The Best States to Retire In for Low Taxes (2026 Rankings)
The best states to retire for low taxes are Florida, Nevada, Wyoming, South Dakota, and Texas — all with no state income tax whatsoever. But income tax is only one dimension. The best overall retirement tax picture considers whether the state taxes Social Security, whether it exempts pension and retirement account income, property tax rates, sales tax, and estate taxes. This guide ranks all the key states across every dimension that matters to retirees.
The financial stakes are real: a retiree moving from California to Florida before taking $1 million in IRA withdrawals over 20 years can save $130,000–$200,000 in state taxes. Geography is one of the most powerful tax levers available in retirement.
How to Evaluate Retirement Tax Friendliness
Tax friendliness for retirees isn't just about income tax rates. Here's the complete scoring framework:
| Tax type | Why it matters for retirees |
|---|---|
| State income tax rate | Applies to 401k/IRA withdrawals, pension income, interest, dividends |
| Social Security taxation | 41 states don't tax SS; 9 still do (some partially) |
| Retirement income exemptions | Many states exempt pensions, IRAs, or military retirement up to a limit |
| Property tax | A major fixed cost for homeowners — varies 10× across states |
| Sales tax | Affects everyday spending — retirees spend more at home than commuters |
| Estate/inheritance tax | Matters for legacy planning — 12 states still impose one |
| Property tax relief programs | Many states offer senior homestead exemptions or freezes |
No state is perfect on every dimension. The best state for you depends on your specific income sources, whether you own or rent, and your spending patterns.
Build your state-specific retirement budget: Use our free retirement budget calculator to model your after-tax income in any state.
The 9 States With No State Income Tax
These states impose zero income tax — meaning 401(k) withdrawals, IRA distributions, pension income, interest, and dividends are all completely free from state income tax.
| State | Income tax | Sales tax (avg.) | Property tax (avg. effective) | Notable for retirees |
|---|---|---|---|---|
| Florida | None | 7.0% | 0.89% | No estate tax; warm climate; large retiree infrastructure |
| Nevada | None | 8.2% | 0.55% | Low property taxes; no estate tax |
| Wyoming | None | 5.4% | 0.61% | Lowest overall tax burden in US; small population |
| South Dakota | None | 6.4% | 1.14% | No estate tax; growing retiree destination |
| Texas | None | 8.2% | 1.68% | No estate tax; high property taxes offset income tax savings |
| Alaska | None | 1.8% (local only) | 1.04% | Permanent Fund Dividend; harsh climate limits appeal |
| Washington | None | 9.4% | 0.98% | Capital gains tax on high earners (>$262,000); no estate tax at state level |
| Tennessee | None | 9.5% | 0.71% | Recently eliminated income tax; rapidly growing retiree destination |
| New Hampshire | None* | 0% | 2.09% | *Taxes interest and dividends on investment income above $2,400 (phasing out); very high property taxes |
The winner among no-income-tax states for most retirees: Florida. It combines zero income tax, no estate tax, relatively low property taxes, a massive retiree infrastructure (Medicare providers, senior communities, healthcare access), and a warm climate. It's not cheap in terms of cost of living — particularly in South Florida — but the tax picture is unmatched.
Texas caveat: While Texas has no income tax, its property taxes are among the highest in the nation — averaging 1.68% effective rate. A retiree owning a $400,000 home pays approximately $6,720/year in property taxes. Seniors 65+ can freeze their school district property taxes, which helps, but Texas is less favorable than Florida for property-heavy retirees.
Best States for Social Security Tax Treatment
41 states do not tax Social Security benefits at all. Only 9 states partially or fully tax Social Security retirement income:
| State | SS tax treatment |
|---|---|
| Colorado | Exempt up to $20,000/person ($24,000 age 65+) |
| Connecticut | Exempt if AGI below $75,000 (single) / $100,000 (married) |
| Minnesota | Partially taxable; partial exemption based on income |
| Montana | Taxable, with partial deduction based on AGI |
| New Mexico | Fully exempt if income below $100,000 (single) / $150,000 (married); otherwise taxable |
| Rhode Island | Exempt if at or above full retirement age and below income limits |
| Utah | Credit equal to federal tax; reduces but doesn't eliminate SS taxation |
| Vermont | Exempt for income below $65,000 (single) / $85,000 (married); otherwise taxable |
| West Virginia | Phasing out SS taxation — 35% taxable in 2024, reducing further |
Note: Missouri and Kansas eliminated Social Security taxes in 2023 and 2024 respectively.
If Social Security is a significant portion of your retirement income, avoiding these nine states — or at least understanding their exemption thresholds — can save $1,000–$4,000/year in state taxes on SS benefits alone.
