Nine states have no income tax at all, meaning they never touch your pension or Social Security benefits. Beyond those, a growing number of states with income taxes still fully exempt retirement income or offer generous deductions. The landscape has shifted significantly in recent years, with several states phasing out taxes on Social Security and expanding pension exclusions.
States With No Income Tax
The simplest path to tax-free retirement income is living in a state that doesn’t collect income tax from anyone. These nine states won’t tax your pension, Social Security, 401(k) distributions, or IRA withdrawals:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
New Hampshire is a recent addition to this list. It previously taxed interest and dividend income, but that tax was fully repealed starting with the 2025 tax year. If you have significant investment income alongside your pension, New Hampshire is now on equal footing with the other no-income-tax states.
States That Exempt Pensions Despite Having an Income Tax
A handful of states collect income tax on wages and investment earnings but carve out full exemptions for retirement income. Illinois exempts income from qualified employee benefit plans, government pensions, and military pensions. Distributions from 401(k) plans and IRAs are also tax-free there, as are Social Security benefits.
Mississippi doesn’t tax pension income (provided it’s not from an early retirement distribution) and also exempts 401(k) and IRA distributions. The state is further reducing its overall income tax rate, which will drop to 4 percent in 2026 and is on track to be eliminated entirely over the following years.
Michigan is joining this group as well. Beginning in January 2026, qualifying pension and retirement income will be fully exempt from state income tax. The exemption covers most forms of retirement income, including 401(k) withdrawals, IRA distributions, annuities, and certain deferred compensation plans.
States That Don’t Tax Social Security
Most states leave Social Security alone. Combining the nine no-income-tax states with all the states that have an income tax but fully exempt Social Security, 42 states and the District of Columbia won’t tax your benefits regardless of your income level. West Virginia is phasing out its Social Security tax and will eliminate it entirely in 2026.
That leaves eight states that still tax Social Security benefits in 2026, though every one of them offers at least a partial exemption based on age or income.
The Eight States That Still Tax Social Security
Colorado: If you’re 65 or older, you can deduct all of your federally taxed Social Security from state income. Retirees aged 55 to 64 can deduct up to $95,000 (married filing jointly) or $75,000 (single) of Social Security income. Above those thresholds, the deduction drops to $20,000.
Connecticut: Social Security is fully exempt if your adjusted gross income (AGI) is below $75,000 for single filers or $100,000 for joint filers. Above those levels, no more than 25 percent of your benefits are taxed.
Minnesota: Joint filers with AGI below $108,320 are fully exempt. Single and head-of-household filers are exempt below $84,490. Above those thresholds, the exemption phases out by 10 percent for each $4,000 of additional income.
Montana: Taxpayers 65 and older receive a $5,500 subtraction from federal taxable income, which can offset some Social Security taxation, but there’s no broad exemption.
New Mexico: Single filers earning up to $100,000 and joint filers earning up to $150,000 pay no state tax on Social Security.
Rhode Island: Joint filers with AGI below $133,750 are exempt. Most other filing statuses are exempt below $107,000.
Utah: The state taxes Social Security but offers a benefits credit that can reduce or eliminate the tax for lower-income retirees. A separate retirement tax credit of $450 is available, though you can’t claim both.
Vermont: Joint filers with AGI of $70,000 or less are fully exempt. Single filers are exempt at $55,000 or less. Partial exemptions extend to $79,999 for joint filers and $64,999 for single filers.
States With Generous Pension Deductions
Many states that do tax pension income offer substantial deductions that can eliminate the tax bill for retirees with moderate incomes. These are the most notable:
- New Jersey: Retirees 62 and older can deduct up to $100,000 (joint filers), $75,000 (single), or $50,000 (married filing separately) of retirement income.
- Georgia: Taxpayers 62 and older can exclude up to $35,000 of retirement income. At 65, the exclusion rises to $65,000.
- Maine: Offers a pension deduction of up to $48,216.
- Maryland: Retirees 65 and older can exclude up to $42,000 of pension income.
- Kentucky: Provides a $31,110 deduction for state, private, and military retirement income.
- Wisconsin: Retirees 67 and older may exclude up to $24,000 (single) or $48,000 (joint) of retirement income.
- Colorado: Offers a retirement income deduction of up to $20,000 for those 55 and older, rising to $24,000 at age 65.
- New York: Taxpayers at least 59½ can deduct up to $20,000 of qualified retirement income. Government pensions, including federal, state, and local, are fully exempt.
- Rhode Island: The pension and annuity income exemption is $20,000, with some taxpayers qualifying for up to $40,000.
- South Carolina: Provides a retirement income exclusion of up to $15,000.
- Delaware: Taxpayers 60 and older can deduct up to $12,500 from qualified retirement plans.
- Virginia: Retirees 65 and older may qualify for a deduction of up to $12,000.
Smaller exclusions exist in several other states. Alabama and Arkansas each offer up to $6,000 in retirement income deductions. Oklahoma exempts up to $10,000 for retirees 65 and older. Arizona allows up to $2,500 for certain pension types.
How to Think About Your Total State Tax Picture
Focusing on pension and Social Security taxes alone can be misleading. A state with no income tax may have higher property taxes or sales taxes that eat into your retirement budget. Conversely, a state that taxes some pension income but has low property taxes and affordable housing could leave you with more money at the end of the month.
Your personal tax situation also depends on the mix of your income sources. If most of your retirement income comes from Social Security and a modest pension, you may owe nothing in the vast majority of states. If you’re drawing large 401(k) distributions on top of a government pension, the deduction limits above matter much more. Add up all your expected retirement income streams, then check whether your total falls below or above your state’s exemption thresholds before making any relocation decisions.