Choosing where to retire is about more than sunshine and golf courses — it's about keeping more of your money. The best states to retire in taxes can save retirees thousands of dollars every year, and the difference between states can be dramatic.
Surprisingly, only about nine states currently levy no broad-based state income tax at all, yet plenty of high-tax states still offer generous retirement-friendly exemptions. The problem most retirees face is that "tax-friendly" gets thrown around without context, and headlines rarely explain what matters for your specific income mix.
In this guide, you'll learn how states tax Social Security, pensions, 401(k)s, property, and sales — plus which states consistently rank as the most retirement-friendly. By the end, you'll have a practical framework for comparing states before you pack up the moving truck.
What Makes a State Tax-Friendly for Retirees?
Not all taxes hit retirees the same way. The best states to retire in taxes tend to combine three things: no tax on Social Security, exemptions for retirement account withdrawals, and reasonable property tax rates. Understanding these categories is the first step in any search for the best states to retire in taxes.
According to the Tax Foundation, more than 40 states currently exempt Social Security benefits from state income tax, making Social Security taxation a poor single measure of retirement friendliness. What varies far more is how states treat pension income and retirement account distributions.
A common mistake is comparing states only on income tax rates while ignoring property taxes. A retiree in a no-income-tax state with high property levies can easily pay more overall than one in a state with a modest income tax.
How to apply this: List your expected income sources — Social Security, pension, IRA/401(k) withdrawals, investment income — then check how each state taxes each category, not just the headline rate.
States With No Income Tax: The Obvious Contenders
The fastest way to eliminate state income tax on your retirement income is to move to one of the states that simply doesn't levy one. As of the most recent tax year, these are:
- Alaska
- Florida
- Nevada
- New Hampshire (no wage or retirement income tax; interest and dividends tax has been fully repealed)
- South Dakota
- Tennessee
- Texas
- Washington (no wage tax, but a capital gains tax applies to high earners)
- Wyoming
Kiplinger's annual state tax rankings consistently place Florida, Nevada, Tennessee, and Wyoming among the best states to retire in taxes because they combine no income tax with moderate property and sales taxes. Alaska goes further, paying residents an annual dividend from its oil wealth fund, though its remote location doesn't suit everyone.
For many retirees, these no-income-tax states are the default starting point when researching the best states to retire in taxes.
How to apply this: If relocation flexibility matters to you, shortlist two or three no-income-tax states and compare their property tax rates and cost of living next.
States That Exempt Social Security but Tax Other Income
Many retirees are surprised to learn that state tax-friendliness isn't binary. Several states with income taxes still rank among the best states to retire in taxes because they exempt Social Security and offer large pension exclusions.
Pennsylvania is a strong example: it does not tax Social Security, retirement plan distributions, IRAs, or pension income at all for residents over 59½, even though its flat income tax rate applies to wages. Mississippi and Illinois take a similar approach with broad retirement income exclusions.
These exemptions are exactly why such states deserve a spot on any list of the best states to retire in taxes.
According to the IRS, "Social security benefits and monthly social security disability insurance (SSDI) payments may be taxable income in some states" — which is why checking state-specific rules matters even for benefits that are federally protected.
How to apply this: If you're staying near family in a state with income tax, search that state's revenue department website for "retirement income exclusions" — you may owe far less than the headline rate suggests.
The Hidden Costs: Property, Sales, and Estate Taxes
Income tax is only one piece of the puzzle. The best states to retire in taxes also keep other levies predictable, which is why evaluating hidden costs matters when comparing the best states to retire in taxes side by side.
| Tax type | What it means for retirees | Action to take |
|---|---|---|
| Property tax | Often the biggest retirement tax bill | Check your target county's effective rate |
| Sales tax | Affects daily spending | Compare combined state + local rates |
| Estate/inheritance tax | Can shrink what heirs receive | Confirm the state has neither |
| Vehicle/fees | Small but recurring | Review total cost-of-living calculators |
States like New Hampshire and Texas have no income tax but relatively high property tax rates, which can offset the benefit for homeowners. Meanwhile, roughly a dozen states still impose an estate or inheritance tax at the state level — something the federal threshold doesn't protect you from.
How to apply this: Use a property tax lookup for the specific county (not just the state) you're considering, since rates vary widely within states.
