Most Tax-Friendly States for Retirees: 2026 Roth-Conversion Tax Score

A $100,000 Roth conversion generates $0 of state income tax in the nine U.S. states that levy no tax on ordinary income in 2026, and up to $13,300 in California, whose 13.30% top marginal rate is the highest in the nation (Source: Tax Foundation, 2026). California’s 13.30% rate applies only to taxable income above about $1,000,000, so $13,300 is an upper-bound illustration rather than the typical bill on a $100,000 conversion, which for most retirees falls in a lower California bracket. For a retiree deciding where to be domiciled during the conversion years, the domicile decision can move a meaningful amount of tax and is worth planning around.

Q3 Advisors Research | Last updated July 2026 | Methodology and sources below

Executive summary

Key findings

• California’s 13.30% top marginal individual income tax rate is the highest of any U.S. state in 2026, and it applies only to taxable income above about $1,000,000 (Source: Tax Foundation, 2026).
• Hawaii (11.00%), New York (10.90%), New Jersey (10.75%), and Oregon (9.90%) follow California as the states with the highest 2026 top marginal rates on conversion income (Source: Tax Foundation, 2026).
• A $16,000 annual IRA or 401(k) withdrawal is taxed $0 in the four full-exemption U.S. income-tax states (Illinois, Pennsylvania, Mississippi, Iowa) versus about $2,128 at California’s top rate in 2026 (Source: Q3 Advisors computation from Tax Foundation 2026 rates).
• Pennsylvania combines a 3.07% flat rate with a full exemption of retirement distributions taken at the plan’s qualifying age, giving it a composite score of 86.6, which is third among the states that tax ordinary income, behind Iowa and Mississippi (Source: Q3 Advisors computation, 2026).
• Iowa (88.6) and Mississippi (88.0) rank first and second among income-tax states on the composite because both fully exempt qualified retirement income and carry no state death tax (Source: Q3 Advisors computation, 2026).
• Oregon has the lowest estate-tax exemption of any U.S. state at $1,000,000, and Rhode Island the second lowest at about $1,802,431, as of Oct. 1, 2025; Massachusetts is next at $2,000,000 (Source: Tax Foundation, Oct. 1, 2025; Rhode Island Division of Taxation, ADV 2024-30).
• Connecticut is the only state conforming to the U.S. federal estate-tax exemption, which rises to $15,000,000 in 2026 (Source: Tax Foundation, Oct. 1, 2025; OBBBA, P.L. 119-21).
• Eight states tax Social Security benefits in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont (Source: Kiplinger, 2026).
• Connecticut fully exempts Social Security for single filers with federal AGI under $75,000 and joint filers under $100,000 in 2026, so most middle-income retirees there pay no Social Security tax (Source: Kiplinger, 2026).
• The U.S. federal estate-tax exemption is $15,000,000 per individual in 2026 with a 40% top rate, after OBBBA (P.L. 119-21, 2025) made the higher exemption permanent and indexed (Source: OBBBA, P.L. 119-21).
• Montana cut its top income tax rate from 5.9% to 5.65% effective 2026, with a further cut to 5.4% scheduled for 2027 (Source: Tax Foundation, 2026 State Tax Changes).
• Twenty-six states have reduced individual income tax rates since 2021, and 41 U.S. states plus DC levy a broad-based individual income tax in 2026 (Source: Tax Foundation, 2026).
• A large conversion raises AGI and MAGI, which can push a retiree above the 2026 U.S. federal IRMAA thresholds of $109,000 single and $218,000 joint and increase Medicare Part B costs above the $202.90 standard monthly premium (Source: CMS/SSA 2026 figures; IRMAA and the Part B premium are set by CMS and SSA, not the IRS).

The metric: what the Composite Conversion-Tax Score measures

Many published rankings of retiree-friendly states focus on a household’s headline income-tax treatment and give less weight to the other taxes a converting retiree faces. This score does something narrower and more decision-relevant: it isolates the four taxes that decide a converting retiree’s bill on a Roth conversion. Those four taxes are the state income tax that applies to the conversion, the retirement-income exclusion that can shelter part of it, Social Security taxation that eats bracket room during the conversion window, and the estate or inheritance tax that a conversion is often designed to reduce.

The formula is fixed and reproducible: CompositeScore = 0.40 x S_income + 0.25 x S_retexcl + 0.20 x S_ss + 0.15 x S_estate, scored 0 to 100 where 100 is most friendly. Income tax on the conversion carries the largest weight (0.40) because it is the immediate cash cost. The retirement-income exclusion (0.25) directly offsets that cost. Social Security taxation (0.20) governs how much bracket room a retiree has each year. Estate and inheritance tax (0.15) is a back-end cost that binds only above each state’s threshold. The weights are an explicit analyst judgment, documented so any user can re-weight them.

