Where you retire decides how much tax you pay on the money you live on. Retirement income tax varies enormously by state: some states tax none of it, some tax all of it, and most land somewhere in between. The same pension that's tax-free in one state gets taxed in the one next door.

This guide explains the four kinds of state, how Social Security, pensions, and IRA or 401(k) money each get treated, and links to a detailed guide for all 50 states.

The Four Kinds of Retirement Income Tax State

Every state's approach to retirement income tax fits one of four molds. Knowing which one your state uses tells you most of what you need: whether your Social Security is safe, whether your pension gets a break, and whether you owe anything at all.

Type What It Means Example States
No income tax Nothing is taxed, including retirement income Florida, Texas, Nevada
Exempts all retirement income Income tax exists, but pensions, IRAs, and 401(k)s are exempt Illinois, Mississippi, Pennsylvania
Exempts Social Security, taxes the rest The common setup; senior exclusions soften the bill Georgia, most states
Taxes Social Security too The few that tax benefits, some phasing it out Montana, Utah

Type 1: No Income Tax at All

Nine states levy no personal income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If there's no income tax, there's nothing to tax your retirement income with. Social Security, pensions, IRA withdrawals, 401(k) distributions, all of it is free of state income tax.

Florida is the clearest example. The state has no personal income tax, which is barred by the Florida Constitution, so Social Security benefits, public and private pensions, IRA withdrawals, and 401(k) distributions are all free of Florida income tax. The Florida Department of Revenue confirms there's no individual income tax to collect. That's a big reason retirees flock there.

One caveat. No income tax doesn't mean no taxes. These states raise money some other way, usually through higher sales tax or property tax. Washington, for instance, taxes capital gains above a threshold even though it has no general income tax. Tennessee and New Hampshire reached this group recently by phasing out taxes they once levied on interest and dividends. Look at the whole tax picture, not just the income line.

Type 2: Income Tax, but Retirement Income Is Exempt

Some states do levy an income tax but carve retirement income out of it almost entirely. If your money comes from a pension, an IRA, or a 401(k), you pay little or nothing, even though a working neighbor pays the full rate on wages.

Illinois is the strongest example. The state taxes other income at a flat 4.95 percent, but Social Security benefits, public and private pensions, IRA withdrawals, and 401(k) distributions are all subtracted from income and exempt, with no age requirement and no dollar cap. The Illinois Department of Revenue spells out the subtraction. A retiree living entirely on those sources can owe Illinois nothing.

Mississippi and Pennsylvania work similarly, exempting most qualified retirement income. Iowa exempts retirement income for residents 55 and older. The details differ, so read your state guide, but the headline is the same: in these states, retirement money is treated far more gently than a paycheck.

Watch one boundary. These states exempt qualified retirement income, meaning money from a recognized pension, IRA, or 401(k). Income that doesn't fit the definition, such as wages from a part-time job or some annuity payments, can still be taxed at the regular rate. If you're working in retirement, sort your earned income from your retirement income, because the exemption may not cover both.

Type 3: Social Security Is Safe, the Rest Gets Taxed

This is where most states land. They don't tax Social Security, but they do tax pensions, IRAs, and 401(k) withdrawals, usually with a senior exclusion or exemption that shields a chunk of it.

Georgia is a good model. Georgia doesn't tax Social Security at all. On top of that, it offers a Retirement Income Exclusion: up to $35,000 per taxpayer for those ages 62 to 64, and up to $65,000 per taxpayer for those 65 and older, covering pensions, IRA and 401(k) withdrawals, interest, and dividends. A married couple who both qualify can each claim it. Only income above the exclusion gets taxed.

The exclusion amounts and ages vary widely from state to state. Some cap the break at a few thousand dollars; others, like Georgia, shield tens of thousands. Some apply only to government pensions, others to all retirement income. The pattern holds though: Social Security is protected, and a senior exclusion reduces the tax on everything else. Your state guide has the exact figures.

Type 4: The States That Still Tax Social Security

A small group of states taxes Social Security benefits themselves. The number keeps shrinking as states phase the tax out, but a few still apply it.

Montana is one. Montana taxes Social Security benefits to the same extent they're included in your federal taxable income, and it taxes pension, IRA, and 401(k) income too. After a 2024 reform, the main break left for retirees is a $5,500 subtraction for taxpayers 65 and older, with older pension exclusions repealed. The Montana Department of Revenue administers it. Utah also taxes benefits, though it offers an income-based credit to offset them.

