Retirement Taxes: How All 50 States Tax Retirees in 2026
Key Takeaways Nine states charge no income tax at all, making retirement income completely tax-free at the state level — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Only eight states still tax Social Security benefits in 2026 — Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont — […]
Nine states charge no income tax at all, making retirement income completely tax-free at the state level — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Only eight states still tax Social Security benefits in 2026 — Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont — down from nine after West Virginia completed its phase-out.
Michigan completed its retirement income tax phase-out in 2026, joining Illinois, Iowa, Mississippi, and Pennsylvania as states that tax wages but fully exempt pensions, 401(k)s, and IRAs.
Choosing the right state to retire in can save — or cost — thousands of dollars each year. State tax policies on retirement income vary widely, from states with zero income tax to states that tax nearly every dollar of pension, Social Security, and 401(k) withdrawals. For retirees planning their next chapter in 2026, understanding these differences is more important than ever.
The retirement tax landscape keeps shifting. West Virginia completed its multi-year phase-out of Social Security taxes in 2026. Michigan now exempts most retirement income. Ohio moved to a flat 2.75% rate. Meanwhile, the federal estate tax exemption jumped to $15 million per person under the latest legislation, reshaping estate planning strategies for wealthier retirees.
This guide breaks down how all 50 states treat retirees when it comes to income taxes, Social Security, pensions, retirement account withdrawals, property taxes, sales taxes, and estate or inheritance taxes. Whether you are already retired or planning years ahead, this state-by-state breakdown will help you make a well-informed decision about where to spend your retirement years.
Retirement Taxes: How All 50 States Tax Retirees in 2026
Before diving into each state, it helps to understand the five main tax categories that affect retirees: state income tax (including how a state treats pensions, 401(k)/IRA withdrawals, and Social Security benefits), sales tax, property tax, and estate or inheritance tax. A state that scores well in one area may fall short in another. Florida charges no income tax but has a 6% sales tax. New Hampshire has no income or sales tax but has relatively high property taxes. The full picture matters.
The classifications below reflect tax laws in effect for the 2026 tax year, based on legislation enacted through March 2026. Tax laws change frequently, so retirees should verify details with a qualified tax professional or their state’s revenue department before making major decisions.
States With No Income Tax: The Cleanest Path to Tax-Free Retirement
Nine states impose no state income tax whatsoever, meaning all retirement income — Social Security, pensions, 401(k) and IRA distributions, annuities, and investment gains — is completely free of state income tax.
NINE STATES WITH ZERO INCOME TAX (2026)
AlaskaNO TAXNo income, sales, or estate tax. Residents receive an annual Permanent Fund Dividend (approximately $1,700 in 2025). Property taxes vary by borough. One of the lowest overall tax burdens in the country.
FloridaNO TAXNo income or estate tax. The 6% state sales tax (up to 8.5% with local surtaxes) and moderate property taxes offset the savings. The most popular retirement destination in the U.S.
NevadaNO TAXNo income or estate tax. Sales tax is 6.85% (up to 8.375% locally). No inheritance tax. Property tax rates are among the lower in the West.
New HampshireNO TAXEliminated its interest and dividends tax as of January 1, 2025, achieving full zero-income-tax status. No sales tax. No estate tax. Property taxes are among the highest in the nation.
South DakotaNO TAXNo income, estate, or inheritance tax. Sales tax is 4.2% (can rise with local additions). Property taxes are moderate. Consistently ranks among the most tax-friendly states.
TennesseeNO TAXFully eliminated its Hall Income Tax (on interest/dividends) in 2021. No estate tax. Sales tax is among the highest at 7% (up to 9.75% locally).
TexasNO TAXNo income or estate tax. Sales tax is 6.25% (up to 8.25% locally). Property taxes are among the highest in the nation, which partially offsets the income tax savings for homeowners.
WashingtonNO TAXNo traditional income tax, but imposes a 7% capital gains tax on gains exceeding $262,000. Has a state estate tax (threshold ~$2.193 million). Sales tax is 6.5% (up to 10.4% locally).
WyomingNO TAXNo income, estate, or inheritance tax. Sales tax is 4% (up to 6% locally). Low property taxes. Consistently ranked the most tax-friendly state for retirees overall.
Analyst Note
While zero-income-tax states look ideal on paper, retirees should weigh the full picture. Texas and New Hampshire have property tax rates that can exceed 1.6% of home value annually — potentially costing more than a moderate income tax in a lower-property-tax state. Washington’s estate tax can also catch retirees off guard if they have accumulated significant assets.
