Tax policies, particularly income tax policy, can vary from state to state. Some states have no income tax, while others might not have sales taxes. However, there are 13 states in the Union that do not tax retirement income – including income from Social Security benefits, pensions, and IRA or 401(k) distributions. If you’re looking to save a little extra in your golden years, Kiplinger has put together a list of 13 states that might be right for you.
Alaska
Alaska has no individual income tax, meaning that neither retirement incomes, like Social Security benefits, nor traditional incomes, like wages, will be taxed.
Alaska also does not have an estate tax. Furthermore, Alaska has a Permanent Fund, which delivers annual dividends to Alaskan residents that have lived in the state for at least 1 full year. The dividend per person in 2024 was $1,702.
Florida
The Sunshine State is known as one of the most retiree-friendly states in the country. While the weather is a major draw, the lack of taxes on income (including retirement income), inheritances, and a relatively low property tax. Furthermore, many essentials, like groceries and common household medicines, are exempt from sales taxes.
Illinois
While the Land of Lincoln does have a flat income tax rate of 4.95% on traditional incomes like wages, retirement income is exempt. However, the state does tax investment income and estates worth more than $4 million. It is worth pointing out that the state also has some of the highest gas and sales taxes in the country, and is one of the few states that still has a tax on groceries, although the latter is expected to be eliminated in 2026.
Iowa
Starting at age 55, retirement incomes, such as Social Security, pensions, and 401(k) distributions, are exempt from taxation. Furthermore, regardless of age, Social Security is not taxed in Iowa.
The state does have a tax for incomes like wages or investment returns, but the rate was recently changed to a flat rate of 3.8%.
Mississippi
Mississippi does not tax retirement incomes, nor does it have an inheritance or estate tax. Other sources of income that exceed $10,000 are taxed at a flat, 4.4% rate, and the rate will gradually decrease annually to 4% in 2026. Furthermore, the Mississippi House of Representatives recently passed a bill that would phase out the state’s income tax entirely.
Mississippi is one of several states that has a grocery tax, with the rate of 7%.
Nevada
Nevada has no income tax, so neither wages, investment income, nor retirement income are taxed. Nevada does not have inheritance taxes and has some of the lowest property taxes in the United States. However, the sales tax rate of 6.85% is higher than most states.
New Hampshire
As of January 2025, New Hampshire no longer has any income tax, so neither wages, dividends nor retirement incomes are taxed. Additionally, the state has no sales tax.
Pennsylvania
Pennsylvania has a flat income tax rate of 3.07% that does not apply to retirement incomes such as Social Security, IRA, 401(k), or pension distributions. However, there are local income taxes, and also steep inheritance taxes. Children over 21 pay an inheritance tax of 4.5%, while all other heirs can face a tax rate as high as 15%. Children 21 and younger are exempt from the state’s inheritance tax.
South Dakota
The home of Mount Rushmore does not tax income, including income from dividends or interest. The state also lacks estate taxes. However, groceries are taxed at a rate of 4.2%, and the state does not offer a grocery tax credit to offset the levy.
Tennessee
Tennessee does not have a personal income tax. However, the state has a grocery tax of 4% and a state sales tax of 7%, one of the highest in the country.
Texas
Texas is known as a tax-friendly state, with zero taxes on personal income, which includes retirement income. The state also has no estate tax. Furthermore, Texans aged 65 and older can receive a $110,000 homestead property tax exemption. However, the local sales tax can reach 8.25% in some areas of the state.
Washington
Washington State has no personal income tax. However, the state does tax capital gains that exceed $250,000 per year at a rate of 7%. Estates worth $2,193,000 or less are exempt from the estate tax, while those that exceed that number are subject to taxes ranging from 10% to 20%.
Wyoming
Wyoming does not have an income tax, which extends to retirement income and income from interest or dividends. Furthermore, state and local sales taxes do not exceed 6%.
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