The states that don’t tax retirement income in 2026 number thirteen: nine that levy no broad income tax at all, plus four that tax other income but fully exempt pensions, 401(k) and IRA withdrawals. A fourteenth, Michigan, now shields most middle-class retirement income after its four-year phase-out finished for 2026. Which state actually keeps the most money, though, depends on far more than the income tax line.
Thirteen states impose no state tax on retirement income in 2026. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming levy no broad income tax, while Illinois, Iowa, Mississippi, and Pennsylvania tax wages but exempt retirement distributions. Michigan effectively becomes a fourteenth for 2026, deducting up to $67,610 (single) or $135,220 (joint) of retirement income (Source: Tax Foundation, 2026).
How many states don’t tax retirement income in 2026?
Thirteen states levy no tax on retirement income in 2026, and Michigan now joins them in practice for most retirees. Nine states have no broad income tax, so every income type escapes state tax. Four more tax wages but subtract qualifying retirement distributions. Michigan’s completed phase-out adds a large retirement deduction that covers most middle-class households (Source: Michigan Department of Treasury; Empower, 2026).
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Many published lists still say thirteen. That count is right for states that fully exempt retirement income, but it now misses Michigan, which spent 2023 through 2026 unwinding its retirement tax. For 2026 its deduction is large enough that most middle-class retirees owe no Michigan tax on pension, 401(k), or IRA income. Read the list as thirteen fully exempt states plus Michigan as an effective fourteenth.
Which states have no state income tax at all?
These nine states tax no category of personal income, so every dollar of retirement money escapes state tax automatically. Traditional 401(k) and IRA withdrawals, pension checks, and Social Security benefits all arrive free of any state income tax, at any age and with no dollar cap. The list below notes how each state raises revenue instead:
- Alaska: no income tax and no statewide sales tax.
- Florida: no income tax and no estate or inheritance tax, a long-standing draw for retirees.
- Nevada: no income tax and one of the lower effective property tax rates on this list.
- New Hampshire: a full no-income-tax state since January 1, 2025, when its Interest and Dividends Tax (last rate 3%) was repealed (Source: New Hampshire Department of Revenue Administration, 2025).
- South Dakota: no income tax and no estate or inheritance tax.
- Tennessee: completed the phase-out of its Hall tax on interest and dividends in 2021; no income tax.
- Texas: no income tax, though one of the higher effective property tax rates in the country.
- Washington: no income tax on wages or retirement distributions, but a separate excise tax on high long-term capital gains.
- Wyoming: no income tax and among the lowest combined tax burdens for retirees here.
Which states tax income but exempt retirement distributions?
These states levy tax on wages and other income but subtract qualifying retirement distributions, so pensions, 401(k) money, and IRA withdrawals often escape state tax even though a paycheck would not. Each state sets its own age or dollar rules, and Michigan now belongs in this group for most retirees after finishing its phase-out. The specifics for each state appear below:
- Illinois: flat 4.95% income tax, but subtracts Social Security, pensions, and IRA and 401(k) distributions with no age or dollar cap (Source: Illinois Department of Revenue, 2026).
- Iowa: fully exempts pensions and IRA and 401(k) distributions for taxpayers age 55 and older (Source: Iowa Department of Revenue, 2026).
- Mississippi: exempts qualified retirement income; early or non-qualified withdrawals before age 59½ may be taxed (Source: Mississippi Department of Revenue, 2026).
- Pennsylvania: flat 3.07% income tax, but exempts retirement income distributed after age 59½ (Source: Pennsylvania Department of Revenue, 2026).
- Michigan: flat 4.25% income tax, but after its four-year phase-out deducts retirement income up to $67,610 (single) or $135,220 (joint) for 2026, covering the full pension, 401(k), and IRA income of most middle-class retirees. Michigan also does not tax Social Security (Source: Michigan Department of Treasury, 2026).