States That Tax Income but Fully Exempt Retirement Income
A second group of states charges income tax on wages and business income but fully exempts most or all retirement income. These states offer a powerful advantage for retirees while still collecting revenue from working residents.
STATES THAT FULLY EXEMPT RETIREMENT INCOME (2026)
Illinois4.95% FLATAll retirement income is exempt — Social Security, pensions, 401(k)s, IRAs, and annuities. The 4.95% flat tax applies only to wages and business income. Sales tax is 6.25% (up to 11% locally). Property taxes are among the highest in the nation. For more details, see our Illinois tax guide.
Iowa3.8% FLATAll retirement income is exempt for residents age 55 and older, including pensions, IRAs, and 401(k) withdrawals. Social Security is also exempt. Iowa moved to a flat 3.8% rate in 2026. Sales tax is 6%.
Michigan4.25% FLATNew for 2026: Michigan completed its phase-out of retirement income taxation. Most pensions, 401(k) distributions, IRA withdrawals, and annuity income are now fully exempt. Social Security was already exempt. See our Michigan tax breakdown for background on this change.
Mississippi4.0% FLATRetirement income received after age 59½ is fully exempt, including pensions, annuities, IRAs, and 401(k) withdrawals. Social Security is exempt. Early withdrawals before 59½ may be taxable. Sales tax is 7%.
Pennsylvania3.07% FLATMost retirement income is exempt after age 59½, including pensions, 401(k)s, IRAs, and Social Security. Pennsylvania’s 3.07% flat rate is among the lowest in the nation. No local income tax on retirement income in most municipalities.
States That Partially Exempt Retirement Income
The majority of states fall into a middle category — they tax some retirement income but offer various exemptions, deductions, or credits that reduce the burden. These exemptions typically depend on the type of income (pension vs. 401(k) vs. Social Security), your age, and your income level.
States That Partially Exempt Retirement Income
The majority of states fall into a middle category — they tax some retirement income but offer various exemptions, deductions, or credits that reduce the burden. These exemptions typically depend on the type of income (pension vs. 401(k) vs. Social Security), your age, and your income level.
Estate TaxBoth estate ($5M) and inheritance (10% on non-lineal heirs) — one of only two states with both
County-level income taxes add to the burden. The dual estate + inheritance tax is unique and can be costly.
Massachusetts5% Flat + 4% surtax over $1M
Social SecurityExempt
PensionsPartial Government pensions (federal/state/military) exempt. Private pensions taxable
401(k) / IRATaxable
Sales Tax6.25%
Property TaxHigh — ~1.04% effective rate
Estate TaxYes — $2M exemption, one of the lowest thresholds in the nation
Expensive for retirees with significant private retirement income or estates above $2M.
Minnesota5.35% – 9.85% Graduated
Social SecurityPartial Exempt if AGI < $84,490 (single) / $108,320 (joint)
PensionsTaxable As regular income
401(k) / IRATaxable
Sales Tax6.875% (up to 8.875% locally)
Property TaxHigh — ~0.98% effective rate
Estate TaxYes — $3M exemption
One of the least tax-friendly states for retirees: high rates, Social Security taxation, and a state estate tax.
Important Notice
Only eight states still tax Social Security benefits in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. However, all of them offer income-based exemptions or deductions that shield lower- and middle-income retirees. If your income is below the exemption threshold in any of these states, you may owe nothing on Social Security.
Missouri2.0% – 4.7% Graduated
Social SecurityExempt Fully eliminated as of 2024
PensionsPartial Public pensions fully exempt. Private pensions partially exempt by AGI
Credits help lower-income retirees, but higher earners face full taxation on nearly all retirement income.
Vermont3.35% – 8.75% Graduated
Social SecurityPartial Exempt if AGI < $50K (single) / $65K (joint). Phases out at $60K/$75K
PensionsTaxable
401(k) / IRATaxable
Sales Tax6% (up to 7% locally)
Property TaxHigh — ~1.73% effective rate
Estate TaxYes — $5M exemption
One of the most expensive states for retirees: high income tax, Social Security taxation, high property taxes, and a state estate tax.
Virginia2% – 5.75% Graduated
Social SecurityExempt
PensionsPartial Age 65+: up to $12,000 deduction (phases out at higher AGI)
401(k) / IRAPartial Same deduction
Sales Tax5.3% (up to 7% in Northern Virginia)
Property TaxModerate — ~0.74% effective rate
Estate TaxNone
Moderately tax-friendly — the $12K retirement deduction helps lower-income retirees.
