13 States That Don’t Tax Retirement Income in 2025
When it comes to planning for retirement, every dollar counts. While you can’t completely avoid taxes, choosing the right state to retire in can make a big difference. Many retirees are surprised to learn that state tax laws vary widely across the U.S., especially when it comes to retirement income.
That’s why understanding states that don’t tax retirement income is so important. Moving to one of these tax-friendly states could save you thousands of dollars each year, helping your retirement savings last longer.
Why Taxes Matter in Retirement
There’s an old saying: “The only two certainties in life are death and taxes.” But in retirement, when paychecks stop and you’re living on savings, pensions, or Social Security, taxes can have an even bigger impact.
The average American household saves only about $200,000 by age 65. Using the 4% withdrawal rule, that’s just $8,000 a year. For millions of retirees, Social Security is a financial lifeline. This makes it essential to know how different states treat retirement income.
Do States Tax Social Security Benefits?
Most states don’t tax Social Security benefits. Only a handful of states—such as Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia—still do. West Virginia, however, is phasing out its tax on Social Security after the 2025 tax year.
At the federal level, depending on your income, you may still owe taxes on your Social Security. But at least in the majority of states, your monthly check won’t be reduced by additional state income tax.
States That Don’t Tax Pension Income
For retirees who still have traditional pension plans, there are 15 states that don’t tax pension income. However, some may still tax withdrawals from 401(k)s or IRAs.
Here’s a breakdown:
| State | Pension Tax Status |
|---|---|
| Alabama | Pension exempt (other distributions may be taxed) |
| Alaska | No state income tax |
| Florida | No state income tax |
| Hawaii | Pension exempt (other distributions may be taxed) |
| Illinois | No tax on retirement income |
| Iowa | Pension exempt (ages 55+) |
| Mississippi | No tax on retirement income |
| Nevada | No state income tax |
| New Hampshire | No state income tax (effective 2025) |
| Pennsylvania | No tax on retirement income |
| South Dakota | No state income tax |
| Tennessee | No state income tax |
| Texas | No state income tax |
| Washington | No income tax, but capital gains tax applies |
| Wyoming | No state income tax |
The 13 States That Don’t Tax Retirement Income at All
Finally, let’s look at the 13 states that don’t tax retirement income in 2025. If you’re searching for tax-friendly destinations, these states stand out:
States With Zero Income Tax (Retirement Friendly)
- Alaska
- Florida
- Nevada
- New Hampshire (from 2025 onward)
- South Dakota
- Tennessee
- Texas
- Wyoming
- Washington (with exception of capital gains tax over $270,000)
States That Exempt Retirement Income (Social Security + Accounts)
- Illinois
- Iowa (55+)
- Mississippi
- Pennsylvania
These are the 13 states that don’t tax retirement income, meaning retirees can keep more of their Social Security, pensions, and 401(k)/IRA withdrawals.
Is It Only About Taxes?
While moving to a tax-free state can save money, taxes aren’t the only factor in choosing where to retire. Cost of living, healthcare access, housing prices, and lifestyle are just as important.
For example:
- Alaska has no income tax, but higher living costs.
- Florida offers tax savings and warm weather, but higher insurance costs due to hurricanes.
- Pennsylvania doesn’t tax retirement income but has local taxes that can vary.
It’s important to weigh the full picture before making your retirement decision.
Also More: How to File for a Tax Extension Online in 2025 – Step-by-Step IRS Guide
Knowing which states that don’t tax retirement income can help you stretch your retirement savings further. Whether you’re considering Florida’s sunny beaches, Texas’s growing cities, or Pennsylvania’s mix of urban and rural living, choosing wisely could mean thousands of extra dollars in your pocket every year.
When planning your retirement, combine tax savings with lifestyle factors to find the perfect balance. After all, retirement should be about enjoying life—not stressing about taxes.