If you live in one of these states, the tax usually isn't on your full benefit. Most tie it to the portion of Social Security already taxed federally, and most offer an income-based break that erases it for lower-income retirees. Several states have recently dropped the tax entirely, so the list is moving. Check your state guide for the current rule, not last year's.

What Retirement Income Tax Hits: Social Security vs Pensions vs IRA and 401(k)

Within a single state, your three buckets of retirement money can be treated three different ways. Don't assume that because your pension is exempt, your IRA is too. Sort your income into these buckets and check each one.

Social Security. This is the most protected bucket. The federal government taxes part of it for higher-income retirees, but most states don't touch it at all. As covered above, only a handful tax benefits, and the Social Security Administration explains the federal side separately. State treatment is usually all-or-nothing: your state either taxes benefits or it doesn't.

Pensions. Public and private pensions are taxed unevenly. Many states exempt government pensions (state, local, military, federal) while taxing private ones, or give a larger break to public retirees. Military retirement pay gets its own exemption in a growing number of states. If your pension is your main income, the pension rule is the one that matters most.

IRA and 401(k) withdrawals. These are usually treated together as ordinary income, but a senior exclusion often covers them the way it covers pensions. A Roth IRA withdrawal you've already paid tax on is generally tax-free at both levels. Where the IRS taxes a traditional withdrawal as income, your state often does too, minus any exclusion.

The point is that one state can exempt your pension, partly tax your IRA, and ignore your Social Security all at once. A state isn't simply "retiree-friendly" or not. It's friendly to specific kinds of income. Match your actual income mix against your state's rules.

Why Retirement Income Tax Matters for Paying for Care

For a retiree on a fixed income, state tax is one of the few costs you can actually plan around. Every dollar a state doesn't take is a dollar left for housing, medicine, or care. When the cost of care enters the picture, the difference between a state that exempts your pension and one that taxes it can run into thousands of dollars a year.

It matters most when you start drawing down savings to pay for care. A large IRA or 401(k) withdrawal to cover a year of assisted living or in-home help can push your taxable income up sharply. In a state that taxes those distributions, part of that withdrawal goes to state tax instead of care. In a no-tax state or one with a generous exclusion, more of it reaches the bill it was meant to pay.

So weigh the tax rule against your spending plan, not in isolation. If most of your income is Social Security, almost any state treats you gently and the income tax barely moves the needle. If you're living on a sizable pension or planning to tap retirement accounts to fund care, the state rule deserves real weight. It's one input in a larger funding picture that also includes property tax, the cost of care, and what each account costs you to withdraw.

Find Your State

Pick your state below for a detailed guide to how it taxes retirement income: whether it taxes Social Security, how it treats pensions and IRA or 401(k) money, the senior exclusions, and the age and income limits.

Frequently Asked Questions

Nine states have no personal income tax, so they tax no retirement income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. A second group does have an income tax but exempts retirement income almost entirely, including Illinois, Mississippi, and Pennsylvania. In those states a retiree living on pensions, IRAs, and 401(k) money can owe little or nothing.

Most states don't. Only a handful tax Social Security benefits, and the list keeps shrinking as states phase the tax out. Montana and Utah are current examples, though both tie the tax to the amount already taxed federally and offer breaks for lower-income retirees. The other 40-plus states with an income tax exempt Social Security entirely. Check your state guide, since this is one of the most frequently changed rules.

It can. Many states treat the three buckets of retirement income differently. A state might exempt government pensions, partly tax private pensions, and tax IRA or 401(k) withdrawals as ordinary income, all at once. Some give a single senior exclusion that covers all of them up to a dollar cap. Don't assume one bucket's treatment applies to the others. Sort your income by source and check each against your state's rules.

Not on the income tax alone. A state with no income tax often makes up the revenue with higher sales or property taxes, so your total bill may not drop as much as you expect. Cost of living, proximity to family, healthcare access, and your specific income mix all matter more than the headline rate. Run your real numbers, and weigh income tax alongside property tax and the cost of care before you move.

Learn More

Find personalized help understanding how your state taxes retirement income at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

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Brevy Care Team

Expert eldercare guidance from Brevy's team of healthcare professionals and researchers.