Best States for Retirees Taxes in 2026

Top 10 Most Tax Friendly States for Retirees in 2026

Quick answer: Wyoming, Nevada, and Florida top the list of the best states for retirement taxes in 2026 because they levy no income tax at all and keep property taxes low. Texas and Tennessee also charge no income tax but hit back with high property and sales taxes, while Pennsylvania, Illinois, and Mississippi made the top 10 because they fully exempt qualified retirement income even though they have an income tax.

Choosing where to retire is one of the biggest tax decisions you will ever make. Unlike workers, retirees cannot offset high state taxes with higher salaries — every dollar of state tax comes directly out of fixed pension, Social Security, and savings income. That is why the best states for retirees taxes are not just the states with no income tax, but the states where your specific mix of retirement income — pension, 401(k), IRA withdrawals, and Social Security — faces the lowest total burden once property, sales, and estate taxes are counted.

The math behind this ranking is simple: 9 no-income-tax states + 4 full-exclusion states (IL, MS, PA, IA-55+) = 13 states where retirement income faces $0 state tax. We ranked the top 10 of that group by property-tax burden and estate taxes, and ranked the worst states by top marginal rates plus Social Security taxation.

Honorable mentions: Iowa (exempts retirement income at age 55+ for qualifying residents), New Hampshire (no income or sales tax, but property tax near 1.86% — the 4th highest in the nation), and Washington (wages and retirement income face $0 tax, but a 7% capital-gains tax above $278,000 plus an estate tax apply — see the footnote below).

States With No Retirement Income Tax: The 9 No-Income-Tax States

Quick answer: Nine states levy no personal income tax in 2026: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. In these states your pension, 401(k), and IRA withdrawals face $0 state income tax — but property, sales, capital-gains, and estate taxes still apply.

"No income tax" is the strongest possible starting position for a retiree, because it automatically zeroes out the state tax on every common retirement income stream: pensions, 401(k) distributions, IRA withdrawals, and Social Security. As VisionRetirement summarized in 2026: "The short list: In 2026, 13 U.S. states won't tax your pension, 401(k), or IRA income — the nine states with no income tax at all plus Illinois, Mississippi, Pennsylvania, and Iowa."

But no-income-tax does not mean no-tax. Each of the nine funds its government differently, and the replacement taxes land hardest on exactly the things retirees buy and own:

• Alaska — $0 income tax, plus residents receive an annual Permanent Fund Dividend. The tradeoff is a median property tax bill near $4,004 and a high cost of living driven by remoteness.
• Florida — $0 income tax, and tourism taxes subsidize the resident burden. Homeowners insurance and housing costs, not income tax, are the real budget risk here.
• Nevada — $0 income tax with a median property tax of only ~$1,937 (about 0.49% effective) and no estate tax, which is why it ranks #2.
• New Hampshire — $0 income tax after its interest-and-dividends tax ended in January 2025. The catch: property tax near 1.86%, the 4th highest in the country, which stings homeowners living on fixed income.
• South Dakota — $0 income tax with a consistently low total tax burden and no estate complications. Quiet, cheap, and retiree-friendly.
• Tennessee — $0 income tax, but a combined sales tax near 9.55%, the 2nd-highest in the nation. Retirees who spend heavily will feel it on every purchase.
• Texas — $0 income tax, but property tax near 1.60%, the 6th-highest in the nation. For a homeowner with a valuable house, Texas property tax can erase much of the income-tax saving.
• Washington — $0 on wages and retirement income, with an important caveat: long-term capital gains above $278,000 face a 7% tax, a gross-receipts B&O tax applies to business income, and an estate tax applies above a roughly $3 million exemption. That is why some "8 states" lists exclude Washington — but for pension, Social Security, and IRA income, the $0 treatment holds, so the 9-state framing is correct for retirees.
• Wyoming — $0 income tax with a median property tax near $1,640, the lowest in the group, and no estate or inheritance tax. The complete package is why Wyoming is our #1 pick.

Social Security Tax by State: Only 8 States Still Tax Benefits

Quick answer: For the 2026 tax year, if you live in Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah or Vermont, some portion of your benefits may be subject to state income taxes. The other 42 states do not tax Social Security at all. (Source: AARP, "9 Things to Know About Social Security and Taxes in 2026".)

Social Security taxation is where retirees overpay from fear more than from law. Eight states levy their own taxes on Social Security benefits: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont. (Source: AARP, "Taxes on Social Security Are Based on Your Income".) Every one of them shields lower incomes with thresholds, age rules, or credits — which leads to the most important line on this page: a retiree living only on $30,000 of Social Security pays $0 state tax even in these 8 states — tax only kicks in when IRA, pension, or part-time income pushes AGI above the exemption line.

The trend is clearly toward elimination. AARP confirms: "Kansas, Missouri and Nebraska stopped taxing benefits in 2024, and West Virginia did so in 2026." West Virginia's phase-out completed in 2026, so it is now a non-taxing state. If you are planning a move years ahead, bet on fewer taxing states, not more. To model how your benefits interact with other income, use our Social Security calculator before deciding.

One warning that surprises many retirees: required minimum distributions count toward the AGI that determines whether your Social Security gets taxed. Once RMDs begin, they can push your AGI over a state's exemption line even if your lifestyle has not changed. Run the numbers with our RMD calculator so RMDs do not ambush your Social Security exemption.

Pension Income Tax by State: The 4 All-Stars That Exempt Retirement Income

Quick answer: Illinois, Mississippi, Pennsylvania, and Iowa charge a flat income tax on wages but fully exempt qualified retirement income — Social Security, pensions, 401(k), and IRA distributions — making them honorary members of the no-tax club for retirees.

