Which States Don’t Tax Pension Income?
Where you live in retirement is often just as important to your bottom line as how much you’ve saved. Why? Because states treat retirement income very differently: some tax your pension, 401(k), and IRA withdrawals in full, others exempt them entirely, and a handful levy no income tax at all. Anyone deciding where to spend their retirement years—or simply weighing a move—should understand these rules as an important piece of the planning puzzle.
This article breaks down which states won’t tax pension income in 2026, how Social Security fits in, and why taxes are only one factor in your decision about where to move while zooming in on pensions specifically. For broader rankings, see our best states for taxes in retirement guide; for deciding factors unrelated to taxes, see our tips for choosing where to live in retirement. Deciding where to spend your later years is one of the bigger considerations covered in our retirement planning guide.
Key Takeaways
- The short list: In 2026, 13 U.S. states won’t tax your pension, 401(k), or IRA income—the nine states with no income tax at all plus Illinois, Mississippi, Pennsylvania, and Iowa.
- Two different reasons: Some states (e.g., Florida and Texas) tax no income of any kind; others (like Illinois and Pennsylvania) do have an income tax but specifically exempt qualified retirement income.
- Watch the fine print: Iowa’s exemption applies only at age 55+ (or for disability/survivors), and Mississippi and Pennsylvania sometimes tax early withdrawals taken pre-retirement.
- Social Security is separate: Only eight states still tax Social Security benefits in 2026, with most offering income-based breaks that shield many retirees anyway.
- Taxes aren’t everything: Property taxes, sales taxes, insurance, healthcare, and cost of living can easily outweigh an income-tax break; weigh it all before relocating.
Two ways states can spare your pension
When people say a state “doesn’t tax pensions,” they usually mean one of two very different things:
1. The state has no income tax at all.
Nine states don’t levy a broad personal income tax, so there’s simply nothing to tax—not your wages, pension, or 401(k)/IRA withdrawals.
2. The state has an income tax but exempts retirement income.
A second group does tax ordinary income (e.g., paychecks) but carves out a specific exemption for qualified retirement income. In these states, a retiree living on a pension, Social Security, and/or IRA distributions can still owe little or no state income tax.
13 states that won’t tax your pension in 2026
These states levy no tax on pension, 401(k), or IRA income—for two different reasons.
No state income tax (9)
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington*
- Wyoming
*No tax on wages or retirement income, but Washington taxes large long-term capital gains.
Income tax, but retirement income exempt (4)
- IllinoisFlat 4.95% tax; Social Security, pensions, and 401(k)/IRA income are fully exempt.
- MississippiFlat 4.0% tax; qualified retirement income exempt (early withdrawals may not qualify).
- PennsylvaniaFlat 3.07% tax; qualified plan income exempt once you’ve reached retirement age.
- IowaFlat 3.8% tax; retirement income exempt only at age 55+ (or disability/survivors).
Rules change and exceptions apply, so always confirm the current treatment for your specific situation before making a move. General information, not tax advice.
Nine states with no income tax
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming impose no broad personal income tax. For retirees, that means pensions, 401(k) and IRA withdrawals, and Social Security all escape state income tax. A couple of nuances are in play here. While New Hampshire historically taxed interest and dividend income, it fully repealed this on January 1, 2025 so investment income is now state-tax-free there too. Washington also doesn’t tax wages or retirement income, but it does levy a tax on large long-term capital gains—potentially affecting retirees who sell highly appreciated investments in a single year.
Four states that exempt retirement income
Illinois, Mississippi, Pennsylvania, and Iowa all levy a state income tax but carve out qualified retirement income. All four use a flat tax, meaning the following rates apply to other income as well (e.g., paychecks)…
Illinois
Illinois applies a flat 4.95% income tax to wages but fully excludes Social Security, pensions, and distributions from 401(k)s and IRAs; retirees drawing entirely from these sources can owe $0 in Illinois income tax.
Mississippi
Mississippi levies a flat 4.0% tax on taxable income above $10,000, the rate scheduled to fall in the coming years as the state moves toward eliminating income tax altogether. Qualified retirement income (including pensions, 401(k)s, and IRAs) is exempt, though withdrawals taken pre-retirement age are still sometimes taxed.
Pennsylvania
Pennsylvania’s flat 3.07% income tax is among the lowest in the nation and doesn’t apply to retirement income from qualified employer plans, 401(k)s, or IRAs upon reaching retirement age. Early distributions, however, are sometimes taxable.
Iowa
Iowa recently moved to a flat 3.8% income tax and now exempts retirement income entirely, but only for residents aged 55+ (or those who qualify via disability or as a surviving spouse). A younger early retiree, therefore, could still owe Iowa tax on those withdrawals.
