States with No Income Tax on Retirement Statistics 2026 | Rankings & Key Facts

For the tens of millions of Americans approaching or already living in retirement, where you live is almost as important as how much you saved. State income tax policy on retirement income — covering Social Security benefits, pension payments, 401(k) and IRA withdrawals, and annuity income — can translate to differences of $3,000 to $18,000 per year in after-tax income depending on the state. As of the 2026 tax year, nine states impose zero personal income tax of any kind, making every dollar of retirement income fully free from state taxation. Beyond those nine, a further group of states levy income taxes on wages but carve out complete exemptions for retirement distributions — bringing the total count of retirement-friendly states to 13 or more depending on income type. The retirement tax landscape also shifted meaningfully in 2026: West Virginia fully eliminated its Social Security income tax, Michigan completed its three-year phase-out of pension and retirement account taxation, and New Hampshire fully repealed its tax on interest and dividends from January 2025, cementing its status as a zero-income-tax state.

The financial stakes are high enough that retirement tax policy now ranks among the top three reasons retirees relocate, alongside climate and cost of living. In 2023, Florida alone recorded a net gain of 44,504 residents aged 60 and over — the highest of any state and more than double the next-highest. By 2025, South Carolina had overtaken Florida as the fastest-growing retirement destination by net percentage gain, and Texas posted the second-largest net gain of older adults. The primary states hemorrhaging retirees — California, New York, New Jersey, Illinois, and Connecticut — share one defining characteristic: high income tax rates with limited retirement exemptions. A retiree drawing $120,000 per year from the same mix of Social Security, pension, and IRA income pays roughly $7,200 more in state income tax in California than in Wyoming, and over a 25-year retirement, that compounding difference can exceed $180,000 in after-tax spending capacity according to the Tax Foundation’s 2026 State Tax Handbook.

Interesting Facts: States with No Income Tax on Retirement 2026

RETIREMENT INCOME TAX LANDSCAPE — US 2026 SNAPSHOT
====================================================

  States with ZERO income tax (all retirement income exempt):   9
  States exempting most retirement income (with income tax):    4+
  States fully exempting pensions (all types):                 16
  States still taxing Social Security benefits:                 8
  States that eliminated SS tax since 2024 (new):              4
  (Kansas, Missouri, Nebraska — 2024; West Virginia — 2026)

  States NOT taxing SS vs taxing SS
  ┌────────────────────────────────────────────────────┐
  │ Do NOT tax SS:   41 states + DC  ████████████████  │
  │ Still tax SS:         8 states   ███               │
  └────────────────────────────────────────────────────┘

Source: Tax Foundation 2026 State Tax Handbook, Income Lab (April 2026), Greenback Tax Services (March 2026), SmartAsset, CNBC (July 2025), Newsweek/HireAHelper (March 2026), AARP (March 2026), countrytaxcalc.com (2026)

The speed at which the retirement tax map has changed is remarkable. As recently as 2020, thirteen states taxed Social Security — by 2026 that number has been cut to eight, with four states acting since 2024 alone. This is not a slow drift but a policy competition: states are actively repositioning themselves to attract retirees and their fixed but reliable income streams, which support local economies through spending on housing, healthcare, and services without drawing on school systems or creating commuter infrastructure demands. The West Virginia 2026 elimination of its Social Security tax is particularly significant given the state’s older demographic profile; advocates had long argued the tax was punishing residents who could least afford it. Michigan’s completed phase-out under Public Act 4 of 2023 means that starting with 2026 tax returns, most retirees in the state can exempt pensions and IRA/401(k) withdrawals up to $67,610 (single) / $135,220 (joint) — a change that repositions Michigan as broadly retirement-tax-friendly after years of being a notable outlier in the Midwest.

The migration data confirms that retirees vote with their feet, and they are reading the tax maps carefully. The fact that nearly 1 in 5 Americans aged 65 and over who moved in 2025 crossed state lines — and that the top destinations are almost exclusively no-income-tax or retirement-tax-exempt states — speaks to how central tax policy has become in retirement location decisions. The emergence of South Carolina and North Carolina as leading destinations alongside established giants like Florida and Texas reflects a second wave of tax-friendly relocation: these states combine no Social Security tax, partial or full pension exemptions, lower housing costs than Florida’s now-expensive coastal markets, and favorable climates. The same retirees who fled California or New York are no longer all landing in Miami or Dallas — they are diversifying across a broader belt of southern and mountain-state retirement havens.