These four states are the page's hidden gems, because most "best states" lists stop at the nine no-income-tax states and miss them. If you earn a pension or draw heavily from a 401(k), your effective state rate in these states is $0 on that income — the flat rate only touches other income like part-time wages or business profits.

• Illinois (4.95% flat) — the most generous exclusion in America: Social Security, pensions, and 401(k)/IRA distributions are fully exempt. Only non-retirement income faces the 4.95% rate. Check the wage side with our Illinois paycheck calculator.
• Mississippi (4.0% flat) — qualified retirement income is exempt once you reach age 59½, and the flat rate itself is falling toward elimination, so the state keeps getting friendlier.
• Pennsylvania (3.07% flat) — at retirement age, qualified plans, 401(k)s, and IRAs are exempt; note that early withdrawals can still be taxable. See the wage picture with our Pennsylvania paycheck calculator.
• Iowa (3.8% flat) — exempts qualifying retirement income at age 55 and older, including disability and survivor cases. Younger early retirees should verify eligibility before counting on it.

The 5 Worst States for Retirees Taxes in 2026

Quick answer: California, New York, New Jersey, Vermont, and Minnesota are the worst states for retirees on taxes — high top marginal rates stacked on taxable pensions and IRA withdrawals, with Vermont and Minnesota adding a Social Security tax on top.

Knowing where not to retire matters as much as knowing where to go, especially if your retirement income comes mostly from a pension or pre-tax savings rather than Social Security. These five share one trait: they tax the income streams retirees actually live on.

A closer look at each. California has the highest top marginal rate in the nation at 13.3%, applying above $1 million of taxable income for single filers (Tax Foundation 2026 data via VisualCapitalist), followed by Hawaii at 11% and New York at 10.9%. California exempts Social Security and military retirement pay, but pensions, 401(k)s, and IRA distributions are fully taxable — and Kiplinger ranks California among the worst states to retire when it comes to taxes. New York taxes most retirement income; only taxpayers at least 59½ years old can deduct up to $20,000 of qualified retirement income (Kiplinger) — everything above that is taxable at rates up to 10.9%. New Jersey taxes most types of retirement income, though most retirees age 62 and older can deduct a significant portion of taxable income, with an extra exclusion at 65 (Kiplinger). Vermont is uniquely painful for middle-income retirees: it taxes Social Security and layers 3–9% brackets onto IRA income, so a retiree with $30,000 of Social Security plus $40,000 of IRA withdrawals can pay roughly $30,000–$50,000 extra over 20 years versus a no-tax state. Minnesota combines a 9.85% top rate with Social Security taxation — the double hit that lands it at #5.

The Hidden Taxes: Property, Sales, and Estate Taxes

Quick answer: No state is fully tax-free. States without income tax collect through property tax (Texas ~1.60%, New Hampshire ~1.86%), sales tax (Tennessee ~9.55%), and estate or capital-gains taxes (Washington) — always compare the total burden, not just the income-tax rate.

Income-tax rankings tell barely half the story for retirees, because retirees own homes, spend savings, and leave estates. A $0 income-tax state can still be expensive. Texas homeowners pay property tax near 1.60%, the 6th-highest rate in the country — on a $400,000 home that is about $6,400 a year, every year, straight out of retirement savings. New Hampshire's 1.86% property rate (4th highest) works the same way. Tennessee's 9.55% combined sales rate (2nd-highest) taxes every dollar you spend from your nest egg.

Estate and inheritance taxes are the second ambush. Washington taxes estates above roughly $3 million, and several high-tax states set their exemptions well below the federal level. If leaving an inheritance matters to you, a state with no estate tax — Wyoming, Nevada, Florida, Texas, Tennessee, and South Dakota among our top 10 — protects your heirs in a way no income-tax cut can match.

The practical move: compare your own situation state by state instead of trusting a single ranking. Model your working years with a state-specific tool — for example our Ohio paycheck calculator or Georgia paycheck calculator — then layer the property, sales, and estate numbers from this guide on top. A renter with modest spending may do fine in Tennessee; a homeowner with a large estate may do far better in Wyoming or Nevada.

Estimate Your Retiree Taxes With Our Free Calculators

Rankings get you to a shortlist; calculators get you to a decision. Your required minimum distributions can push Social Security into taxable territory, your refund depends on withholding across all income streams, and federal tax applies no matter which state you choose — up to 85% of Social Security benefits may be federally taxable once combined income crosses $25,000 single or $32,000 joint. Run three checks before you move: project your withdrawals with our RMD calculator, estimate your retiree refund with our retiree tax refund calculator, and confirm your benefit math with our Social Security calculator.

Sources

• AARP — "9 Things to Know About Social Security and Taxes in 2026" (8-state taxing list: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont).
• AARP — "Taxes on Social Security Are Based on Your Income" ("Eight states levy their own taxes on Social Security benefits…"; "Kansas, Missouri and Nebraska stopped taxing benefits in 2024, and West Virginia did so in 2026.").
• Kiplinger — "Retirement Taxes: How All 50 States Tax Retirees" (California worst-state ranking; $20,000 NY exclusion; NJ senior deductions).
• Tax Foundation 2026 data via VisualCapitalist, 2026-09-23 (13.3% CA top rate; Hawaii 11%; New York 10.9%).
• VisionRetirement, 2026-08-27 ("In 2026, 13 U.S. states won't tax your pension, 401(k), or IRA income…").
• State Departments of Revenue (thresholds and exclusion rules verified per state).