States That Don’t Tax Retirees’ Income

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If you’re looking for the perfect place to help you make the most of your retirement money, look no further. This article tells you which U.S. states don’t levy taxes on retirement income. Keep reading to learn more.

10. Wyoming

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According to, Wyoming is the most tax-friendly state for retirees in the U.S. For starters, the state doesn’t levy a personal income tax, which means it also doesn’t tax Social Security benefits, pension income, 401(k) plan withdrawals, or IRA distributions. And, there’s no estate or inheritance tax either. Not only that but Wyoming’s property and sales taxes are also relatively low. In fact, the state has one of the 10 lowest real-estate property tax burdens in the country. To top it all off, Wyoming boasts a relatively affordable cost of living.

9. Alaska

Alaska Glacier
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Although Alaska might not be at the top of your list of best places to retire, it’s worth some consideration. That’s because if you live in Alaska, you won’t have to pay taxes on your personal income, nor will you have to pay taxes on your 401(k), IRA, pension, or Social Security benefits. And, guess what? The state doesn’t have an inheritance tax or an estate tax either.

Alaska allows some municipalities to levy sales taxes, which can go as high as 7.5 percent.
-Although Alaska is one of the most tax-friendly states, it’s actually an expensive place to live.

8. Hawaii

Oahu Beach Hawaii
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Some retirement income such as Social Security benefits and employer-funded pensions aren’t taxed in Hawaii. The state also doesn’t tax qualifying distributions from federal civil service retirement, military pension, or state or county retirement system. Not only that but Hawaii also has the lowest real-estate property tax burden in the country.

-If you receive distributions from a private employer pension plan that you made contributions to, your distribution is partially taxable.
-Early distributions from a pension plan that is subject to the 10 percent penalty do not qualify for the exclusion.

7. Florida

Florida Miami Beach
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Florida comes in at number eight on’s list of most tax-friendly states for retirees. Florida doesn’t tax personal income, 401(k) plans, IRAs, pension income, or Social Security benefits. There are no inheritance or estate taxes either. Not only do you get to keep all your money, but you also get to enjoy sandy beaches, palm trees, and plenty of sunshine!

-Because Florida has no state income tax, it relies heavily on sales taxes (six percent at the state level, with localities allowed to add as much as 2.5 percent) and property taxes.
-Sales and property taxes in Florida are above the national average.
-Florida has a higher-than-average cost of living and higher-than-average housing costs.

6. California

Hollywood California
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Ah, yes. California. The land of swimming pools and movie stars. It’s also the land of tax-free living — for Social Security recipients, that is. Unfortunately, that’s about as good as it gets. That’s because California has the highest top income tax rate of any U.S. state, with rates ranging from one percent up to 12.3 percent for residents with a taxable income of up to $1 million. Those with taxable income greater than $1 million are required to pay an additional one percent.

5. Nevada

Nevada Las Vegas
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According to, Nevada is the second-most tax-friendly state for retirees. There is no state income tax as well as no taxes on your 401(k), IRA, or pension income. Plus, your Social Security benefits are tax-free, too. Just think of what you can do with all of that money. You could really rack up in the casinos! Don’t get it twisted, though. The IRS will definitely collect their share from your winnings. Also, Nevada has a three-tiered casino tax that tops out at 6.75 percent on monthly revenue greater than $134,000.

4. New Jersey

Atlantic City New Jersey
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Several types of retirement income isn’t taxed in New Jersey. They include Social Security benefits, U.S. military pensions, and military survivor’s benefit payments. Life insurance proceeds and employee death benefits aren’t taxed either. Unfortunately, the state’s income tax rates range from 1.4 percent to 10.75 percent, giving it the third-highest top income tax rate of any state. New Jersey also has the highest real-estate property tax burden of any U.S. state. According to a WalletHub report, the state’s effective real estate tax rate is 2.47 percent.

3. North Dakota

Badlands North Dakota
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Here’s some good news for anyone living in or planning on moving to North Dakota: beginning this year, single residents will no longer have to pay taxes on their Social Security benefits if they have a federal AGI of $50,000 or less. Married residents filing a joint return won’t have to pay taxes on their Social Security benefits if they have a federal AGI of $100,000 or less. North Dakota lawmakers approved the Social Security tax break back in 2019. The original bill would have allowed residents to reduce their state taxable income by the amount of Social Security benefits included on their federal taxable income.

2. Indiana

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Although Indiana does have a state income tax (3.23 percent), they don’t tax Social Security benefits. What’s more, is that four Indiana counties ranked among the top 25 in the nation for people who live off their Social Security benefits alone. “No state is represented on this list more than Indiana. While some may dismiss it as a ‘fly-over state,’ there’s no denying it offers cheaper living for those looking to make the most of their Social Security money,” MoneyTalksNews said in an article published on its website.

1. Alabama

Gulf Shores Alabama
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The following types of income are exempt from taxes in Alabama: Social Security benefits, U.S. Civil Service Retirement System benefits, State of Alabama Teachers Retirement System benefits, State of Alabama Employees Retirement System benefits, Federal Railroad Retirement benefits, military retirement pay, dividends on veteran’s life insurance, and life insurance proceeds from someone’s death. Keep in mind that this is only a few examples of retirement income that’s exempt (You can see the entire list on the Alabama Department of Revenue’s website). Not only that but the state has the second-lowest property tax burden in the country. Plus, its residents enjoy low living costs, affordable taxes, and low income and property taxes. No wonder ranked it as the fourth-most tax-friendly state for retirees in the United States!


Now that you know which states don’t tax retirement income, take a look at this list of states that don’t levy taxes on personal income.