Retirement Tax Guide by State (2026)

States that do not tax retirement income

A handful of states levy no income tax of any kind, which means Social Security, pension checks, and IRA/401(k) distributions all arrive untouched at the state level. Two additional states — Illinois, Mississippi, and Pennsylvania — do have a state income tax but specifically exempt most retirement income.

Social Security taxation, by state

The vast majority of states leave Social Security benefits alone. Only a small number tax them in full or in part — and several of those are phasing the tax out entirely.

Full state-by-state table

The table below shows the top state income-tax bracket, how Social Security is treated, and the general rules for pensions and retirement-account withdrawals. Rules change — always confirm with a CPA or your state revenue agency before relocating.

The 10 most tax-friendly states for retirees

Combining no income tax (or full retirement-income exemptions) with moderate property and sales tax, these states consistently rank at the top for retirees in 2026:

1. Florida — no income tax, no estate tax, retirement-friendly homestead protections.
2. Tennessee — no income tax, low property tax, moderate sales tax.
3. Wyoming — no income tax and among the lowest overall tax burdens in the country.
4. Nevada — no income tax; sales tax is moderate but property tax is low.
5. Mississippi — exempts Social Security, pensions, and qualified retirement withdrawals.
6. Pennsylvania — exempts Social Security, pensions, and qualified retirement withdrawals after age 59½.
7. Alabama — Social Security and most pensions are exempt; low cost of living.
8. South Dakota — no income tax, low overall tax burden.
9. Alaska — no income tax and an annual Permanent Fund Dividend.
10. Georgia — up to $65,000 retirement-income exclusion for residents 65+.

Don't forget property tax, sales tax, and estate tax

Income tax is only part of the picture. Several "no income tax" states (Texas, New Hampshire) have above-average property taxes. A handful of states still levy estate or inheritance taxes at relatively low thresholds — including Massachusetts, Oregon, Washington, Maryland, and New Jersey. When comparing locations, look at the combined tax burden: income + property + sales + estate/inheritance.

How home equity fits into your retirement tax picture

For most U.S. homeowners 62+, the largest single asset is the home itself — and how you access that equity has direct tax consequences. A few rules of thumb:

• Selling and downsizing can trigger capital gains above the $250K / $500K exclusion, plus state capital-gains tax in states like Washington.
• Withdrawing from a traditional 401(k) or IRA is taxed as ordinary income at both federal and (in most states) state level — and can push you into a higher Medicare IRMAA bracket.
• Reverse mortgage proceeds (HECM or jumbo proprietary) are loan advances, not income. They are generally not taxable at the federal level, do not count as income for most state purposes, and typically do not affect Social Security or Medicare eligibility.

That tax treatment is one reason many financial planners use a reverse mortgage as a "buffer asset" — drawing from home equity in down-market years instead of selling investments at a loss or triggering an unnecessary tax bill.