Two retirees with identical pensions and Social Security checks can owe sharply different tax bills depending on nothing more than the state line they live behind. A handful of states levy no personal income tax at all, and several others impose an income tax but exempt Social Security, pensions, and retirement-account withdrawals entirely. The map has been shifting in retirees’ favor: over the past few years a string of states has stopped taxing Social Security benefits, and the number that still do keeps shrinking.
The states with no income tax at all
Nine states impose no broad personal income tax, which means wages, pensions, Social Security, and withdrawals from 401(k) and IRA accounts all escape state taxation there. Those states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. For a retiree drawing entirely from Social Security and retirement savings, the state portion of the tax bill in these places is simply zero.
New Hampshire is the newest member of that group. The state long taxed interest and dividend income even though it never taxed wages, but it repealed that tax effective at the start of 2025, according to the New Hampshire Department of Revenue Administration. Its removal left the state with no tax on any form of individual income, closing the one gap that had kept New Hampshire off the fully tax-free list.
One caveat applies to Washington. The state has no income tax, but since 2022 it has levied a tax on very large long-term capital gains, and the state revenue department confirms the tax exempts real estate and assets held in retirement accounts. For the ordinary retiree living on Social Security and account withdrawals it does not apply, but a wealthy resident selling a large taxable portfolio could be reached by it.
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States that tax income but exempt retirement money
A second group of states does impose an income tax yet carves retirement income out of it. Illinois taxes wages at a flat rate but lets residents subtract Social Security, qualified pensions, and distributions from 401(k) and IRA accounts, so a retiree drawing entirely from those sources can owe nothing, as the state’s retirement income guidance lays out. There is no age requirement and no dollar cap on the subtraction.
Pennsylvania and Mississippi take similar approaches. Pennsylvania exempts Social Security and, once a taxpayer reaches retirement age, distributions from pensions and retirement accounts, treating them as untaxed under its flat personal income tax, according to the state’s personal income tax guidance. Mississippi likewise exempts qualified retirement income and Social Security, and Iowa stopped taxing most retirement income for residents 55 and older in recent years. In each case, a retiree can live in a state with a working income tax and still owe little or nothing on retirement cash flow.
The distinction matters because “no tax on retirement income” and “no income tax” are not the same thing. A wage earner in Illinois or Pennsylvania pays state tax on a paycheck, while a retiree next door drawing the same amount from a pension pays none. For someone choosing where to spend retirement, the exemption states can be as favorable as the no-tax states without giving up the public services an income tax funds.
The shrinking list of states that still tax Social Security
Most of the country now leaves Social Security benefits alone. As of the 2026 tax year, the large majority of states plus the District of Columbia do not tax those benefits, and fewer than ten still do in any form. The states that continue to tax Social Security, such as Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont, mostly exempt lower-income retirees or those above a certain age, so many residents there owe nothing on their benefits in practice.
The trend has run steadily in one direction. Missouri and Nebraska both stopped taxing Social Security benefits starting in 2024, and West Virginia completed a multi-year phase-out that fully removed its tax on those benefits for the 2026 tax year. Each change moves another state off the list, and no state has recently moved onto it.
Still, retirees weighing a move should look past the Social Security question alone. A state that spares benefits may still tax pension checks or IRA withdrawals, and property taxes, sales taxes, and the overall cost of living can outweigh a favorable income tax. The treatment of retirement income is one large variable in where a fixed-income household can afford to live, but it is the interaction of all of a state’s taxes, not any single exemption, that determines how far a retirement dollar stretches.
The federal tax on benefits that no state can change
Choosing a state that spares Social Security does nothing about the federal tax on the same benefits, which follows a retiree into every state. Under a formula left unchanged for decades, a single filer whose provisional income tops $25,000, or a couple above $32,000, owes federal tax on part of their benefits, and once that figure passes $34,000 single or $44,000 joint, up to 85% of the benefit becomes taxable, as the Social Security Administration lays out in its guidance on benefit taxation. Congress set those thresholds in 1983, expanded them in 1993, and never indexed them, so inflation has steadily pulled more retirees above the lines.
A 2025 law offers a partial and temporary offset. The One Big Beautiful Bill Act, signed in July 2025, created an extra deduction of up to $6,000 per person for taxpayers 65 and older, or $12,000 for a married couple where both qualify, for tax years 2025 through 2028. Because the deduction lowers adjusted gross income, it can pull some retirees back under the provisional-income thresholds and shrink or erase the federal tax on their benefits, though it phases out at higher incomes and leaves the underlying thresholds untouched. The interplay is a reminder that a state exemption addresses only one layer of the tax on retirement income.
This article was produced with AI assistance and reviewed against primary sources by The Money Overview editorial team.
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