Alaska
- Florida
- Illinois
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
- Illinois
- Mississippi
- 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.
- Alaska
- Florida
- Nevada
- New Hampshire (earned wages only)
- South Dakota
- Tennessee
- Texas
- Washington
- 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:
- 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 guide: Empowering Retirement.
States That Won’t Tax Your Pension But Tax 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
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 (excluding Social Security Benefits).
| Features | Annuity | 401(k) | IRA | Roth IRA |
|---|---|---|---|---|
| Withdrawal Percentage | 5.20% – 6.55% | 4% | 4% | 4% |
| Can Income Increase? | Yes | Yes | Yes | Yes |
| Can Income Decrease? | No | Yes | Yes | Yes |
| How Long Will Money Last? | Lifetime | 30 Years+ | 30 Years+ | 30 Years+ |
| Annual Fees | 0 – 1.50% | 1% – 4% | 1% – 4% | 1% – 4% |
| Taxation | Taxable/Tax-Free | Taxable | Taxable | Tax-Free |
| Death Benefit | Account Balance | Account Balance | Account Balance | Account 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 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: 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 to leave to beneficiaries, read this guide on reducing 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
- Utah
- West Virginia
- Wisconsin
Helpful Tip: If you need a cheap service to set up your entire estate plan, we recommend:
Retirement Tax Calculator By State
Calculate how much taxes, by state, you’ll have to pay in retirement.
Next steps
If you’re nearing retirement or are already retired, it’s essential 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.
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 in 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 more significant 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, and Wyoming do not have a state income tax.
What are the best states for taxes?
The best states for taxes depend on individual circumstances, but some tax-friendly states are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.
Related Reading
- Best Ways To Leave Money To Heirs
- How Long Will My Money Last?
- How Much Money Do You Need To Retire?
- 401k Calculator
- Traditional IRA Calculator
- Roth IRA Calculator
- Estimate Taxes On Retirement Income Calculator
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