Which 13 States Don't Tax Retirement Income?
- - Which 13 States Don't Tax Retirement Income?
Stefon Walters, The Motley FoolFebruary 12, 2026 at 6:35 AM
0
Key Points -
Some states don't tax any form of income, including regular and retirement income.
If a state doesn't have an income tax, you're still not exempt from federal taxes.
Your federal tax bill on Social Security is based on your combined income.
The $23,760 Social Security bonus most retirees completely overlook ›
People don't jump for joy when it comes to paying taxes, even though they're necessary for many of the public services they enjoy daily. This goes for sales, property, capital gains, and income taxes.
Although people spend their whole careers paying taxes and saving for retirement, they're not off the hook for taxes in retirement. Luckily, 13 states don't tax retirement income in any form. This doesn't exempt you from federal tax rules, however, but it can be a major relief and help you keep more money in your pockets in your senior years.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
The word taxes written across five letter beads.
Image source: Getty Images.
States with no income tax
Let's begin with the nine states that don't tax any income, retirement-related or not:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
Since these states don't tax income, they typically make up for it with higher taxes on other sources, such as property, sales, or business taxes. Tennessee, for example, has one of the highest sales taxes in the country.
States that don't tax some form of retirement income
These six states tax regular income, but retirees are off the hook with some of their retirement income and pensions. Three of them have no tax on retirement income at all:
Arkansas: Up to $6,000 is exempt annually from individual retirement account (IRA) distributions and employer-sponsored pension plans.
Illinois: All retirement income is exempt.
Iowa: After age 55, distributions from retirement accounts and pensions are exempt.
Mississippi: All retirement income is exempt.
Pennsylvania: All retirement income is exempt.
South Carolina: Up to a certain amount is tax-deductible for retirement accounts and pensions.
How Social Security taxes work
There are currently 42 states and Washington, D.C., that don't tax Social Security benefits. The eight exceptions are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont.
Even if you're in one of the 42 states or D.C., there's a chance that you'll need to pay federal taxes on your benefits. How much you pay is based on your combined income, which includes your adjusted gross income (AGI), half of your annual Social Security benefit, and any nontaxable interest you receive.
If you're single and your combined income is less than $25,000, none of your benefits are eligible to be taxed. If it's between $25,000 and $34,000, up to 50% are eligible, and if it's more than $34,000, up to 85%.
If you're married and filing jointly and your combined income is less than $32,000, none of your benefits are eligible to be taxed. If it's between $32,000 and $44,000, up to 50% are eligible, and if it's more than $44,000, up to 85%.
The amount of your Social Security benefits eligible to be taxed is added to your other income and then taxed at your normal income tax rate.
The $23,760 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
View the "Social Security secrets" »
The Motley Fool has a disclosure policy.
Source: “AOL Money”