State-by-state comparison table
The comparison below covers all thirteen states that don’t tax retirement income, plus Michigan, across five lines that decide the real cost: state income tax, treatment of 401(k)/IRA and pensions, Social Security, effective property tax, and combined sales tax. A zero in the income column can sit next to a high property or sales number (Source: Tax Foundation, 2026).
| State | State income tax | 401(k)/IRA & pensions | Social Security | Effective property tax | Combined sales tax |
|---|---|---|---|---|---|
| Alaska | None | Not taxed | Not taxed | 1.03% | 1.82% |
| Florida | None | Not taxed | Not taxed | 0.80% | 6.98% |
| Nevada | None | Not taxed | Not taxed | 0.48% | 8.24% |
| New Hampshire | None | Not taxed | Not taxed | 1.44% | 0.00% |
| South Dakota | None | Not taxed | Not taxed | 1.02% | 6.11% |
| Tennessee | None | Not taxed | Not taxed | 0.46% | 9.61% |
| Texas | None | Not taxed | Not taxed | 1.49% | 8.20% |
| Washington | None* | Not taxed | Not taxed | 0.77% | 9.51% |
| Wyoming | None | Not taxed | Not taxed | 0.57% | 5.56% |
| Illinois | 4.95% flat | Exempt | Exempt | 1.96% | 8.96% |
| Iowa | 3.8% flat | Exempt (age 55+) | Exempt | 1.31% | 6.94% |
| Mississippi | 4% flat | Exempt (qualified) | Exempt | 0.64% | 7.06% |
| Pennsylvania | 3.07% flat | Exempt (after 59½) | Exempt | 1.18% | 6.34% |
| Michigan | 4.25% flat | Deduction to $67,610 / $135,220 (2026) | Not taxed | 1.19% | 6.00% |
How is each type of retirement income taxed by state?
Not all retirement income is treated alike. In the nine no-income-tax states, Social Security, pensions, 401(k) and IRA withdrawals, military retirement pay, and TSP income are all state-tax-free. Illinois, Iowa, Mississippi, Pennsylvania, and Michigan tax wages but subtract qualifying retirement distributions, subject to each state’s age or dollar rules (Source: state departments of revenue, 2026).
Are Social Security benefits taxed?
All thirteen states here, and Michigan, leave Social Security untaxed. Nationally, only eight states tax any portion of benefits in 2026, each with income thresholds that spare many retirees (Source: Kiplinger, 2026). The full list appears below. For the federal side, see Q3 Advisors on the taxation of Social Security benefits in 2026.
Are pensions taxed?
Public and private pension income is untaxed in the nine no-income-tax states. Illinois and Pennsylvania fully exempt it, Iowa exempts it at age 55 and older, Mississippi exempts qualified pension distributions, and Michigan deducts pension income up to $67,610 (single) or $135,220 (joint) for 2026, covering most middle-class pensions in full (Source: state departments of revenue, 2026).
Are 401(k) and IRA withdrawals taxed?
Qualified 401(k) and IRA distributions are state-tax-free in all thirteen states, and in Michigan up to its deduction limits. Because Alaska has no state income tax, for example, Alaska 401(k) and IRA distributions carry no state tax at any age. The one caution: in Mississippi and Pennsylvania, early or non-qualified withdrawals before age 59½ may fall outside the exemption and be taxed at the state level.
Military retirement and TSP
Military retirement pay and federal Thrift Savings Plan (TSP) income follow the same pattern: state-tax-free in the nine no-income-tax states, and covered by the retirement-income exemptions in Illinois, Iowa, Mississippi, Pennsylvania, and Michigan. Many states beyond this list now also fully exempt military retirement pay (Source: state departments of revenue, 2026).
Does federal tax still apply?
Yes. No state exemption changes your federal bill. Traditional 401(k) and IRA withdrawals remain federally taxable as ordinary income, up to the top rate of 37% (Source: OBBBA, P.L. 119-21). The 2026 federal standard deduction is $16,100 (single) and $32,200 (joint), plus an added amount at age 65 and older. A qualified Roth withdrawal is generally federally tax-free. A no-income-tax state removes the state layer, not the federal one.
Which states still tax Social Security in 2026?
Eight states tax Social Security benefits for at least some residents in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. All use income-based thresholds that exempt many retirees. West Virginia completed its phase-out and no longer taxes benefits starting with the 2026 tax year (Source: Kiplinger, 2026; CNBC, January 2026).