West Virginia2.36% – 5.12% Graduated
Social SecurityExemptNew for 2026 — 100% exempt after multi-year phase-out
PensionsPartial $2,000 deduction for married couples
401(k) / IRATaxable
Sales Tax6% (up to 7% locally)
Property TaxLow — ~0.49% effective rate
Estate TaxNone
SS phase-out is a major win for retirees. Combined with low property taxes, West Virginia is becoming more attractive.
Wisconsin3.5% – 7.65% Graduated
Social SecurityExempt
PensionsPartial Government pensions exempt (65+). Private pensions taxable
401(k) / IRATaxable
Sales Tax5% (up to 5.6% locally)
Property TaxHigh — ~1.51% effective rate
Estate TaxNone
SS and government pensions are exempt, but private retirement income faces high rates and property taxes are steep.
Key Changes for Retirees in 2026
Several states made significant changes that took effect in 2026 or that are reshaping the retirement tax landscape right now.
MAJOR 2026 TAX CHANGES AFFECTING RETIREES
✓West Virginia: Completed its Social Security tax phase-out — benefits are 100% exempt starting with tax year 2026. Only eight states now tax Social Security.
✓Michigan: Phased out state income tax on most retirement and pension benefits, including defined-benefit pensions, IRA distributions, 401(k) withdrawals, and annuity income.
→Ohio: Moved to a flat 2.75% income tax rate for income over $26,050 (income below that threshold is tax-free), simplifying the tax structure for retirees.
→Federal estate tax: Exemption increased to $15 million per person ($30 million for married couples) under the latest legislation, significantly raising the threshold for estate tax liability.
→Iowa: Now at a 3.8% flat rate with full retirement income exemption for those 55+, completing its multi-year tax reform.
States With Estate and Inheritance Taxes: A Hidden Cost
Estate and inheritance taxes are often overlooked in retirement planning, but they can significantly affect how much wealth you pass to heirs. While the federal estate tax now exempts up to $15 million per person, several states impose their own estate or inheritance taxes with much lower thresholds.
States with estate taxes: Connecticut, Hawaii, Illinois ($4 million exemption), Maine ($6.8 million), Maryland ($5 million), Massachusetts ($2 million — one of the lowest), Minnesota ($3 million), New York ($7.35 million, with a “cliff”), Oregon ($1 million — the lowest), Rhode Island ($1.77 million), Vermont ($5 million), Washington ($2.193 million), and the District of Columbia.
States with inheritance taxes: Iowa (being phased out), Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is unique in imposing both an estate tax and an inheritance tax.
Retirees with estates above these state thresholds should factor these taxes into their relocation decisions. A move from Oregon (with its $1 million threshold) to a state with no estate tax could save heirs hundreds of thousands of dollars.
Property Tax Considerations for Retirees
Property taxes can be a retiree’s largest ongoing expense, especially in states with no income tax that rely on property taxes for revenue. Rates vary enormously: New Jersey averages around 2.21% of home value, while Hawaii averages just 0.27%.
Many states offer senior-specific property tax relief. Texas, Illinois, and Ohio provide valuable senior homestead exemptions. Some states freeze assessed values at age 65, preventing tax increases even as home values rise. Income-qualified programs exist in most states, with thresholds ranging from about $33,800 (North Carolina) to $150,000 (New Jersey). Social Security income is excluded from these calculations in many states.
Recommended Action
Before choosing a retirement state based on income tax savings alone, calculate your total expected property tax bill. A zero-income-tax state like Texas (average property tax ~1.60%) could cost more in property taxes than a moderate-income-tax state like Delaware (average ~0.53% property tax, no sales tax) if you own a home valued above $300,000.
The 10 Most Tax-Friendly States for Retirees in 2026
Taking into account income tax, Social Security treatment, retirement income exemptions, property taxes, sales taxes, and estate taxes, these 10 states stand out as the most tax-friendly for retirees in 2026:
Wyoming — No income tax, no estate tax, low property taxes, low sales tax. The overall lightest tax burden for retirees.
South Dakota — No income tax, no estate or inheritance tax, moderate property and sales taxes.
Florida — No income tax, no estate tax. Higher sales and property taxes are offset by no taxation of any retirement income.
Alaska — No income tax, no sales tax, no estate tax. The Permanent Fund Dividend adds income. Remote location and high cost of living are the tradeoffs.
Nevada — No income tax, no estate tax. Low property taxes. Higher sales tax is the main downside.
Pennsylvania — Low 3.07% flat rate with most retirement income exempt after age 59½. No sales tax on most essentials.