The score is a conversion-tax metric, not an all-in cost-of-living metric. It does not model property tax, sales tax, or a specific household budget. A retiree comparing total lifetime cost of living should pair this score with a property-and-sales-tax analysis, which is flagged in the limitations below.

The full 50-state data table

The table below is the citable asset. It shows each state’s 2026 top marginal ordinary-income rate, the four sub-scores, and the composite for the 13 states whose inputs are fully verified. Higher is friendlier to a converting retiree. Eight no-income-tax U.S. states tie at 100.0; the ranks that follow are ordered by composite score. The remaining 38 states levy an income tax with a partial retirement-income exclusion that has not yet been verified per state, so their retirement-exclusion sub-score (S_retexcl) and composite are marked provisional and are not ranked; their income, Social Security, and estate sub-scores are shown because those inputs are verified. Sub-scores are defined in the Methodology section.

Note: S_retexcl equals 100 for the nine no-income-tax states and the four full-exemption states (Illinois, Pennsylvania, Mississippi, Iowa), which is why those 13 states carry a composite and a rank. The other 38 income-tax states have a partial exclusion whose reach to IRA and Roth-conversion income has not been verified per state; assigning them a single assumed sub-score would be the largest source of error, so they are marked provisional and are neither scored nor ranked, per the data-integrity rule of excluding what cannot be verified. This is discussed in Methodology and Data limitations. A retiree evaluating a specific state should confirm its exclusion rules against that state’s Department of Revenue before acting. See the Q3 Advisors overview of Roth conversions and state taxes.

What drives the numbers

The income-tax rate does most of the work in this score, by design, because it is 40% of the weight and it is the only cost that lands in cash the year of the conversion. That is why every no-income-tax state sits at or near the top and why California, with a 13.30% top rate, carries the lowest income-tax sub-score (0.0) even though it levies no estate tax. The rate captures the immediate decision most directly.

The 2026 top marginal ordinary-income rate is 0.00% in nine U.S. states and 13.30% at the California ceiling, applied only to taxable income above about $1,000,000 (Source: Tax Foundation, 2026). Applied to a $100,000 conversion at the top rate, that spread is $0 versus an upper-bound $13,300 in state income tax (Source: Q3 Advisors computation). The four full-exemption income-tax states reduce the tax on qualified retirement withdrawals to $0, though Pennsylvania’s exemption generally does not shelter a conversion taken before the plan’s qualifying age (Source: state DOR instructions, 2026).

Social Security taxation matters less to the conversion itself and more to the bracket room around it. Eight states tax Social Security in 2026, and most shield lower- and middle-income retirees with AGI-based caps (Source: Kiplinger, 2026). A large conversion raises AGI, which can push a retiree above those caps and expose Social Security to state tax that would otherwise be exempt. That interaction is why the raw count of eight overstates how many retirees actually pay, but understates the risk for someone converting aggressively.

Estate and inheritance tax is a back-end cost that binds only above each state’s threshold, which is why it carries the smallest weight. It still reorders the top of the table. Washington falls from 100 to 93.3 on an estate tax with a $3,000,000 exemption and a top rate that reverted to 20% for decedents dying on or after July 1, 2026 (Source: Washington ESB 6347, 2026), and Illinois scores lowest of the four full-exemption states at 79.1 despite that exemption because its estate-tax exemption is only $4,000,000 (Source: Tax Foundation, Oct. 1, 2025).

Illustrative conversion cost by state, 2026

The figures below are illustrative and apply each state’s 2026 top marginal rate to a $100,000 conversion. They assume the conversion falls entirely in the top bracket, which overstates the cost for smaller conversions taxed in lower brackets. For example, California’s 13.30% rate applies only to taxable income above about $1,000,000, so a typical $100,000 conversion would be taxed in a lower California bracket and the $13,300 figure is an upper bound rather than the amount most retirees would owe. The figures exclude local income taxes such as those in New York City and several Ohio, Pennsylvania, and Kentucky municipalities.

Sizing a conversion around bracket room is the core of the exercise; see the Q3 Advisors guide to how much to convert to Roth and the Roth conversion break-even analysis.

The domicile-timing rule that changes the math

A retiree is not permanently bound to the state where the retirement account was earned. U.S. federal law limits which state can tax the money. Under 4 U.S.C. section 114, the Pension Source Tax Act of 1996, no state may impose an income tax on the retirement income of a person who is not a resident or domiciliary of that state (Source: 4 U.S.C. section 114, Cornell LII).