Top Overall Picks for Retirement Tax Friendliness
Pulling all the tax types together, several states consistently appear at the top of rankings from Kiplinger and the Tax Retirement Report style surveys. Delaware stands out for combining low property taxes, no sales tax, and no estate tax for most estates. Wyoming pairs zero income tax with among the lowest property and sales tax burdens in the country.
Florida remains popular not just for climate but for its complete absence of state income tax and estate tax.
Consider what one combination looks like: a retiree drawing $40,000 from a 401(k) plus $30,000 in Social Security would generally owe $0 in state income tax in Florida, Tennessee, or Pennsylvania — while paying state tax on some portion of that income in many other states.
The best states to retire in taxes for you also depend on healthcare access, proximity to family, and climate — taxes are one input, not the whole decision. That's why most rankings of the best states to retire in taxes should be treated as a starting point rather than a final answer.
How to apply this: Rank your top three candidate states on all four tax types, then weigh that against healthcare and lifestyle factors before committing.
How to Calculate Your Real Tax Burden Before Moving
Paper comparisons only go so far. The smartest move is modeling your own numbers before relocating.
- Total your expected annual retirement income by source.
- Check each candidate state's treatment of that income (state revenue department websites publish this).
- Estimate property tax on a realistic home price in your target county.
- Run your figures through a retirement tax calculator such as SmartAsset's retirement tax friendliness tool, which compares state-by-state treatment of Social Security, pensions, and property taxes.
A common scenario: retirees move expecting savings, then discover their new state taxes distributions from a pension their old state exempted. A two-hour modeling session prevents that surprise. The best states to retire in taxes are only "best" relative to your income mix, so your personal calculation matters more than any list of the best states to retire in taxes.
How to apply this: Before listing your house, run a full-year income projection for your current state and top two alternatives, and note the dollar difference.
Frequently Asked Questions About best states to retire in taxes
How do states tax 401(k) and IRA withdrawals for retirees?
Most states with an income tax treat 401(k) and IRA withdrawals as ordinary income, though several offer exclusions for seniors.
A retiree in Illinois, for example, pays no state tax on retirement account distributions, while a similar retiree in California pays the full state rate — one reason Illinois often ranks among the best states to retire in taxes despite its income tax.
Which states tax Social Security benefits?
Only a small handful of states currently tax Social Security at some income levels, and most provide exemptions for moderate incomes. If you rely mainly on Social Security, you may owe little state tax almost anywhere — so the best states to retire in taxes for you will hinge on how they treat your pension or withdrawals instead.
Do I still owe taxes to my old state after moving?
Generally no, once you establish legal residency in the new state — but states make this determination based on facts like where you vote, register your car, and spend most of the year. Snowbirds who split time between states sometimes get tax bills from both, so document your move carefully and file a part-year return if required.
Understanding the best states to retire in taxes requires knowing that your old state may still claim you without clear proof of a permanent move.
Is it worth moving just for lower retirement taxes?
It depends on your income size and total cost of living. If most of your income is Social Security, savings may be modest; if you have a large taxable pension or portfolio withdrawals, the best states to retire in taxes could save you thousands annually. Always weigh moving costs, healthcare access, and family proximity against the tax benefit.
How do state estate and inheritance taxes affect retirees?
A few states impose estate or inheritance taxes with much lower thresholds than the federal estate tax, meaning some mid-value estates get caught. Married couples moving between states sometimes overlook this, assuming federal exemptions apply everywhere — they don't, so check both estate and inheritance rules in any state you're considering.
Conclusion
Finding the best states to retire in taxes comes down to looking past headlines and matching state rules to your actual income mix. Key takeaways:
- No-income-tax states like Florida, Texas, and Wyoming offer the simplest tax picture for retirees.
- States like Pennsylvania, Illinois, and Mississippi prove high-rate states can still be retirement-friendly through broad exemptions.
- Property, sales, and estate taxes can quietly erase income tax savings.
- Modeling your own numbers before moving is the single most valuable step you can take.
Taxes shouldn't be the only factor in your relocation decision — but they compound every single year you're retired. Start today by writing down your expected retirement income sources, then check how your current state and one alternative treat each of them.
The best states to retire in taxes reward retirees who do the homework, and a one-page comparison now could save you five figures over a long retirement.