Social Security is taxed separately
A state can exempt Social Security even if it taxes pensions and vice versa. The good news? The list of states taxing these benefits keeps shrinking. In 2026, only eight still tax Social Security with most protecting lower- and middle-income retirees via exemptions or phase-outs.
Eight States That Still Tax Social Security in 2026
| State | How it taxes Social Security (2026) |
|---|---|
| Colorado | Retirees 65+ deduct all federally taxed benefits (effectively exempt); ages 55–64 qualify too under state income limits. |
| Connecticut | Fully exempt under ~$75,000 AGI (single) / $100,000 (joint); above that, up to 25% of benefits may be taxed. |
| Minnesota | Fully exempt below ~$86,000 (single) / $111,000 (joint), then phases out at higher incomes. |
| Montana | Taxes the same portion of benefits that’s taxable on your federal return—no separate state break, so higher-income retirees pay. |
| New Mexico | Fully exempt unless AGI tops $100,000 (single) / $150,000 (joint). |
| Rhode Island | Exempt once you reach full retirement age and your AGI is under ~$104,000 (single) / $133,000 (joint). |
| Utah | A tax credit offsets the tax for lower incomes and phases out above ~$54,000 (single) / $90,000 (joint). |
| Vermont | Fully exempt below ~$55,000 (single) / $70,000 (joint), with a partial break just above this. |
The other 42 states (plus D.C.) don't tax Social Security at all. Thresholds shown are for 2026, are generally indexed each year, and vary by filing status—confirm your state's current rules. General information, not tax advice.
Why a tax break shouldn’t drive the decision alone
A zero-income-tax state can still be an expensive place to retire. Property taxes, sales taxes, home and auto insurance, healthcare costs, and overall cost of living all factor in—any of them potentially erasing pension tax break savings. New Hampshire, for example, has one of the highest effective property tax rates in the country (property taxes as a share of home value), while Texas leans heavily on property and sales taxes since it collects no income tax. In other words, states may simply find other means to collect money not taken from your pension.
Lifestyle matters just as much as math. Proximity to family, climate, access to quality healthcare, and the type of community you want to be part of all impact where you retire; we explore these same factors in our tips for choosing where to live in retirement article. A smart approach is to examine your total projected cost of living in each state you’re considering—beyond just the income-tax line—and fold taxes into a broader plan. Our guides for minimizing retirement income taxes and tax-efficient withdrawal strategies can help you keep more of what you’ve saved, no matter where you land.
In sum: location is part of the plan
Which state you call home in retirement can indeed affect how far your savings stretch. Thirteen states won’t tax your pension (as of 2026), and most states no longer tax Social Security. The fine print and other costs involved, however, mean the right choice is rarely as simple as chasing after the lowest tax rate.
Want help weighing how a move (or your current state of residence) fits into your broader retirement income and tax picture? Schedule a FREE discovery call with one of our financial advisors to get the clarity you need.
Reviewed for accuracy
Paul Muller, AEP®, CFP®
Founder and Relationship Manager at Vision Retirement, with 30+ years in the financial industry.
Read full bio →FAQs
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Nine states levy no broad personal income tax—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—where pensions, 401(k) and IRA withdrawals, and Social Security are all free from state income tax. Note that Washington still taxes large long-term capital gains, and some of these states lean more heavily on property or sales taxes to make up the difference.
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The tax treatment here differs by income type and U.S. state. While several states that tax other income fully exempt qualified retirement income (e.g., Illinois, Mississippi, and Pennsylvania), the details vary, and some states tax private pensions differently from public or government pensions. Since the rules are nuanced and change over time, it’s best to confirm how your specific mix of income would look tax-wise in any state you’re considering.
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Eight states still tax Social Security as of 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. Most of these offer income-based exemptions shielding lower- and middle-income retirees, however, so many residents owe little or even nothing. The other 42 states and Washington, D.C. don’t tax Social Security at all.
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Oftentimes, yes. Many states that tax private pensions offer partial or full exemptions for military retirement pay and (in some cases) state or local government pensions. If a significant share of your retirement income comes from the latter, it’s worth checking the specific rules in each state since one that taxes your neighbor’s private pension may fully exempt yours.
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Not necessarily since income tax is only one piece of the cost equation. Property taxes, sales taxes, insurance, healthcare, and general cost of living can offset—or even exceed—any pension tax savings. Lifestyle factors (e.g., family, climate, and healthcare access) matter too. The best approach is to compare your total projected cost of living in the states you’re considering and fold taxes into a broader retirement income plan.