The 9 States with Zero Income Tax on Retirement 2026

9 ZERO-INCOME-TAX STATES — PROPERTY TAX & SALES TAX COMPARISON (2026)
=======================================================================
(Property tax = effective rate; Sales tax = avg combined state + local)

  State           Prop. Tax   Sales Tax   Notes
  ─────────────────────────────────────────────────────────────────────
  Wyoming         0.56%       5.36%       Lowest total tax burden (7.5%)
  Nevada          0.53%       8.23%       Lowest property tax; higher sales
  Florida         0.86%       7.02%       Most popular retirement destination
  Alaska          1.04%       1.76%       No statewide sales tax; PFD dividend
  South Dakota    1.08%       6.40%       Very low overall burden
  Tennessee       0.67%       9.55%       Highest combined sales tax nationally
  Texas           1.60%       8.20%       High property tax offsets income saving
  New Hampshire   1.93%       0%          No sales tax; highest prop. tax of the 9
  Washington      0.98%       9.51%       7% capital gains tax (high earners only)
  ─────────────────────────────────────────────────────────────────────

Source: Tax Foundation Facts and Figures 2025, Income Lab Complete Advisor Guide 2026, countrytaxcalc.com, Kiplinger (2026), Empower (2026)

Not all zero-income-tax states are created equal for retirees, and the property and sales tax picture varies so dramatically that the after-tax math can flip depending on a retiree’s spending profile and home value. Wyoming stands out as the most comprehensively low-tax state: 0% income tax, the 4th-lowest effective property tax rate (0.56%), and a modest combined sales tax of 5.36% — producing the lowest total tax burden of any state at 7.5%. A retiree owning a $500,000 home in Wyoming pays roughly $2,800 in annual property taxes; the same home in Texas costs approximately $8,000 per year in property taxes — a $5,200 annual difference that significantly erodes the income-tax saving. Nevada offers the lowest effective property tax rate of the group at 0.53%, making it attractive for retirees who own property, though its higher combined sales tax of 8.23% affects everyday spending.

Tennessee’s headline appeal — no income tax, no estate tax, warm climate, relatively low property taxes at 0.67% — is partially offset by having the second-highest combined sales tax in the nation at 9.55%, which hits fixed-income retirees through daily spending on food, clothing, and services. New Hampshire is the mirror image: zero sales tax and zero income tax (as of January 2025, following repeal of the Interest and Dividends Tax), but property taxes averaging 1.93% — the highest of the nine zero-income-tax states — mean a retiree with a $400,000 home faces roughly $7,720 per year in property taxes. Washington state warrants a specific note: it levies a 7% capital gains tax on gains exceeding $270,000 and a significant estate tax (10%–35%) — unusual liabilities for a no-income-tax state that estate-planning retirees should carefully consider. For retirement income itself (Social Security, pensions, IRA distributions), Washington remains fully exempt.

States Exempting Retirement Income Despite Having an Income Tax 2026

STATES FULLY EXEMPTING RETIREMENT INCOME (WITH STATE INCOME TAX) — 2026
========================================================================

  State           Income Tax Rate    What Is Exempt
  ─────────────────────────────────────────────────────────────────────
  Illinois        4.95% flat         All retirement income (SS, pension,
                                     401k/IRA, annuities)
  Iowa            3.9% flat (2026)   All retirement income age 55+
  Mississippi     4.0% (2026)        All retirement income (plan rules apply)
  Pennsylvania    3.07% flat         All retirement income after age 59½
  Michigan        4.05%              Pensions/IRA/401k up to $67,610 (single)
                                     / $135,220 (joint) — NEW for 2026
  ─────────────────────────────────────────────────────────────────────

Source: 401(k) Specialist Magazine (May 2026), Bankrate (September 2025), Kiplinger (January 2026), Michigan Treasury, Income Lab (April 2026)

This group of states represents a highly strategic opportunity for retirees that is frequently overlooked. Illinois taxes wages at a flat 4.95% — but a retiree drawing entirely from Social Security, a pension, and IRA distributions pays zero Illinois state income tax on all of it. The same logic applies to Pennsylvania’s 3.07% flat rate: a retiree aged 59½ or older in Pennsylvania pays nothing to the state on retirement distributions despite living in a state with a formal income tax. These are not marginal exemptions — they are complete carve-outs that effectively put Illinois and Pennsylvania in the same retirement-income category as Florida and Texas for many retirees, while potentially offering lower property taxes and lower home prices than competitive Sun Belt markets. Iowa’s 2026 flat tax of 3.9% (down from multiple brackets) applies to non-retirement income for those under 55, but retirees aged 55 and over are fully exempt from state tax on all retirement distributions.

Michigan’s 2026 transition is the biggest immediate change for any state’s retirees. Under Public Act 4 of 2023, Michigan completed a three-year phase-out of its retirement income tax in the 2026 tax year, meaning retirees born after 1952 can claim both the standard deduction and the Social Security deduction together. The result is that most Michigan retirees with moderate incomes will owe zero or near-zero state income tax on their retirement distributions, repositioning a Great Lakes state with strong urban healthcare infrastructure and accessible housing costs as a genuinely competitive retirement destination. Mississippi continues its own long trajectory: its income tax rate is falling from 4.4% to 4.0% in 2026, heading to 3% by 2030 and ultimately full elimination — making it a state in continuous transition toward zero income tax while already fully exempting all retirement income.

