States That Do Not Tax Retirement Income (2026 Ranking)
If you are weighing whether to retire abroad or simply move to a more tax-friendly US state, this is the first decision that compounds for the rest of your life. State income tax can quietly cost a retiree USD 5,000–25,000 per year on top of federal tax. This guide ranks the states that go easiest on retirement income in 2026, explains the trade-offs (property tax, sales tax, cost of living), and shows when leaving the country actually beats relocating within it.
Establishing domicile in a no-tax state: Traveling Mailbox gives you a real Florida, Texas, Nevada, etc. street address with mail forwarding — the cleanest paper trail for state-tax exit. Set up a virtual mailbox →
The 9 states with no broad income tax
These states levy zero state income tax on wages, pensions, IRA withdrawals, or Social Security:
| State | Income tax | Property tax (effective) | Sales tax |
|---|---|---|---|
| Alaska | 0% | ~1.04% | 0% state, local up to ~7.5% |
| Florida | 0% | ~0.83% | 6% + local |
| Nevada | 0% | ~0.55% | 6.85% + local |
| New Hampshire | 0% on wages and retirement (interest/div tax phased out 2025) | ~1.93% | 0% |
| South Dakota | 0% | ~1.17% | 4.2% + local |
| Tennessee | 0% (Hall tax fully repealed) | ~0.67% | 7% + local up to 9.75% |
| Texas | 0% | ~1.68% | 6.25% + local |
| Washington | 0% on wages, 7% capital gains tax over USD 270k threshold | ~0.87% | 6.5% + local up to 10.4% |
| Wyoming | 0% | ~0.55% | 4% + local |
None of these is a free lunch. New Hampshire and Texas have some of the highest property tax rates in the country. Tennessee makes up for income tax with a high sales tax. Washington layers in a 7% capital gains tax over the threshold and an 11.5%-and-rising estate tax. Wyoming, South Dakota, and Alaska have minimal infrastructure for retirees outside a few towns.
States that exempt Social Security and most retirement income
If you have meaningful Social Security plus pension or IRA income, several states with income tax still treat retirees very generously:
- Pennsylvania — does not tax Social Security, public pensions, or qualified retirement plan distributions for residents past retirement age
- Mississippi — exempts Social Security, pensions, and IRA/401(k) distributions
- Illinois — exempts Social Security, qualified retirement plans, and pensions despite high overall taxes
- Iowa — fully exempts retirement income for residents 55+ since 2023 reform
- Georgia — exempts up to USD 65,000 of retirement income per person 65+
- South Carolina — generous deduction for retirement income, no Social Security tax
The 2026 list of states that DO tax Social Security
The number keeps shrinking — Kansas, Missouri, Nebraska, and West Virginia have all phased out Social Security tax in recent years. The remaining states still taxing Social Security to varying degrees in 2026:
- Colorado (most retirees exempt under deduction rules)
- Connecticut (income-based exemption)
- Minnesota (most retirees exempt under threshold)
- Montana (income-based exemption)
- New Mexico (income-based exemption)
- Rhode Island (income-based exemption)
- Utah (income-based credit)
- Vermont (income-based exemption)
Most apply income thresholds — a couple with combined income under roughly USD 60,000–100,000 often pays no state tax on Social Security even in these states. Check the current threshold before assuming.
Property tax matters more than people think
For a retiree on USD 80,000 income with a USD 500,000 home, the math often flips:
| Scenario | Income tax | Property tax on USD 500k | Combined |
|---|---|---|---|
| Texas (no income tax, 1.68% property) | USD 0 | USD 8,400 | USD 8,400 |
| Florida (no income tax, 0.83% property) | USD 0 | USD 4,150 | USD 4,150 |
| Pennsylvania (3.07% income, retirement exempt) | ~USD 0 retirement | USD 7,200 (1.44%) | USD 7,200 |
| Mississippi (5% income, retirement exempt) | ~USD 0 retirement | USD 4,000 (0.79%) | USD 4,000 |
The retirees’ top 5 in practice
Patterns from the past 5 years of net retiree migration:
- Florida — still #1. No income tax, large established communities, year-round climate, strong healthcare in metro areas. Insurance and HOA costs have risen sharply.
- Tennessee — Nashville and Knoxville have boomed. No income tax, lower property tax than Florida, four seasons.
- South Carolina — Charleston, Greenville, Hilton Head. Low cost of living, retiree-friendly tax treatment.
