Where you live in retirement can change your effective tax rate on the exact same income by several percentage points — a real, permanent difference that has nothing to do with federal tax planning and everything to do with which state collects your mail.
Only 8 States Still Tax Social Security in 2026
The states that tax at least some Social Security income in 2026 are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. The other 42 states don’t touch it at all. Even within those 8, most use income-based exemption thresholds that shield lower-income retirees entirely — Connecticut exempts single filers under $75,000 AGI and joint filers under $100,000, while Minnesota’s thresholds sit at $86,410 single / $110,780 joint for 2026. A retiree living on Social Security alone often owes nothing even in a “taxing” state.
9 States Tax No Retirement Income of Any Kind
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming impose no state income tax at all, which means zero state tax on 401(k) distributions, IRA withdrawals, pensions, or Social Security — not because retirement income is specifically exempted, but because none of these states tax any income.
The States That Exempt Retirement Income Specifically
A separate group of states does have a broader income tax but carves out most retirement income anyway. Pennsylvania has a 3.07% flat income tax but exempts essentially all pension and qualified retirement account distributions from state tax. Illinois, Iowa, and Mississippi similarly exempt most retirement income even though they tax other income normally — a real distinction from the no-income-tax states above, since these states still tax wages and other income for anyone still working there.
Why This Matters More Than People Assume
Two retirees with identical $80,000 annual withdrawals from the same type of accounts can have a meaningfully different after-tax outcome purely based on state of residence — this is a real, permanent difference every year of retirement, unlike a one-time federal tax law change. It’s a genuine factor in retirement relocation decisions, alongside cost of living and proximity to family, not just a minor detail.
Don’t Confuse This With Estate or Inheritance Tax
State income tax treatment of retirement withdrawals during your lifetime is a completely separate question from state estate or inheritance tax owed by your heirs after you die — a state with no income tax on retirement withdrawals can still have its own estate tax with a much lower exemption threshold than the federal one.
The Bottom Line
Before relocating in retirement, check your destination state’s specific treatment of Social Security, pensions, and retirement account withdrawals separately — they aren’t always taxed the same way even within a single state’s tax code, and the “no income tax” states aren’t the only ones that meaningfully help retirees.
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