Most retirement tax articles focus on Social Security, but for many people that is the smaller issue. Only eight states tax Social Security at all, and most exempt middle incomes. Pensions and withdrawals from IRAs and 401(k)s are different. Many more states tax them, and the rules vary from fully exempt to fully taxed.
If you have a pension or a large retirement account, the state you live in can change your yearly tax bill by thousands of dollars. This guide groups the states by how they treat that income in 2026.
The short version
- 9 states have no broad income tax, so pensions, IRA and 401(k) withdrawals are untaxed: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
- 4 states have an income tax but exempt most retirement income: Illinois, Mississippi, Pennsylvania and Iowa (for those 55 and older).
- Many states exempt part of it, usually with an age requirement and a dollar cap.
- Some states tax nearly all of it, including California.
Group 1: No state income tax
| State | Notes |
| Alaska | No state income tax or state sales tax |
| Florida | No income tax; homestead protections for property tax |
| Nevada | No income tax |
| New Hampshire | No tax on wages or retirement income; its tax on interest and dividends has been repealed |
| South Dakota | No income tax |
| Tennessee | No income tax |
| Texas | No income tax; relatively high property taxes |
| Washington | No tax on wages or retirement income; taxes certain large capital gains |
| Wyoming | No income tax |
A missing income tax is not the whole story. These states often rely more on sales or property taxes, so compare the full picture.
Group 2: Income tax, but retirement income is largely exempt
| State | 2026 income tax | Retirement income treatment |
| Illinois | Flat 4.95% | Social Security, pensions and qualified 401(k) and IRA income are exempt |
| Mississippi | Flat 4.0% | Qualified retirement income is exempt |
| Pennsylvania | Flat 3.07% | Income from qualified plans is exempt once you reach retirement age under the plan’s terms |
| Iowa | Flat 3.8% | Retirement income is exempt for residents 55 and older |
For a retiree drawing $50,000 a year from a pension or IRA, living in one of these states instead of a state that taxes it at 5% saves about $2,500 a year.
Group 3: Partial exclusions (selected states)
These states tax retirement income but let older residents exclude some or all of it. Amounts are per person unless noted.
| State | What is excluded | Key conditions |
| Alabama | Defined benefit pensions are exempt; up to $6,000 of other retirement income | The $6,000 exclusion applies from age 65 |
| Arkansas | Up to $6,000 of retirement income | Applies to pensions and retirement account distributions |
| Colorado | Up to $24,000 of retirement income, including taxable Social Security | Age 65+; $20,000 for ages 55 to 64 |
| Delaware | Up to $12,500 of pension and eligible retirement income | Age 60+; $2,000 under 60 |
| Georgia | Up to $65,000 of retirement income | Age 65+; $35,000 for ages 62 to 64 |
| Hawaii | Employer-funded pensions are exempt | IRA and 401(k) withdrawals are generally taxable |
| Kentucky | Up to $31,110 of retirement income | Applies to pensions and retirement account distributions |
| Michigan | Pension and retirement income deduction, phased in to full exemption | Phase-in was scheduled to be complete for tax year 2026 |
| New Jersey | Pension and retirement income exclusion up to $100,000 (married filing jointly) or $75,000 (single) | Full exclusion only with total income of $100,000 or less; reduced up to $150,000 |
| New York | Up to $20,000 of private pension and annuity income | Age 59½+; New York public and federal pensions are fully exempt |
| Oklahoma | Up to $10,000 of retirement income | Applies to pensions and retirement account distributions |
| South Carolina | Retirement income deduction of $10,000 at 65+ ($3,000 under 65), plus a separate senior deduction | Age rules apply |
| Virginia | Age deduction up to $12,000 | Age 65+; income limits apply for many filers |
Rules and dollar amounts change often, and several have income limits or special cases for military and government pensions. Treat this table as a guide and confirm current rules with the state revenue department before filing or moving.
Group 4: States that tax most retirement income
In states such as California, pensions and IRA or 401(k) withdrawals are taxed like ordinary income. Some of these states offer small senior credits, but no broad exclusion. California’s top rates are among the highest in the country, although most retirees fall into its lower brackets.
Military and government pensions
Many states treat military retirement pay more generously than private pensions. A large majority of states now fully or partly exempt military retired pay, and some also exempt state and local government pensions, as New York does for its own public retirees. If you have a military or public pension, check your state’s specific rules, because they can be very different from the private pension rules above.
How much can state taxes cost in retirement?
A simple illustration for a married couple with $60,000 a year of pension and IRA income (not counting Social Security):
| Where they live | Approximate state tax on that $60,000 |
| Florida, Texas or another no-income-tax state | $0 |
| Illinois, Mississippi, Pennsylvania or Iowa (55+) | $0 |
| Georgia, both 65+ (up to $65,000 excluded each) | $0 |
| A state taxing it at about 5% with no exclusion | About $3,000 |
These are simplified examples. Actual tax depends on deductions, credits and the state’s brackets.
Taxes are only one part of the decision
A state that exempts your pension could still cost more overall if housing, home insurance or health care are expensive. For example, Illinois exempts retirement income but has high property taxes in many areas. Texas has no income tax but also higher property taxes. Florida has neither income tax nor high property taxes on homesteads, but home insurance can be expensive.
Before moving, estimate your total yearly cost in each state you are considering: income tax, property tax, sales tax, home insurance and everyday living costs. Our cost of retirement by state guide gives a starting point for the last one.
Changing your state of residence
If you move for tax reasons, make it a clean break. States with income taxes may challenge a move if you keep strong ties. Common steps include selling or renting out your old home, changing your driver’s license and voter registration, filing a part-year return in your old state, and spending most of the year in your new one. Some states, including New York and California, audit residency changes more closely than others.
If you are in your 40s or 50s
Where you hold your savings affects future state taxes. Money in Roth accounts is generally tax-free in retirement at both the federal and state levels. Traditional 401(k) and IRA money will be taxed by your state of residence when you withdraw it, not where you earned it. Knowing where you are likely to retire can help you decide how to split contributions between traditional and Roth accounts.
Frequently asked questions
Which states don’t tax 401(k) or IRA withdrawals? In 2026, the nine states with no income tax, plus Illinois, Mississippi, Pennsylvania and Iowa (for residents 55 and older).
Does my old state tax my pension if I move? Generally no. Federal law prevents states from taxing the retirement income of former residents, so your pension is taxed by the state where you live when you receive it.
Which states are most tax-friendly for retirees? States with no income tax and states that exempt retirement income score best on income tax. But property taxes, sales taxes and home insurance also matter, so no single state is best for everyone.
Are military pensions taxed by states? Most states now exempt all or part of military retired pay. Check your state’s rules.
Sources
- Vision Retirement, “Which States Don’t Tax Pension Income?” (2026)
- IncomeTaxByState.com, 2026 retirement income scorecard
- State departments of revenue and taxation for Alabama, Arkansas, Colorado, Delaware, Georgia, Hawaii, Illinois, Iowa, Kentucky, Michigan, Mississippi, New Jersey, New York, Oklahoma, Pennsylvania, South Carolina and Virginia
- Federal law on state taxation of retirement income of nonresidents (4 U.S.C. section 114)
State tax rules change often. Confirm details with your state tax agency before filing or moving. This article is general information, not tax advice.