The statute covers distributions from IRC section 401(a) qualified trusts, section 403(a) and 403(b) plans, section 7701(a)(37) IRAs, section 457 deferred compensation, governmental plans, and SEPs, and it protects qualified-plan and IRA distributions regardless of payment pattern (Source: 4 U.S.C. section 114, Cornell LII). The practical effect is that a retiree can accrue assets in a high-tax state, establish domicile in a no-income-tax state, and convert there, and a former state cannot tax that conversion once a valid change of domicile is complete. That outcome is fact-dependent: it turns on a genuine change of domicile, and states audit residency aggressively, so a taxpayer should confirm the facts with a qualified professional. A lump-sum conversion by a current resident is fully taxable by that resident state; section 114 does not shield a resident.

Original synthesis

Insight 1: The Composite Conversion-Tax Score

Formula: CompositeScore = 0.40 x S_income + 0.25 x S_retexcl + 0.20 x S_ss + 0.15 x S_estate, scored 0 to 100. S_income = 100 x (1 minus rate divided by 13.30), where 13.30 is California’s top rate; no-income-tax states score 100. Inputs: Tax Foundation 2026 income rates (S_income), state DOR instructions and 2026 summaries (S_retexcl), Kiplinger 2026 Social Security list (S_ss), and the Tax Foundation Oct. 1, 2025 estate and inheritance table (S_estate). Result: eight no-income-tax states tie at 100.0 and, among the 13 states with fully verified inputs, Illinois is lowest at 79.1; the 38 partial-exclusion states are marked provisional and are not ranked. Limitation: uses statutory top marginal rate, overstating cost for conversions in lower brackets, and cannot score the 38 partial-exclusion states until each state’s retirement-income exclusion is verified against its Department of Revenue.

Insight 2: The reputation-versus-reality gap for converters

Logic: rank each fully-scored state on income-tax friendliness alone (S_income) and compare that to its composite rank to expose states whose headline reputation overstates or understates their true friendliness to a converter. Inputs: S_income and the composite, both above. Result: Illinois, which markets a full retirement-income exemption, scores 79.1, the lowest of the four full-exemption states, because its 4.95% conversion rate and $4,000,000 estate-tax exemption pull it below Iowa, Mississippi, and Pennsylvania. Washington, a no-income-tax state, drops to 9th because it levies an estate tax with a $3,000,000 exemption and a 20% top rate, which reverted to 20% from 35% for decedents dying on or after July 1, 2026 and ties Hawaii for the highest state estate-tax top rate (Source: Washington ESB 6347, 2026). Limitation: the gap reflects only the four modeled taxes and ignores property and sales tax, and the 38 partial-exclusion states are unranked pending verification.

Insight 3: The full-exemption premium in dollars

Logic: quantify what a state’s full retirement-income exemption is worth by applying the state’s top rate to a fixed withdrawal. Inputs: Tax Foundation 2026 rates and the four full-exemption states. Result: on a $16,000 annual 401(k) or IRA withdrawal, the exemption is worth $0 of tax in Illinois, Pennsylvania, Mississippi, and Iowa, versus about $2,128 in California (16,000 x 13.30%), $1,744 in New York (16,000 x 10.90%), and $792 at Illinois’s own 4.95% rate if the exemption did not apply (Source: Q3 Advisors computation from 2026 rates). Limitation: illustrative at top marginal rate; Pennsylvania’s exemption may not apply to a pre-qualifying-age conversion.

Figures

Source quality ranking

Tier 1 (primary, government, statutory). 4 U.S.C. section 114 (Pension Source Tax Act of 1996) via Cornell Legal Information Institute; IRS 2026 inflation-adjustment figures and Publication 590-B (Uniform Lifetime Table); OBBBA, P.L. 119-21 (2025); CMS and SSA 2026 figures for Medicare Part B and IRMAA; Washington Engrossed Senate Bill 6347 (2026) and Washington Department of Revenue estate-tax tables (top rate reverting to 20% for decedents dying on or after July 1, 2026); state Departments of Revenue 2026 instructions for retirement-income exclusion mechanics.

Tier 2 (credible research citing primary statutes). Tax Foundation, State Individual Income Tax Rates and Brackets, 2026 (Feb. 11, 2026); Tax Foundation, Estate and Inheritance Taxes by State (Oct. 1, 2025, citing Bloomberg Tax and state statutes); Tax Foundation, 2026 State Tax Changes Taking Effect January 1st; Rhode Island Division of Taxation, ADV 2024-30 (2025 estate-tax exemption).

