These States Don’t Tax Social Security or Retirement Income

Most states, 41 in total plus Washington, D.C., won’t tax your Social Security benefits in 2025, based on current laws, making this a critical consideration for retirees planning their financial future. The landscape of retirement taxation has shifted dramatically in recent years, with states recognizing the financial burden on seniors and eliminating these taxes. While federal taxes on Social Security may still apply depending on your income, the state-level picture offers welcome relief for many.

Alaska Leads With Complete Tax Freedom

As of 2025, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no individual income tax, making Alaska an exceptional choice for retirees. The Last Frontier not only exempts retirement income entirely but also stands out for its lack of sales tax at the state level, though Alaska has a very low average combined state and local sales tax rate of 1.82%, making it a tax-friendly destination for retirees. Alaska residents also benefit from the annual Permanent Fund Dividend, though the harsh climate and high cost of living require careful consideration when planning a move.

Florida Offers Sunshine Without Tax Burdens

There’s no state income tax in Florida, so Social Security, pensions, and other retirement income aren’t taxed at all, which has made the Sunshine State one of the most popular retirement destinations in the country. Florida ranks 4th in tax competitiveness, according to the Tax Foundation’s 2025 State Competitiveness Index. In addition to not having a state income tax, sales taxes here are lower than in many other southern states. Owner-occupied homes also have a property tax rate of just 0.71%. The combination of warm weather, extensive retirement communities, and substantial tax savings makes Florida particularly attractive for those looking to stretch their retirement dollars.

Illinois Exempts All Retirement Income Despite Having State Tax

Illinois: All retirement income is exempt, including Social Security, retirement account withdrawals, and pensions, making it unique among states with income taxes. While Illinois does charge a flat rate on other types of income, retirees who rely primarily on retirement accounts, pensions, and Social Security benefits can live tax-free on those income sources. However, When you factor in the state tax rate of 6.25 percent and local taxes of up to 4.75 percent, Illinois has the seventh-highest average sales tax rate in the country, at 8.89 percent, which means retirees need to consider the total tax picture beyond just income tax.

Iowa Recently Eliminated Taxes For Seniors

Iowa recently made retirement income tax-exempt for residents 55 and older and eliminated its inheritance tax for tax years 2025 and later, representing a major shift in the state’s approach to retirement taxation. For 2025, Iowa moved to a flat tax rate of 3.8%, which applies only to non-retirement income for those under 55. This change has transformed Iowa into one of the most tax-friendly states for retirees, particularly those concerned about passing wealth to heirs without the burden of inheritance taxes.

Missouri Eliminated Social Security Taxes In 2024

Missouri eliminated the tax on all Social Security retirement benefits, effective beginning with the 2024 tax year, providing significant relief to retirees across the state. “In Missouri, for instance, retirees are looking at a collective annual saving of around $309 million,” said Jeff Rose, CFP, founder of Good Financial Cents. Previously, Missouri had income limitations that determined who paid taxes on Social Security, but the new law removes these caps entirely, meaning all residents regardless of income can now deduct their full Social Security benefits from state taxes.

Nebraska Joined The Tax-Free List Recently

Missouri and Nebraska have decided to stop taxing Social Security benefits in 2024, marking another victory for retirees in the Midwest. When Governor Jim Pillen signed that bill into law, it set the final countdown that led to roughly 350,000 Nebraskans never having to worry about whether their Social Security benefits would get taxed. The change came after years of legislative efforts to phase out the tax, ultimately accelerating the timeline to provide immediate relief to the state’s senior population.

Mississippi Fully Protects Retirement Income

Mississippi: All retirement income is exempt, including Social Security, retirement account withdrawals, and pensions, though early withdrawals may still face taxation. The income tax rate on taxable income is low, and it is set to decrease in the coming years. Flat 4.4% tax rate for 2025 (Note: Mississippi’s income tax rate will gradually decrease until it reaches 4% in 2026.) The state’s plan to eventually eliminate income tax altogether makes it an increasingly attractive option for retirees considering relocation to a lower cost-of-living area.

Pennsylvania Exempts Retirement Accounts And Pensions

Pennsylvania: All retirement income is exempt, including Social Security, retirement account withdrawals, and pensions, making the Keystone State particularly appealing for those with diverse retirement income sources. The Commonwealth has a flat tax rate of 3.07%, which is less than in most states that impose an income tax, and this rate only applies to non-retirement income such as wages from continuing to work part-time. The state’s location and access to major metropolitan areas also make it attractive for retirees who want to remain near family while enjoying tax benefits.

Several States Still Tax Benefits With Limitations

In 2025, nine states tax Social Security benefits, including Colorado, Minnesota, Rhode Island, and Vermont, though many offer exemptions based on age or income level. For example, in Colorado, residents ages 65 and older have been able to fully deduct federally taxed Social Security benefits on their state income tax returns since tax year 2022. For 2025, that full exemption will expand to include those ages 55 to 64 with an adjusted gross income equal to or less than $75,000 for individuals or $95,000 for couples filing jointly. These states continue to refine their tax codes, with many showing momentum toward further reducing or eliminating retirement income taxation.

West Virginia Is Phasing Out Social Security Tax

West Virginia is phasing out its tax on Social Security benefits. For 2025 returns, 65% of benefits will be tax-exempt. For 2026 returns (filed in 2027), benefits will be completely exempt, representing a gradual but definitive shift toward becoming more retirement-friendly. West Virginia is phasing out Social Security taxes, with no state income taxes on Social Security starting in 2026, which will make the Mountain State the most recent addition to the list of states that fully exempt Social Security from taxation. This change reflects broader trends across the country as states compete to attract and retain retirees who contribute to local economies.