Top 10 Overall Best States for Retirement Taxes
Combining income tax rates, Social Security treatment, retirement income exemptions, and property taxes:
1. Florida ⭐⭐⭐⭐⭐
- Income tax: None
- Social Security: Not taxed
- IRA/401k withdrawals: Not taxed
- Pension income: Not taxed
- Property tax: Low–moderate (0.89% avg.); senior homestead exemption available
- Estate tax: None
- Verdict: The gold standard for retirement tax friendliness. High cost of living in metro areas, but the tax picture is unmatched.
2. Wyoming ⭐⭐⭐⭐⭐
- Income tax: None
- Social Security: Not taxed
- IRA/401k withdrawals: Not taxed
- Property tax: Low (0.61% avg.)
- Estate tax: None
- Verdict: Lowest total tax burden of any US state. Limited urban amenities and harsh winters reduce appeal for many retirees.
3. Nevada ⭐⭐⭐⭐½
- Income tax: None
- Social Security: Not taxed
- IRA/401k withdrawals: Not taxed
- Property tax: Very low (0.55% avg.)
- Sales tax: Higher than average (8.2%)
- Estate tax: None
- Verdict: Excellent tax picture; Las Vegas metro has strong healthcare infrastructure and retiree amenities.
4. Tennessee ⭐⭐⭐⭐½
- Income tax: None (fully eliminated as of 2023)
- Social Security: Not taxed
- IRA/401k withdrawals: Not taxed
- Property tax: Low (0.71% avg.)
- Sales tax: High (9.5% avg.)
- Estate tax: None
- Verdict: Rapidly becoming a top retiree destination. Nashville area is growing but still more affordable than comparable metros elsewhere.
5. South Carolina ⭐⭐⭐⭐
- Income tax: 3–6.4% (top rate applying above $16,040); substantial retirement income deductions
- Social Security: Not taxed
- Pension/IRA: Up to $15,000 exemption per person ($30,000/couple); military pensions fully exempt
- Property tax: Very low for owner-occupied homes; senior homestead exemption reduces taxable value significantly
- Estate tax: None
- Verdict: Not zero income tax, but retirement exemptions make effective rates very low for most retirees. Coastal areas are excellent value.
6. Georgia ⭐⭐⭐⭐
- Income tax: Flat 5.49% (transitioning to 4.99% by 2029)
- Social Security: Not taxed
- Retirement income: $65,000 exclusion per person ($130,000/couple) for those 65+
- Property tax: Low; senior exemptions available in most counties
- Estate tax: None
- Verdict: The $130,000/couple retirement income exclusion means most retirees pay minimal state income tax. Atlanta area offers urban amenities.
7. Arizona ⭐⭐⭐⭐
- Income tax: Flat 2.5% (one of the lowest flat rates in the US)
- Social Security: Not taxed
- Pension: Arizona state/local government pensions exempt; private pensions taxable
- Property tax: Low–moderate; significant senior freeze programs available
- Estate tax: None
- Verdict: 2.5% flat rate is among the best in states that have income tax. Strong retiree infrastructure in Phoenix and Tucson areas.
8. Mississippi ⭐⭐⭐⭐
- Income tax: 4.7% (dropping to 4% by 2026, then phasing to 0% by 2030)
- Social Security: Not taxed
- Retirement income: All qualified retirement income (pensions, 401k, IRA) fully exempt
- Property tax: Very low
- Estate tax: None
- Verdict: Full retirement income exemption means most retirees effectively pay zero state income tax on retirement account withdrawals despite the nominal rate. Transitioning to zero income tax.
9. Pennsylvania ⭐⭐⭐⭐
- Income tax: Flat 3.07%
- Social Security: Not taxed
- Retirement income: All retirement income (pensions, IRAs, 401k, Social Security) fully exempt from state income tax for retirees
- Property tax: Moderate; Property Tax/Rent Rebate program for low–moderate income seniors
- Estate tax: Yes — Pennsylvania has an inheritance tax (4.5% to direct descendants, 12% to siblings, 15% to others)
- Verdict: Despite 3.07% income tax rate, retirees pay virtually nothing on retirement income due to full exemptions. The inheritance tax is the key drawback.
10. Delaware ⭐⭐⭐⭐
- Income tax: 2.2–6.6% (top rate on income above $60,001)
- Social Security: Not taxed
- Pension/retirement: Up to $12,500 exclusion for those 60+
- Property tax: Very low (0.56% avg. — among lowest in the US)
- Sales tax: None — Delaware has no sales tax
- Estate tax: None
- Verdict: No sales tax and very low property taxes make Delaware attractive despite income tax rates. Strong banking and legal infrastructure.