- Texas — Austin Hill Country, San Antonio, the Coast. No income tax balanced by property tax — best for owners of moderate-value homes.
- Arizona — Phoenix, Tucson, Prescott. Low income tax, dry climate, large active-adult communities.
When moving abroad beats moving states
State tax savings cap out at maybe USD 15,000–25,000 per year for high-income retirees. International retirement can dwarf that — but only if your healthcare cost goes down meaningfully, because that is where US retirees spend the most outside Medicare.
- Portugal — D7 visa, NHS-style SNS healthcare, IFICI tax regime for new residents
- Mexico — Permanent or Temporary Resident visa, IMSS public + private hybrid, very low cost of living
- France — Long-stay visitor visa, PUMA after 90 days, US-France treaty protects Social Security
- Spain — Non-Lucrative Visa, public healthcare via convenio especial, established expat communities
Considering both options? Compare with our best countries for Americans, retiring in France guide, and the Portugal D7 visa — all three target retirees specifically.
The exit tax trap if you leave a high-tax state
California, New York, and a few other states aggressively pursue former residents who try to claim non-residency. If you sell appreciated assets, exercise stock options, or take large IRA withdrawals shortly after moving, the source state may still claim its share. The cleanest break:
- Spend more than 183 days in the new state in the first calendar year
- Move drivers licence, voter registration, doctors, vehicle registration, primary banking
- Sell or rent (do not keep available for personal use) the property in the old state
- Keep contemporaneous records — calendars, credit card statements, flight records
Leaving California specifically? Read our FBAR + California exit tax guide — California does not have a formal exit tax but actively challenges residency claims for high earners.
Bottom line
For most retirees, the practical winners are Florida, Tennessee, and South Carolina among income-tax-free states; Pennsylvania and Mississippi among low-tax-with-retirement-exemption states. If your retirement income is heavily Social Security or you have pre-tax IRA balances above USD 1 million, run the math both ways — sometimes a state with income tax but a generous retirement exemption beats a “no tax” state once property and sales tax are added in. And if your healthcare costs are projected to be high, an international option may save you more than any US state can.
State Retirement Tax FAQ
Which US states don’t tax any retirement income?
Nine states have no state income tax at all, so they don’t tax Social Security, pensions, 401(k), IRA, or any other retirement income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. On top of those, Illinois, Iowa, Mississippi, and Pennsylvania have a state income tax but specifically exempt all retirement income from it. A handful more (Alabama, Hawaii, Michigan, etc.) exempt government and military pensions only. Always verify state-specific rules at the time of your move — these change frequently.
Do states without income tax have higher property taxes to compensate?
Sometimes, but not uniformly. Texas and New Hampshire have notably high property taxes (Texas effective rate around 1.6%, NH around 1.8% — both well above the 1.0% national average) that significantly offset the lack of income tax for homeowners. Florida, Nevada, and Tennessee have moderate property taxes (around 0.7-0.9%). Wyoming and South Dakota have some of the lowest property taxes in the country. Sales tax also varies — Tennessee has a 9.5% combined rate while Alaska has zero state sales tax. The full retirement-tax picture requires looking at income tax + property tax + sales tax + estate tax together.
Is Social Security taxed at the federal level?
Yes, partially. Up to 85% of your Social Security benefits can be subject to federal income tax depending on your “combined income” (adjusted gross income + nontaxable interest + 50% of SS benefits). The thresholds haven’t been adjusted for inflation since 1984, so most middle-income retirees see at least some federal tax on their benefits regardless of where they live.
Can I avoid state taxes simply by moving to one of these states?
Moving alone isn’t enough — you have to fully establish domicile in the new state and abandon domicile in the old one. High-tax states like California, New York, New Jersey, and Massachusetts aggressively audit former residents and may continue claiming you owe state tax for years if you don’t make a clean break. Cleanest evidence includes registering to vote in the new state, getting a new driver’s license, registering your vehicles, opening local bank accounts, buying or leasing a primary residence, updating wills and beneficiary designations, and physically spending more than 183 days per year in the new state. Keep a paper trail.
Do I need to live in a no-income-tax state full-time to avoid state taxes?
For most retirees, yes — meaningfully. Most states use a 183-day physical presence test plus a domicile test. Splitting time between states (the “snowbird” pattern) typically requires staying under 183 days in the higher-tax state and being able to prove your true home is in the lower-tax one. Some retirees use the “domicile in one state, vacation in others” model to keep things clean — registered to vote, holding a driver’s license, and filing federal returns from the no-tax state’s address.