As Americans plan 2026 retirement withdrawals, 13 states are widely treated as states that “do not tax 401(k) and other qualified retirement distributions.” That matters most if you expect large withdrawals, are changing jobs, or are moving across state lines in 2026.
For immigrants and visa holders, the stakes can be higher. Many people shift states when they change employers, adjust status, or retire and return abroad. Your state of residence when you receive a distribution often determines state tax. Federal tax rules remain the same nationwide.
The headline development is New Hampshire’s status change. New Hampshire eliminated its tax on interest and dividends starting with the 2025 tax year. As a result, it is now treated in many current guides as a no-income-tax state for retirement distributions. If you were avoiding New Hampshire because of its interest and dividend tax, the 2025 repeal changes the math for 2026 planning.
The 13 states in 2026 lists
These states generally fall into two buckets: states with no state individual income tax, and states that do have an income tax but exempt qualified retirement income.
| Category | States | What it usually means for 401(k)/IRA withdrawals in 2026 |
|---|---|---|
| No state individual income tax | Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming | No state income tax applies to retirement distributions |
| Income tax state, but exempts qualified retirement income | Illinois, Iowa, Mississippi, Pennsylvania | State income tax exists, but qualified retirement distributions are exempt under state rules |
This list concerns state income tax only. It does not change your federal income tax rules, nor does it cover local/city taxes.
⚠️ Warning: State rules can change. Some states have other taxes, too. For example, Washington has a state capital gains tax with exemptions.
Why this matters for tax year 2025 (returns filed in 2026)
Most people think about retirement taxes when they retire. In practice, large tax bills often arrive earlier. Common triggers include:
- Leaving the U.S. and cashing out a 401(k)
- Rolling over a plan after switching employers
- Taking a lump-sum distribution after a layoff
- Starting Required Minimum Distributions later in life
If you will receive a distribution in calendar year 2026, it generally appears on your 2026 federal return (filed in 2027). Still, late-2025 moves and residency choices can shape your 2026 state tax posture.
For tax year 2025 (returns filed in 2026), remember that state decisions not to tax retirement payouts do not remove federal reporting obligations.
For tax year 2025, file federal returns by April 15, 2026 (extension to October 15, 2026 possible). Also keep all Form 1099-R and withholding statements to avoid missing documents during audits.
IRS reporting basics
The IRS reporting backbone is the same for everyone:
- Form 1099-R — reports distributions from pensions, annuities, IRAs, and retirement plans.
- Form 1040 — resident aliens report taxable distributions here.
- Form 1040-NR — nonresident aliens report U.S.-source income and withholding, when applicable.
Useful IRS sources:
– Publication 519 (U.S. Tax Guide for Aliens) — see Publication 519 (U.S. Tax Guide for Aliens)
– IRS forms hub — IRS forms hub
Immigrant and visa-holder issues that can change the result
Your visa status does not decide whether a state taxes you. State residency and domicile rules do. However, immigration timelines often create cross-border tax friction. Common patterns:
1) F-1 and J-1 students who become residents for tax
– F-1 and J-1 holders are often exempt from the Substantial Presence Test for a period, under rules in Publication 519.
– Once you become a resident alien for federal tax, your worldwide income becomes reportable. State rules vary.
2) H-1B and L-1 workers moving for jobs
– H-1B and L-1 holders often become resident aliens under the Substantial Presence Test.
– A move from a high-tax state to a no-income-tax state can materially change your net retirement withdrawal.
3) Green card holders who retire abroad
– Green card holders generally meet the Green Card Test and remain U.S. tax residents until status ends for tax purposes.
– Federal rules continue even if you move; state residency can be sticky.
💡 Tax Tip: If you plan a large distribution in 2026, consider whether your 2026 state residency will be clear. Keep a paper trail of your move.
Federal withholding and treaty issues still apply
Even in states that do not impose state income tax, the IRS can still tax distributions. Nonresident aliens may face federal withholding on certain U.S.-source payments. Tax treaties can reduce withholding for certain pension types, depending on the treaty, but relying on a treaty position can require extra disclosure.
Helpful IRS resources:
– Publication 901 (U.S. Tax Treaties) — for treaty categories and country articles — Publication 901 (U.S. Tax Treaties)
– Publication 519 — for residency rules
Both publications and the IRS treaty guide are available at IRS forms hub.
Deadlines retirees and movers should track for tax year 2025
📅 Deadline Alert: For tax year 2025, most individuals file federal returns by April 15, 2026.
You can request an extension to October 15, 2026 using Form 4868. Any tax owed is still due by April 15.
What to do now (before you choose a state or take a distribution)
- Confirm your state rules for the withdrawal year. Verify 2026 rules before taking money out.
- Match your federal filing to your immigration status. Common mistakes involve filing Form 1040 instead of Form 1040-NR, or vice versa.
- Watch New Hampshire transitions. The 2025 repeal matters, but confirm you meet New Hampshire residency standards.
- Keep every 1099-R and withholding statement. Missing forms are a common audit trigger.
- If moving abroad, plan withholding early. Nonresident withholding can be higher without treaty paperwork.
⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.
Thirteen U.S. states offer tax-free treatment for 401(k) and retirement distributions in 2026, including New Hampshire following its recent tax repeal. For visa holders and immigrants, moving between states can significantly impact net retirement income. While state taxes vary, federal reporting requirements remain mandatory. Individuals should confirm residency status and maintain clear documentation to navigate the intersection of state laws, federal taxes, and immigration status.
