State income taxes on retirement income can cost $3,000–$10,000 per year for many retirees. Choosing the right state — or confirming your current state is favorable — is one of the most impactful financial decisions you can make. Here’s the complete 2026 picture.
States with No Income Tax
These states are automatically tax-friendly for retirement income:
| State | Notes | Major Retirement Downside |
|---|---|---|
| Alaska | No income tax; annual Permanent Fund Dividend (~$1,500/person) | Cold climate; remote; high cost of goods |
| Florida | No income tax; no estate tax; warm climate | High insurance costs; hurricanes; crowded |
| Nevada | No income tax; no estate tax | Hot summer; high cost in Las Vegas metro |
| New Hampshire | No income tax; taxes interest/dividends being phased out | Cold winters; high property taxes |
| South Dakota | No income tax; no estate tax; low property taxes | Cold; rural; few major cities |
| Tennessee | No income tax (on salary; investment income taxes fully eliminated 2023) | Limited Medicaid expansion |
| Texas | No income tax | High property taxes (1.6–1.9%); summer heat |
| Washington | No income tax | High sales tax (10%+); rainy; high cost of living in Seattle |
| Wyoming | No income tax; lowest overall tax burden in US | Small cities; cold winters; remote |
How States Tax Social Security Benefits (2026)
| Category | States |
|---|---|
| No SS tax | AL, AK, AZ, AR, CA, DE, FL, GA, HI, ID, IL, IN, IA, KY, LA, ME, MD, MA, MI, MS, NV, NH, NJ, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, VA, WA, WI, WY |
| Partial SS tax | CO (up to $24K exempt per person), CT (exempt below $75K single / $100K joint), KS (exempt below $75K AGI), MN (exempt under income limits), MT (complex formula), NM (graduated exemptions), RI (exempt below FRA), UT (up to $7,500 credit), VT (exempt below ~$65K single), WV (partial exemption, phasing out) |
How States Tax Pension and IRA Income (2026)
| State | Pension/Retirement Income Tax Treatment | IRA/401(k) Withdrawals |
|---|---|---|
| Illinois | Fully excludes ALL retirement income (pension, 401k, IRA) | Excluded |
| Mississippi | Fully excludes all retirement income | Excluded |
| Pennsylvania | Fully excludes all retirement income if over 59½ | Excluded |
| Michigan | Significant pension deductions (military/government full; private limited) | Partial exemption |
| New York | Up to $20,000/year pension exclusion | $20,000 exclusion (IRA/401k too) |
| Georgia | Up to $65,000/year exclusion per person (age 65+) | Under exclusion |
| Alabama | SS and government pensions exempt; private pensions taxed | Taxable (ordinary income) |
| South Carolina | Up to $15,000/year combined retirement deduction | Under deduction |
| Virginia | Up to $12,000/year exclusion (age 65+) | Under exclusion |
| California | No pension exclusion; all retirement income taxed at 1–13.3% | Fully taxable |
| Minnesota | No pension/IRA exclusion; one of highest retirement tax states | Fully taxable |
Overall Retirement Tax Burden Comparison
| State | State Income Tax on $70K Retirement Income | Property Tax (Typical) | Sales Tax | Overall Rating |
|---|---|---|---|---|
| Wyoming | $0 (no income tax) | Low (~0.56%) | 4–6% | ★★★★★ Best |
| Florida | $0 (no income tax) | Moderate (0.8–1.1%) | 6–8% | ★★★★★ Best |
| Tennessee | $0 (no income tax) | Low (~0.68%) | 9–10% (high) | ★★★★ Very good |
| Nevada | $0 (no income tax) | Moderate (~0.5%) | 6.85–8.4% | ★★★★ Very good |
| Illinois | $0 (retirement income excluded) | HIGH (~2.0%) | 6.25–10.5% | ★★★ Good (offset by high property tax) |
| Mississippi | $0 (retirement income excluded) | Low (~0.65%) | 7% | ★★★★★ Best for low income retirees |
| Pennsylvania | $0 (retirement income excluded) | Moderate (~1.5%) | 6% | ★★★★ Very good |
| Georgia | Low ($700–$1,500 on $70K with exclusion) | Moderate (~0.83%) | 4–9% | ★★★★ Very good |
| Minnesota | $3,000–$5,000 | Moderate (~1.02%) | 6.875–8% | ★★ Average |
| California | $5,000–$8,000+ | Low on assessed value (~0.75%) | 8.5–10.75% | ★ Tax-unfriendly |
| Oregon | $3,500–$6,000 | Moderate (~0.89%) | 0% (no sales tax) | ★★ Average |
Estate and Inheritance Taxes by State
| State | Estate Tax | Exemption Threshold | Inheritance Tax |
|---|---|---|---|
| Massachusetts | Yes | $2,000,000 | No |
| Oregon | Yes | $1,000,000 (lowest in US) | No |
| Washington | Yes | $2,193,000 | No |
| Minnesota | Yes | $3,000,000 | No |
| New York | Yes | $7,160,000 | No |
| Maryland | Yes | $5,000,000 | Yes (on certain heirs) |
| Pennsylvania | No estate tax | N/A | Yes (0–15%; children exempt) |
| Iowa | Phasing out inheritance tax | N/A | Phasing out |
| Nebraska | No estate tax | N/A | Yes (1–18%) |
| All other states | No estate or inheritance tax | N/A | N/A |
Key States to Avoid for High-Income Retirees
| State | Why Tax-Unfriendly | Annual Tax Burden (Couple, $100K Retirement Income) |
|---|---|---|
| California | 9.3–13.3% income tax; no retirement income exclusion | $7,000–$12,000+ |
| Minnesota | All retirement income taxable; partial SS exemption only | $4,500–$8,000 |
| Oregon | High income tax (up to 9.9%); no retirement exclusion | $3,500–$8,000 |
| Vermont | Limited SS exemption; pension taxed; high property taxes | $3,000–$6,000 |
| Connecticut | Partial SS exemption only; pension taxed | $3,000–$6,000 |