Tier 3 (reputable summaries, corroboration only). Kiplinger, States That Tax Social Security Benefits (2026), Empower, myannuitystore, and TaxCompare 2026 updates, used to cross-check the eight-state Social Security list and the four full-exemption states. The specific eight-state Social Security list is not traced to a single primary source in this report and should be confirmed against each state’s Department of Revenue before acting; it is corroborated by a higher tier where possible.

Excluded. Content-marketing aggregators without verifiable primary citations were excluded, and a single secondary infographic map was excluded as a sole source.

Most quotable statistics

Data limitations

• The composite uses statutory top marginal income-tax rates, which overstate the cost for retirees converting within lower brackets; California’s 13.30% rate, for instance, applies only to taxable income above about $1,000,000, so the $13,300 figure is an upper bound. A bracket-aware version would require each state’s full 2026 schedule.
• The retirement-income exclusion sub-score is verified only for the 13 fully-scored states; the 38 partial-exclusion states are marked provisional and receive no composite or rank, because a single assumed sub-score would be the largest source of error in the state-level ranks. Whether each state’s exclusion reaches IRA and Roth-conversion income must be confirmed against that state’s Department of Revenue before acting.
• Local and municipal income taxes (New York City, Yonkers, Maryland counties, and Ohio, Pennsylvania, and Kentucky municipalities) are not included and raise the true conversion cost in those places.
• Estate-tax exemptions are Oct. 1, 2025 values; several states index annually, so 2026 exemptions are marginally higher for New York, Connecticut, Maine, Maryland, Rhode Island, and others. Washington is updated separately: its top estate-tax rate reverted to 20% for decedents dying on or after July 1, 2026, under ESB 6347.
• The score models only four taxes and does not include property tax, sales tax, or a household budget, so it is not an all-in cost-of-living ranking.
• Social Security exemption thresholds for Utah, Montana, Rhode Island, and Vermont were not verified to primary 2026 sources and are reflected only in the ordinal S_ss scale.

Recommended dataset fields

A downloadable version of this dataset would contain, per state: state name and postal code; 2026 top marginal ordinary-income rate; number and width of 2026 brackets; local income tax flag; retirement-income exclusion type (full, partial, none) with the age and AGI triggers and a field for whether the exclusion reaches IRA and Roth-conversion income; a scored-or-provisional flag; Social Security taxation flag with 2026 exemption thresholds; estate-tax flag with 2026 exemption and top rate; inheritance-tax flag with top rate by beneficiary class; the four sub-scores; the composite score where fully verified; and the illustrative state tax on a $100,000 conversion. Each field would carry a source citation and an as-of date.

Frequently asked questions

How many states have no income tax on a Roth conversion in 2026?

Nine U.S. states levy no tax on ordinary income in 2026, so a Roth conversion is untaxed by the state there: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming (Source: Tax Foundation, 2026). Washington taxes only long-term capital gains, which a conversion is not, so a conversion remains untaxed there.

Which state has the highest tax on a Roth conversion?

California has the highest 2026 top marginal individual income tax rate at 13.30%, which would apply about $13,300 of state tax to a $100,000 conversion taxed in the top bracket (Source: Tax Foundation, 2026; Q3 Advisors computation). That 13.30% rate applies only to taxable income above about $1,000,000, so $13,300 is an upper-bound figure; a typical $100,000 conversion falls in a lower California bracket. Hawaii at 11.00% and New York at 10.90% are next (Source: Tax Foundation, 2026).

Which states tax Social Security benefits in 2026?

Eight states tax Social Security benefits to some degree in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont (Source: Kiplinger, 2026). The other 42 states plus DC fully exempt benefits, and most of the eight shield lower- and middle-income retirees with AGI-based caps (Source: Kiplinger, 2026).

Which states fully exempt 401(k) and IRA income but still tax wages?

Four states fully exempt qualified retirement income while levying a broad income tax: Illinois, Pennsylvania, Mississippi, and Iowa for taxpayers age 55 and older (Source: state DOR instructions, 2026). On a $16,000 withdrawal that exemption is worth roughly $2,128 versus California’s top rate (Source: Q3 Advisors computation, 2026).

Does moving to a no-tax state before converting avoid the old state’s tax?

Under 4 U.S.C. section 114, a state may not tax the retirement income of a person who is not its resident or domiciliary, so a retiree who genuinely completes a change of domicile before converting is not taxed by the former state (Source: 4 U.S.C. section 114, Cornell LII). The protection is fact-dependent and requires a genuine change of domicile, which states audit closely, so confirm the facts with a qualified professional.

How many states have an estate or inheritance tax in 2026?