States to Approach With Caution
California ⚠️
- Income tax: 1–13.3% (highest top rate in the US)
- Social Security: Not taxed
- Retirement income: Fully taxable — no exemptions for pensions or IRA/401k withdrawals
- Property tax: Protected by Prop 13 for long-term homeowners (1% of assessed value, growing slowly), but new buyers pay market rate
- Estate tax: None
- Verdict: Catastrophic for retirees taking large IRA withdrawals. A married couple withdrawing $100,000/year from traditional accounts pays up to $9,300 in California state income tax on that withdrawal alone. Long-term homeowners are partially protected by Prop 13, but overall tax burden on retirement income is extreme.
New York ⚠️
- Income tax: 4–10.9% (NYC adds additional 3.08–3.88%)
- Social Security: Not taxed
- Pension: Government pensions exempt; private pensions partially taxable
- IRA/401k: Fully taxable above small exclusion
- Property tax: Very high outside of NYC (avg. 1.72%); NYC apartments have different structures
- Estate tax: Yes — estate tax on estates above $7.16 million (2026)
- Verdict: New York City retirement is prohibitively expensive for most retirees on fixed income. Upstate New York offers lower costs but still high property taxes and income taxes.
Minnesota ⚠️
- Income tax: 5.35–9.85%
- Social Security: Partially taxable (phased exemption for lower incomes)
- Retirement income: Taxable, with partial deductions
- Property tax: Moderate–high
- Verdict: Minnesota taxes Social Security and most retirement income at rates up to 9.85%. One of the least retirement-friendly tax environments in the country.
Illinois ⚡ (Special Case)
- Income tax: Flat 4.95%
- Social Security: Not taxed
- Retirement income: All retirement income — pensions, 401k, IRA, Social Security — fully exempt
- Property tax: Very high (avg. 2.23% — among highest in the US)
- Verdict: Illinois is fascinating — income is essentially zero state tax for retirees despite the 4.95% rate. But property taxes are brutal for homeowners. If you rent or own a modest home, Illinois can actually be quite favorable; if you own a $500,000+ home, the $11,000+/year property tax erases the income tax advantage.
Property Taxes: The Hidden Retirement Cost
Property tax is the largest fixed cost for retiree homeowners — and it varies dramatically across states. Unlike income tax, property tax doesn't go away when your income drops in retirement.
| State | Average effective property tax rate | Annual tax on $350,000 home |
|---|---|---|
| New Jersey | 2.47% | $8,645 |
| Illinois | 2.23% | $7,805 |
| Connecticut | 1.92% | $6,720 |
| New Hampshire | 2.09% | $7,315 |
| Vermont | 1.90% | $6,650 |
| US Average | 1.07% | $3,745 |
| Arizona | 0.63% | $2,205 |
| Nevada | 0.55% | $1,925 |
| Wyoming | 0.61% | $2,135 |
| Hawaii | 0.29% | $1,015 |
| Alabama | 0.41% | $1,435 |
Senior property tax relief programs: Most states offer some form of property tax relief for seniors, including:
- Homestead exemptions (reduce taxable assessed value)
- Senior freezes (lock assessed value at current level)
- Circuit breaker credits (credit when property taxes exceed a % of income)
- Deferrals (postpone taxes until property sale)
These programs vary enormously by state and sometimes by county. Check your state's specific programs — they can save qualifying seniors $1,000–$4,000/year in property taxes.
The Real Dollar Value of Choosing the Right State
Here's what the state tax difference actually means in retirement dollars, comparing a retirement in California vs. Florida for a married couple with:
- $80,000/year from traditional 401k/IRA withdrawals
- $36,000/year in Social Security income
- $400,000 home value
| Tax category | California | Florida | Annual savings (FL) |
|---|---|---|---|
| State income tax on $80K IRA | ~$5,900 | $0 | $5,900 |
| State tax on Social Security | $0 | $0 | $0 |
| Property tax ($400K home) | ~$4,400* | ~$3,560 | $840 |
| Sales tax (est. $25K spending) | ~$2,125 | ~$1,750 | $375 |
| Total annual savings | — | — | ~$7,115/year |
| Over 20 years (uninflated) | — | — | ~$142,300 |
California Prop 13 rate assumed at 1.1% for long-term owner. New buyer in California would pay higher rate.
$142,000 in additional purchasing power over 20 years — purely from choosing a tax-friendly state. That's equivalent to having an additional $284,000–$355,000 in savings at a 4–5% withdrawal rate.
Beyond Taxes: Other Factors to Weigh
Tax friendliness is one dimension of the retirement location decision. These factors also matter significantly:
Healthcare access: Florida, Arizona, and other retirement-heavy states generally have strong Medicare provider networks, specialist access, and senior-focused healthcare facilities. Rural states with low taxes (Wyoming, South Dakota) may have limited healthcare infrastructure.
Cost of living beyond taxes: Nevada and Tennessee have low taxes but Las Vegas and Nashville have seen significant cost-of-living increases recently. Don't equate "low tax" with "low cost."
