The Tax-Free Retirement Haven: 13 States Where Retirees Pay Zero Taxes on Retirement Income

Which States Offer Complete Retirement Income Tax Relief?

For those planning retirement or considering relocation, understanding how different states handle retirement taxation is crucial. Among all U.S. states, 13 have achieved the distinction of imposing zero taxes on retirement income across all categories. These states with no income tax for retirees include Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

What makes these jurisdictions particularly attractive is their comprehensive tax exemption — covering Social Security benefits, pension withdrawals, dividends, interest income, and earned retirement income simultaneously.

Breaking Down State Tax Policies: A Detailed Look

States Without Any Income Tax

Nine states take the most aggressive approach by eliminating state income tax entirely, benefiting not just retirees but all residents. These include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire represents a unique case: it historically taxed interest and dividend income but not earned income. However, starting in 2025, this distinction disappears — dividend and interest income will join earned income in remaining untaxed.

The Retirement-Only Tax Haven Strategy

Four additional states have implemented a more selective approach: they tax general income but deliberately exempt retirement-specific earnings. Illinois, Iowa, Mississippi, and Pennsylvania fall into this category, making them attractive alternatives for those receiving pensions or retirement account distributions.

Social Security Treatment Across America

The vast majority of states — 41 in total, plus Washington, D.C. — do not tax Social Security benefits. This means retirees relying on an average monthly benefit of approximately $1,979 (roughly $23,750 annually) can expect these states to leave that income untouched.

However, nine states do tax Social Security benefits: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. The good news is that this number has been declining — in 2016, thirteen states taxed these benefits, suggesting the trend favors retirees.

Important Considerations Beyond State Taxation

State income tax represents only one piece of the retirement planning puzzle. Many jurisdictions compensate for low or zero income taxes through higher sales taxes or property taxes. Therefore, evaluating a state’s complete tax environment — including property, sales, and estate taxes — remains essential.

Additionally, while states with no income tax for retirees offer significant advantages, the federal government still taxes most Social Security benefits and retirement income for many individuals. Planning comprehensive retirement income strategies across multiple sources remains vital for long-term financial security.

Retirement readiness extends far beyond tax optimization. Building diverse income streams from investments, pensions, Social Security, annuities, and retirement account withdrawals provides greater financial stability than relying on any single source.