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, varies by year) | 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 2021) | 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)
State-level Social Security taxation is one of the fastest-changing areas of state tax law. As of this review, only eight states still tax Social Security to any degree — Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. Kansas, Missouri, Nebraska, and West Virginia are confirmed to have fully repealed their Social Security tax (Kansas effective the 2024 tax year; Missouri and Nebraska also in 2024; West Virginia via a completed multi-year phase-out) — this has been independently corroborated across two separate fact-checking passes on this site (September 2026). Other states continue to consider repeal proposals, so if your state isn’t listed among the eight above, it’s still worth confirming its current rule at its department of revenue.
| Category | States |
|---|---|
| No SS tax | AL, AK, AZ, AR, CA, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MO, MS, NE, NV, NH, NJ, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, VA, WA, WI, WV, WY |
| Partial or full SS tax may apply | CO (exemption for most filers, especially 65+), CT (exempt below $75K single / $100K joint), MN (exempt under income limits), MT (follows a state-specific formula), NM (exempt below ~$100K single / $150K joint), RI (exempt at full retirement age below an income limit), UT (nonrefundable tax credit that phases out with income), VT (exempt below an income threshold) |
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 per-person retirement deduction (65+) | 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 (near $0 for most retirees under the $65K/person 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
Estate tax exemption thresholds shown below are approximate and several are inflation-indexed, meaning they change annually — confirm the current-year figure at your state’s department of revenue before relying on it for planning.
| State | Estate Tax | Exemption Threshold (approximate, confirm current) | Inheritance Tax |
|---|---|---|---|
| Massachusetts | Yes | $2,000,000 (flat, not indexed, since 2023 reform) | No |
| Oregon | Yes | $1,000,000 (lowest in US; not inflation-indexed) | No |
| Washington | Yes | ~$2.19M+ (inflation-indexed annually) | No |
| Minnesota | Yes | ~$3,000,000 | No |
| New York | Yes | ~$7,000,000+ (inflation-indexed annually) | No |
| Maryland | Yes | $5,000,000 | Yes (on certain heirs) |
| Pennsylvania | No estate tax | N/A | Yes (0–15%; children exempt) |
| Iowa | Inheritance tax phased out (eliminated as of 2025) | N/A | Eliminated |
| 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 |
Related Guides
- Best Places to Retire
- Cheapest Places to Retire
- Worst States to Retire
- Snowbird Lifestyle Costs
- Finances in Retirement: Complete Guide
For the full state rankings, see best states to retire in 2026 and state taxes on retirement income. Return to the Best Places to Retire hub.
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