Climate and lifestyle: For many retirees, quality of life — weather, proximity to family, outdoor recreation, cultural amenities — matters more than tax savings. A $5,000/year tax saving doesn't compensate for hating where you live.
Long-term care costs: Assisted living and nursing home rates vary significantly by state — roughly $3,500–$5,500/month for assisted living nationally, with wide variation. A state with great income tax treatment but high long-term care costs may not be the net best choice.
State Medicaid rules: For those who may eventually need Medicaid-funded long-term care, each state has different asset protection rules, spousal protections, and look-back periods. This is a specialized planning area worth researching before choosing a retirement state if long-term care is a concern.
For the budget impact of all these expenses, see: the biggest expenses in retirement and how much does healthcare cost in retirement.
How to Calculate Your Personal State Tax Savings
The rankings above give general guidance — but your specific savings depend on your income mix (Social Security vs. IRA vs. pension), your home value, your spending level, and whether you're still working.
Key inputs for your personal calculation:
- Your expected annual 401(k)/IRA withdrawals — this is where state income tax matters most
- Your Social Security income — 41 states won't tax it regardless
- Your home value and whether you'll own or rent
- Your annual discretionary spending — affects sales tax impact
Our free retirement budget calculator helps you establish your income and spending baseline — the foundation for comparing state tax scenarios.
For the tax mechanics of retirement account withdrawals, see: how are 401(k) withdrawals taxed in retirement.
Frequently Asked Questions
What is the most tax-friendly state to retire in?
Wyoming and Florida are consistently ranked the most tax-friendly states for retirees overall. Wyoming has the lowest total tax burden of any state. Florida combines no income tax, no estate tax, relatively low property taxes, and strong retiree infrastructure. For most retirees, Florida's combination of favorable taxes and retirement amenities makes it the top practical choice.
Which states don't tax retirement income?
Nine states have no income tax at all (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming). Additionally, several states with income taxes fully exempt retirement income: Mississippi, Pennsylvania, and Illinois (among others) exempt all qualified retirement income — pensions, 401k, and IRA distributions — from state income tax despite having nominal income tax rates.
Which states don't tax Social Security benefits?
41 states plus Washington D.C. do not tax Social Security benefits. The states that do tax Social Security (at least partially) are: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia (phasing out). Most of these states have income-based exemptions that shield lower-income retirees.
Is it worth moving to a different state to save on retirement taxes?
For retirees with significant traditional IRA or 401(k) balances, yes — especially moving from a high-tax state like California, New York, or Minnesota to a no-income-tax state. The savings on $80,000–$100,000/year in IRA withdrawals can be $5,000–$13,000/year, compounding to $100,000–$260,000 over a 20-year retirement. Moving costs, family proximity, lifestyle preferences, and healthcare access need to be weighed against the financial benefit.
What state has the lowest property taxes for retirees?
Hawaii has the lowest effective property tax rate (0.29%), followed by Alabama (0.41%), Nevada (0.55%), and Wyoming (0.61%). However, Hawaii's extremely high home prices mean total annual property tax dollars can still be significant. Alabama and Nevada offer the best combination of low effective rates and moderate home prices for most retirees.
Do all states tax 401(k) withdrawals?
No. Nine states have no income tax and therefore don't tax 401(k) withdrawals. Several others — including Mississippi, Pennsylvania, and Illinois — fully exempt retirement account withdrawals from state income tax. Many more offer partial exemptions. Only about 15–20 states tax 401(k) withdrawals in full at their standard income tax rates with no retirement-specific exclusions.
The Bottom Line: The Best States for Retirement Taxes in 2026
| Tier | States | Best for |
|---|---|---|
| Tier 1 — Best overall | Florida, Wyoming, Nevada, Tennessee | Retirees wanting zero income tax + low property taxes |
| Tier 2 — Excellent | South Carolina, Georgia, Arizona, Mississippi | Retirees wanting low effective rates with solid amenities |
| Tier 3 — Good with caveats | Pennsylvania, Delaware, Illinois | Retirement income exempt but other tax issues |
| Avoid for high IRA withdrawals | California, Minnesota, New York | High income tax rates on retirement account withdrawals |
Taxes matter — but they're one piece of the retirement location puzzle. The best state is the one where your after-tax income covers your actual budget, your healthcare needs are met, you're close enough to family and community, and you actually enjoy living there.
Run the numbers on your specific income sources and spending before committing to a retirement location decision. Our free retirement budget calculator helps you establish that baseline.
Last updated: May 2026. Tax laws change frequently — verify current rates with your state's department of revenue or a licensed tax professional before making relocation decisions. This article is for educational purposes and does not constitute personalized financial or tax advice.