Retirees chase every edge to stretch their savings. State income taxes can claim thousands from pensions, 401(k) withdrawals, and IRAs each year. Thirteen states sidestep this entirely—no levy on such income. Nine shun all personal income taxes. Four more carve out exemptions for retirement distributions, even as they tax wages.
Stefon Walters laid it out clearly in The Motley Fool. The no-income-tax nine: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming. The exemption quartet: Illinois, Iowa, Mississippi, Pennsylvania. Federal taxes still bite. Social Security faces IRS scrutiny based on total income thresholds—up to 85% taxable for higher earners.
But state relief compounds over decades. A retiree pulling $100,000 annually from retirement accounts might dodge $5,000 or more in state taxes yearly, depending on rates elsewhere. That’s real money. Numbers like these drive relocations.
The No-Income-Tax Core: Total Freedom from State Levies
Florida draws flocks. No income tax. No estate tax. Median home prices hover around national averages in many spots, though coastal insurance premiums spike after hurricanes. Texas mirrors this. Vast, growing economy. Property taxes sting at 1.60% effective rate, per Income Laboratory, yet no income hit appeals to many.
Nevada. Dry heat. Gaming hubs. Sales tax tops 6.85%, but retirement flows untouched. Wyoming offers space, low density. South Dakota freezes property taxes for seniors in some counties. Tennessee shed its investment income tax years back; now pure no-tax on earnings.
Washington taxes capital gains for ultra-high earners only—over $250,000 annually. Most retirees clear. New Hampshire axed its interest-and-dividends tax in 2025. Alaska funds services via oil, keeps income hands-off. Harsh winters. High living costs. Still, tax math works for some.
These nine fund governments through sales, property, or resources. Florida’s sales tax: 6%. Texas property: high. Trade-offs abound.
And the exemptions? Illinois skips tax on all retirement income despite 4.95% flat rate on wages. Property taxes crush—second-highest nationally at 2.07%, Clark.com reports. A $500,000 home? $10,350 yearly.
Iowa exempts retirement for those 55-plus. Flat tax now 3.8%, per Gov. Kim Reynolds on X. Mississippi phases income tax down—4% in 2026, zero on retirement. Pennsylvania longstanding policy: no tax on 401(k)s, IRAs, pensions.
Caveats and Hidden Costs: Taxes Aren’t Everything
Tax savings vanish if housing surges. Realtor.com warns: Florida insurance averages $6,000 yearly in some counties. Texas property bills shock newcomers. New Hampshire: 1.57% property rate. Kiplinger ranks these 13 by retirement affordability, topping with Mississippi—$730,000 nest egg needed for comfort, versus $1.5 million in pricier spots (Kiplinger).
Social Security? Forty-two states plus D.C. skip it. Holdouts: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont. West Virginia phased out in 2026. But our 13 all exempt it, via no tax or carve-outs.
Healthcare matters. Florida ranks middling for seniors. South Dakota lags clinical care. Cost of living varies—low in Mississippi, high in Alaska. AARP confirms the 13 shield IRA/401(k) draws (AARP).
Relocation surges. California, New York, Illinois lose residents to Florida, Texas, Tennessee. Red states add jobs faster, per recent data. Retirees vote with feet. Tax policy pulls them.
So check property rates. Insurance quotes. Healthcare access. Run numbers for your portfolio. These 13 deliver tax peace. But total costs decide if it’s home.
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