States Still Taxing Social Security & Retirement Income 2026

8 STATES STILL TAXING SOCIAL SECURITY BENEFITS — 2026
======================================================
(Down from 13 states in 2020 — 5 states eliminated SS tax in 6 years)

  Colorado      ██████   Up to 20% deduction for 65+; income-based
  Connecticut   ██████   Exempt below $75K (single) / $100K (joint)
  Minnesota     ████████ Moderate exemptions; higher earners taxed more
  Montana       ████████ Limited deductions; one of least generous
  New Mexico    ██████   Partial exemption above income thresholds
  Rhode Island  ██████   Exempt below $101,000 (single, 2026)
  Utah          █████████ Tax credit offsets; moderate exposure
  Vermont       ████████ Exempt below ~$65K (single) / $85K (joint)

  Eliminated SS tax since 2020:
  Missouri (2024) | Kansas (2024) | Nebraska (2024) | W. Virginia (2026)

Source: SmartAsset (2026), Bankrate (September 2025), Income Lab (April 2026), Kiplinger Retirement Tax Guide (February 2026), CNBC Select (February 2026)

The eight remaining states that tax Social Security benefits in some form are far from a monolithic category. Connecticut and Rhode Island effectively protect most middle-income retirees through generous income-based exemption thresholds — a retiree couple earning under $100,000 in Connecticut pays no state tax on their Social Security at all. Montana and Utah are the least generous in their exemptions: Montana applies standard income tax rates above relatively low deduction amounts, and Utah’s credit structure (maximum $900 for married filers) provides limited relief against a 4.55% flat income tax that applies to all income. For retirees in these states with meaningful Social Security income, the annual tax bill on benefits alone can reach $1,000–$3,000+ depending on total income.

Minnesota stands out as the most complex and potentially costly of the eight states for higher-income retirees. With a top income tax rate of 9.85% and a Social Security subtraction method that phases out for higher earners, a Minnesota retiree drawing $90,000 or more annually faces genuine and significant state income taxation on their benefits — a burden that has made neighboring Wisconsin and South Dakota increasingly attractive relocation alternatives. The practical takeaway for retirees currently residing in any of the eight remaining SS-taxing states: the income threshold exemptions mean many moderate-income retirees are effectively protected, but anyone whose combined income from Social Security, pension, and investment distributions exceeds $75,000–$100,000 per year should specifically model the state tax cost, as it can meaningfully exceed $2,000–$5,000 annually compared to a zero-tax or full-exemption state.

Retirement Migration & Tax-Saving Statistics 2026

WHERE RETIREES ARE MOVING — NET MIGRATION, ADULTS 65+ (2025)
=============================================================

  Top Gaining States (net, 2025)
  ┌──────────────────────────────────────────────────┐
  │ South Carolina   +5,427  ████████████████████    │
  │ Texas            +5,156  ███████████████████     │
  │ North Carolina   +4,900+ █████████████████       │
  │ Florida           Large inflow (also large out)  │
  └──────────────────────────────────────────────────┘

  Top Losing States (net, 2025)
  ┌──────────────────────────────────────────────────┐
  │ California      -12,963  ████████████████████    │
  │ New York         -8,648  ████████████████        │
  └──────────────────────────────────────────────────┘
  Source: HireAHelper / PGM Solutions, February 2026 report

Source: HireAHelper / PGM Solutions (February 2026 report via Newsweek and AARP), SmartAsset, CNBC (July 2025), SafeMoney.com Retirement Migration Statistics 2026, Wealthvieu (2026), countrytaxcalc.com (2026)

The retirement migration data for 2025, compiled from nearly 15 million moving records by HireAHelper and PGM Solutions, confirms that the tax-driven relocation trend is not slowing — it is broadening. South Carolina’s emergence as the #1 net-gaining state for adults 65 and older reflects a specific value proposition: no Social Security tax, partial pension and retirement income exemptions, coastline and mild climate, and significantly lower home insurance costs than Florida. The state is capturing a stream of retirees priced out of Florida’s inflating real-estate and insurance markets but unwilling to move to a state with higher income taxes. Texas’s second-place net gain is driven by a similar calculus: zero income tax, a large and growing stock of age-restricted communities, and lower housing costs than coastal markets — offset only by the state’s high property taxes averaging 1.60%, which weigh more heavily on retirees who own their homes outright.

The savings data makes the mobility rational. A retiree household in New Jersey with $70,000 of annual retirement income that relocates to Florida or Tennessee eliminates $4,000–$6,000 in state income taxes per year and typically reduces property taxes by 50–80%, generating cumulative savings of $120,000–$360,000 over 20 years. At higher income levels, the math is even more compelling: a $200,000 retirement income household moving from California to Florida or Wyoming saves $15,000–$18,000 annually in state income tax alone. These figures explain why nearly 1 in 5 Americans aged 65 and over who relocated in 2025 crossed a state line, and why the states experiencing the largest retiree outflows — California (−12,963) and New York (−8,648) in 2025 alone — are precisely those combining high marginal income tax rates with limited retirement exemptions and high overall costs of living.

Disclaimer: This research report is compiled from publicly available sources. While reasonable efforts have been made to ensure accuracy, no representation or warranty, express or implied, is given as to the completeness or reliability of the information. We accept no liability for any errors, omissions, losses, or damages of any kind arising from the use of this report.

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