Seventeen U.S. jurisdictions imposed a death tax as of Oct. 1, 2025: 12 states plus DC levy an estate tax and five states levy an inheritance tax, with Maryland the only state imposing both (Source: Tax Foundation, Oct. 1, 2025). Oregon’s $1,000,000 estate exemption is the lowest and Rhode Island’s about $1,802,431 the second lowest (Source: Tax Foundation, Oct. 1, 2025).

Why does a Roth conversion reduce estate tax exposure?

A conversion moves money out of a pre-tax account and pays the income tax from the estate, shrinking the taxable estate and pre-paying the heir’s income tax (Source: analytical, based on Tax Foundation and IRS 2026 figures). In states with low estate-tax thresholds like Oregon at $1,000,000 and Rhode Island at about $1,802,431 as of Oct. 1, 2025, that reduction can matter well below the $15,000,000 U.S. federal exemption (Source: Tax Foundation, Oct. 1, 2025).

How can a conversion raise my Medicare costs?

A conversion increases MAGI, and 2026 U.S. federal IRMAA surcharges begin above $109,000 single and $218,000 joint, adding to the $202.90 standard monthly Medicare Part B premium (Source: CMS/SSA 2026 figures). Retirees often spread conversions across years to stay under those thresholds; see the Q3 Advisors 2026 IRMAA brackets guide.

Does the composite score mean these are the cheapest states to retire overall?

No. The score measures only four taxes relevant to a conversion (income, retirement exclusion, Social Security, and estate or inheritance) and does not include property tax, sales tax, or cost of living (Source: Q3 Advisors methodology). A no-income-tax state can still carry high property or sales tax that a full cost-of-living analysis would capture.

What is the RMD age I should plan conversions around in 2026?

The required minimum distribution age is 73 in 2026, rising to 75 for those born in 1960 or later, under the IRS Uniform Lifetime Table in Publication 590-B (Source: IRS, 2026). Many retirees convert in the lower-income years before RMDs begin; see the Q3 Advisors 2026 RMD guide and the overview of Roth conversion planning.

Suggested headlines

• A $100,000 Roth Conversion Costs $0 in Nine States and Up to $13,300 in California in 2026
• The No-Income-Tax Trap: Why Washington and Illinois Rank Lower Than Their Reputation for Converting Retirees
• Four States Fully Exempt 401(k) and IRA Income, With Iowa and Mississippi Scoring Highest in 2026
• Eight States Still Tax Social Security in 2026 After West Virginia Phases Out
• Ranking the States on the Four Taxes That Decide a Roth Conversion Bill

Sources

Tax Foundation, State Individual Income Tax Rates and Brackets, 2026 (data as of Feb. 11, 2026), https://taxfoundation.org/data/all/state/state-income-tax-rates-2026/ (Input 1, all 50 states plus DC).
Tax Foundation, 2026 State Tax Changes Taking Effect January 1st, https://taxfoundation.org/research/all/state/2026-state-tax-changes/ (rate-change corroboration).
Tax Foundation, Estate and Inheritance Taxes by State (data as of Oct. 1, 2025; source: Bloomberg Tax and state statutes), https://taxfoundation.org/data/all/state/estate-inheritance-taxes/ (Input 4).
Washington Engrossed Senate Bill 6347 (2026), effective July 1, 2026 (top estate-tax rate reverted to 20% for decedents dying on or after July 1, 2026, $3,000,000 exemption retained); Washington Department of Revenue estate tax tables, https://dor.wa.gov/ (Washington estate sub-score input, superseding the Oct. 1, 2025 snapshot).
Rhode Island Division of Taxation, Advisory ADV 2024-30, 2025 estate-tax exemption of $1,802,431, https://tax.ri.gov/ (second-lowest state estate exemption).
Kiplinger, States That Tax Social Security Benefits (2026) (Input 2, corroboration for the eight-state list; confirm per state DoR).
4 U.S.C. section 114, Pension Source Tax Act of 1996 (P.L. 104-95), via Cornell Legal Information Institute, https://www.law.cornell.edu/uscode/text/4/114 (domicile-timing legal anchor).
IRS 2026 inflation-adjustment guidance and Publication 590-B (Uniform Lifetime Table); OBBBA, P.L. 119-21 (2025) (U.S. federal 2026 anchors, including the $15,000,000 estate exemption); CMS and SSA 2026 figures (Medicare Part B $202.90 and IRMAA thresholds).
State Departments of Revenue 2026 instructions (retirement-income exclusion mechanics, Input 3), corroborated by Empower and Kiplinger 2026 summaries.
Q3 Advisors computation, 2026 (Composite Conversion-Tax Score and illustrative conversion-cost figures).