Here’s something that might surprise you moving just one state over could translate to thousands more in your pocket every year during retirement. That’s because state tax laws vary wildly-some will happily let you keep every cent of your Social Security, 401(k), IRA, and pension income, while others take a noticeable bite. For retirees living on a fixed income, that difference can make or break a budget.
Federal taxes still apply to Social Security for many households, but at the state level, it’s nowhere near a level playing field. Some states don’t tax retirement income at all, while others have extremely generous exemptions. And then there are the select few that don’t have any income taxes whatsoever. Knowing these rules is more than trivia it’s a strategic way to stretch your nest egg further and give you more freedom in your golden years.
Below, we break down nine states where retirees can sidestep state taxes on their retirement income, plus what else you need to know about living there-from property tax quirks to sales tax surprises.
1. Alaska: No Income Tax, But Watch Property Rates
Alaska’s appeal to retirees goes beyond the pretty views It’s one of a handful of states that don’t levy a personal income tax, so none of your retirement income is taxed at the state level. There’s also no estate or inheritance tax, which helps you preserve wealth for your heirs. On the flip side, property taxes are above average, averaging 1.14% in 2023. The good news? Residents who are at least 65 years old get a property tax exemption on the first $150,000 of their home’s value, and local governments may extend that even further.
2. Florida: Tax-Friendly With Moderate Property Costs
Florida’s reputation as a retiree haven is well-earned. There’s no state income tax, no estate or inheritance tax, and retirement income including pensions and 401(k) withdrawals is completely untaxed. Sales taxes are moderate, with a combined average of about 6.95%, and property taxes sit at 0.79% on average. Homeowners 65+ may qualify for local property tax breaks, adding another layer of savings.
3. Illinois: Full Retirement Income Exemption
Because Illinois exempts all retirement income, including Social Security, pensions, and retirement account withdrawals, from state taxes, the flat income tax rate of 4.95% applies only to other types of income. The trade-off? Illinois has one of the highest property tax rates in the nation at 2.07%, though seniors can access exemptions, freezes, and deferrals to ease that burden. There’s also an estate tax for estates valued over $4 million.
4. Iowa: Retirement-Friendly With Recent Tax Reforms
Iowa doesn’t tax Social Security benefits, pensions, or retirement account withdrawals of residents 55 and older. For other income, the state switched in 2025 to a flat 3.8% income tax rate. Property taxes are on the high side, at 1.43%, but seniors may be able to qualify for credits and exemptions, including a $6,500 home value exemption.
5. Mississippi: All Retirement Income Exempt
Mississippi does not tax Social Security, pensions, or retirement account withdrawals, as long as the latter conform with plan requirements. Early withdrawals are subject to tax. The state also has a flat income tax rate of 4% in 2026, down from 4.4% in 2025. Property taxes are very low, though, at 0.74%, and a senior exemption of $7,500 off of a home’s value is available. No estate or inheritance tax is imposed.
6. Nevada: No Income Tax, Low Property Costs
There are no state income taxes levied on retirees in Nevada, nor is there any estate or inheritance tax. Property taxes come in nearly last at 0.49%, but sales taxes are somewhat higher at an average of 8.24%. That said, the no-income-tax feature makes this a formidable choice for tax-sensitive retirees.
7. New Hampshire: No Income or Sales Tax
New Hampshire has a rare combination of no state income tax, no sales tax, and no estate or inheritance tax. As of 2025, it has phased out its tax on interest and dividends. The catch? Property taxes are steep, averaging 1.77%, the fourth-highest in the nation. Seniors may qualify for exemptions or deferrals, especially if they have owned their home for several years.
8. Pennsylvania: Retirement Income Fully Exempt
Social Security, pensions, and retirement account withdrawals are exempt from state tax in Pennsylvania. Other income pays a flat 3.07% rate. Sales taxes are low at 6.34% on average, and most clothing purchases are exempt. Property taxes are higher, at a rate of 1.35%, but rebates, freezes, and discounts are available to seniors in some counties.
9. South Dakota: No Income Tax, Modest Sales Rates
There is no state income tax in South Dakota, and as such, all types of retirement income are safe from state taxation. The sales taxes are low, averaging 6.11%, though they do apply to groceries. Property taxes are moderately high at 1.09%, but seniors may be able to qualify for relief programs, including freezes and deferrals. There’s no estate or inheritance tax.
Choosing the right state in which to retire isn’t just a matter of climate or scenery it’s about protecting one’s income from unnecessary taxes. These nine states shine in regard to their retiree-friendly policies on taxes, but each carries its own blend of property and sales tax issues. By weighing all these factors, retirees can find a location that keeps more money in their pockets to support a financially comfortable future.