The picture keeps shifting in retirees’ favor. Missouri, Nebraska, and Kansas stopped taxing benefits effective 2024, and West Virginia phased its tax from 35% exempt in 2024 to 65% in 2025 to fully exempt in 2026 (Source: West Virginia phase-out schedule, enacted 2024). Even in the eight states that still tax benefits, income thresholds mean a retiree with modest income often owes nothing.
Why “no income tax” isn’t the same as the lowest total tax bill
A state with no income tax still needs revenue, and it typically raises it through higher property or sales taxes. Texas (1.49% effective property tax) and New Hampshire (1.44%) sit near the top of these states on property tax, while Wyoming (0.57%), Nevada (0.48%), and Tennessee (0.46%) sit near the bottom (Source: Tax Foundation, 2024 ACS data). The income tax line alone can mislead.
This is the part most list-style guides skip. A retiree’s actual cost depends on the full mix: any residual income tax, plus property tax on the home and sales tax on spending. Stacked together, some no-income-tax states can cost a homeowner more than a state that lightly taxes income. Three patterns stand out:
- High property tax, no income tax: Texas (1.49%) and New Hampshire (1.44%) fund government largely through property tax; for a retiree with a substantial home, that bill can rival what an income tax would have cost.
- High sales tax: Tennessee (9.61% combined) and Washington (9.51%) carry some of the country’s highest sales taxes, which weigh most on retirees who spend a large share of their income.
- Lower total burden: Wyoming, South Dakota, Alaska, Florida, and Nevada tend to pair no income tax with lower property or sales taxes, which is what makes them stand out on a total-cost basis.
Consider a hypothetical couple owning a $500,000 home. This is an illustration, not a projection or a real client outcome; it simply applies each state’s published effective property tax rate to that home value:
| State | Effective property tax rate | Illustrative annual property tax on a $500,000 home |
|---|---|---|
| Nevada | 0.48% | $2,400 |
| Wyoming | 0.57% | $2,850 |
| Florida | 0.80% | $4,000 |
| Michigan | 1.19% | $5,950 |
| New Hampshire | 1.44% | $7,200 |
| Texas | 1.49% | $7,450 |
| Illinois | 1.96% | $9,800 |
The takeaway is directional, not prescriptive. Two states can both promise no income tax while producing very different annual bills for the same homeowner. Michigan, which exempts most retirement income and carries a mid-range 1.19% property rate, can land close to some no-income-tax states once the full picture is stacked. The label rarely settles the question on its own.
Early-withdrawal and residency traps that catch retirees
Two details trip up retirees. First, Mississippi and Pennsylvania exempt qualified retirement income but may tax early or non-qualified withdrawals before age 59½. Second, state tax follows your legal domicile, not where you spend a few months, so moving to a lower-tax state requires genuine, documented ties (Source: state domicile rules, 2026).
Early distributions in Mississippi and Pennsylvania
Both states build their exemptions around qualified retirement income. A distribution taken before age 59½, or one that otherwise fails to meet plan requirements, may not qualify and can be taxed as ordinary income at the state level. Retirees planning early withdrawals in these two states may want to confirm the specifics with the state revenue department first.
Establishing residency the right way
State income tax follows domicile, meaning your true, fixed, and permanent home rather than wherever you happen to spend a season. Spending winters in a no-income-tax state does not change your tax home if your primary domicile stays elsewhere, and a former state can still assess tax until the move is genuine and documented. Steps that generally support a change of domicile include:
- Spend the majority of the year in the new state and keep records, such as a day-count log, that support it.
- Register to vote and obtain a driver’s license in the new state.
- Retitle your primary residence and update your homestead or similar designation.
- Move banking, professional relationships, and mailing address to the new state.
- Update your estate documents to reflect the new domicile.
Keeping strong ties to a high-tax state while claiming residency in a low-tax one can invite a residency audit, so consistency across these records matters. Rules vary by state, and a qualified tax professional can confirm the requirements for your situation.
How does living in a no-tax state change Roth conversion planning?