Mississippi — Full retirement income exemption after 59½, low property taxes, no estate tax. Sales tax of 7% is the main drawback.
Georgia — Generous $65,000 exclusion for those 65+, no Social Security tax, no estate tax, moderate property taxes.
Kentucky — Low 3.5% flat rate with $31,110 pension exclusion, no Social Security tax, no estate tax.
New Hampshire — Fully zero-income-tax as of 2025, no sales tax, no estate tax. High property taxes are the main negative.
The 10 Least Tax-Friendly States for Retirees in 2026
These states impose the heaviest combined tax burdens on retirees through some combination of high income taxes, Social Security taxation, limited retirement exemptions, high property taxes, and state estate taxes:
Vermont — High income tax (up to 8.75%), taxes Social Security for moderate earners, high property taxes, and a state estate tax.
Minnesota — Top rate of 9.85%, taxes Social Security, high property taxes, and a $3 million estate tax threshold.
Connecticut — Up to 6.99% income tax, taxes Social Security for higher earners, high property taxes, and estate tax.
Rhode Island — Up to 5.99% income tax, taxes Social Security, high property taxes, and a low estate tax threshold.
New York — Up to 10.9% (higher with NYC tax), very high property taxes, and estate tax with a cliff provision.
California — Nation’s highest income tax (13.3%), fully taxes pensions and retirement accounts (but exempts Social Security).
Oregon — Up to 9.9% income tax and the nation’s lowest estate tax threshold ($1 million), though no sales tax.
Massachusetts — 5% income tax plus 4% surtax on millionaires, $2 million estate tax threshold, high property taxes.
New Jersey — Nation’s highest property taxes (2.21% average), up to 10.75% income tax, and inheritance tax.
Nebraska — Taxes most retirement income, has high property taxes, and one of six states with an inheritance tax.
Frequently Asked Questions
How many states tax Social Security benefits in 2026?
Eight states tax Social Security benefits in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. This is down from nine in 2025 after West Virginia completed its phase-out. All eight states offer income-based exemptions, so lower- and middle-income retirees may owe little or nothing on their Social Security.
Which states don’t tax any retirement income at all?
Nine states have no income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming), meaning no retirement income is taxed. Additionally, Illinois, Iowa, Michigan (new for 2026), Mississippi, and Pennsylvania tax wages but exempt virtually all retirement income including pensions, Social Security, and 401(k)/IRA distributions.
What changed for Michigan retirees in 2026?
Michigan completed its multi-year phase-out of retirement income taxation. As of tax year 2026, most retirement and pension benefits are exempt from the state’s 4.25% income tax, including defined-benefit pensions, IRA distributions, 401(k) withdrawals, and annuity income. Social Security was already exempt.
Is it better to retire in a state with no income tax or one with retirement income exemptions?
It depends on your complete financial picture. A no-income-tax state like Texas may charge higher property taxes than a state like Pennsylvania, which has a 3.07% income tax but exempts retirement income and has lower property taxes. Calculate your total expected tax burden — income tax, property tax, sales tax, and any estate tax — rather than looking at any single factor.
What is the federal estate tax exemption for 2026?
The federal estate tax exemption is $15 million per person for 2026 ($30 million for married couples), increased under the latest legislation. However, several states impose their own estate taxes with much lower thresholds — as low as $1 million in Oregon and $2 million in Massachusetts.
Do any states tax 401(k) withdrawals differently from pension income?
Yes. Some states exempt pension income (especially government pensions) while fully taxing 401(k) and IRA withdrawals. For example, Hawaii exempts employer-funded pension distributions but taxes 401(k)/IRA income. New York exempts government pensions but offers only a $20,000 exclusion for private retirement account withdrawals. Wisconsin exempts government pensions for those 65+ but taxes private 401(k) income.
How do property taxes compare for retirees across states?
Property tax rates vary dramatically. New Jersey has the highest average effective rate (about 2.21%), while Hawaii has the lowest (about 0.27%). Many states offer senior homestead exemptions, assessed value freezes at age 65, or income-qualified relief programs. Texas, Illinois, and Ohio have particularly valuable senior exemptions that can significantly reduce the burden.
Which states have no sales tax?
Five states have no statewide sales tax: Alaska (though some localities impose one), Delaware, Montana, New Hampshire, and Oregon. For retirees on fixed incomes, the absence of sales tax can add up to meaningful savings, especially on major purchases like vehicles and home goods. For more tax strategies, see our guide to 2026 U.S. business deductions.
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