A Roth conversion is taxed as ordinary income in the year you convert, so your state of residence sets the state-tax portion of that bill. Converting while domiciled in a state that doesn’t tax retirement income means only federal tax applies to the conversion. Federal tax applies everywhere; state tax depends on where you live that year (Source: IRS, 2026).
A Roth conversion counts as ordinary income in the conversion year, with no dollar or income limit, no ability to convert a required minimum distribution, and a December 31 deadline. Your domicile at the time of the conversion determines whether a state income tax also applies. This page maps the states; the conversion strategy itself is covered separately, so the two never overlap.
Because conversions raise your modified adjusted gross income, they can also affect the 3.8% net investment income tax and Medicare premiums, and they interact with required minimum distributions, which begin at age 73 (age 75 for those born in 1960 or later). The 2026 conversion deadline is December 31.
Work with Q3 Advisors
Q3 Advisors is a registered investment adviser focused on retirement tax planning. This page is educational and is not advice; consult a qualified professional.
Frequently asked questions
Which states have no state income tax at all?
Nine states levy no broad personal income tax in 2026: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire joined the group when its Interest and Dividends Tax was repealed on January 1, 2025 (Source: New Hampshire Department of Revenue Administration, 2025). Washington still taxes high long-term capital gains through a separate excise tax.
What is the most tax-friendly state for retirees?
There is no single answer, because it depends on your income sources, whether you own or rent, and your spending. States that pair no income tax with lower property and sales taxes, such as Wyoming, South Dakota, and Nevada, tend to rank well on total burden, while a high-property-tax state like Texas can cost a homeowner more despite having no income tax (Source: Tax Foundation, 2026).
Which states don’t tax 401(k) withdrawals?
In the nine no-income-tax states, qualified 401(k) withdrawals face no state tax at any age. Illinois, Iowa (age 55+), Mississippi, Pennsylvania, and Michigan (up to its 2026 deduction limits) also exempt them, though Mississippi and Pennsylvania may tax early or non-qualified withdrawals before age 59½. Federal income tax still applies to traditional-account withdrawals in every state (Source: state departments of revenue, 2026).
Do you pay federal taxes on retirement income if you live in a state with no income tax?
Yes. A state exemption removes only the state layer. Traditional 401(k) and IRA withdrawals and taxable pension income remain subject to federal income tax as ordinary income, up to the top federal rate of 37% (Source: OBBBA, P.L. 119-21). A portion of Social Security can also be federally taxable depending on total income, even in a no-income-tax state.
Which states don’t tax Social Security benefits?
Most states do not. Only eight tax benefits in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont, all with income thresholds that exempt many retirees. West Virginia completed its phase-out and no longer taxes benefits starting with the 2026 tax year (Source: Kiplinger, 2026).
Does moving to a state with no income tax actually save retirees money?
Not always. A no-income-tax state still raises revenue, often through higher property or sales taxes. A homeowner moving to a high-property-tax no-income-tax state may see little net change, while a renter with large retirement withdrawals may benefit more. The result depends on your full mix of income, home value, and spending (Source: Tax Foundation, 2026).
Does Michigan tax retirement income in 2026?
For most retirees, no. Michigan finished a four-year phase-out of its retirement tax and, for 2026, deducts retirement income up to $67,610 (single) or $135,220 (joint), enough to cover the full pension, 401(k), and IRA income of most middle-class households. Michigan also does not tax Social Security. Income above the deduction is taxed at the flat 4.25% rate (Source: Michigan Department of Treasury, 2026).
Sources
Tax Foundation, “State and Local Sales Tax Rates, 2026” and “Property Taxes by State” (2024 American Community Survey data), 2026.
New Hampshire Department of Revenue Administration, Interest and Dividends Tax repeal, 2025.
Michigan Department of Treasury, retirement and pension benefits deduction limits, 2026.
Kiplinger, “States That Tax Social Security Benefits,” 2026; CNBC, January 2026.
Illinois, Iowa, Mississippi, and Pennsylvania departments of revenue, retirement-income exemption rules, 2026.
Internal Revenue Service, 2026 inflation adjustments and RMD rules; One Big Beautiful Bill Act (OBBBA, P.L. 119-21), 2025.
