These States Don’t Tax Social Security or Retirement Income
Watching retirement savings shrink because of taxes feels brutal. You work decades for financial freedom, only to watch state governments take a slice of what you’ve earned. Here’s something that might change your plans entirely: some states won’t touch your at all.
The landscape has shifted dramatically in recent years. Most states, 41 in total, won’t tax your Social Security benefits in 2025, according to recent reports. Even better, thirteen states offer full or near-total exemptions on various forms of retirement income. Let’s be real: where you retire could mean thousands of dollars more in your pocket each year.
States With Zero Income Tax
As of 2025, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no individual income tax. These states essentially function as tax havens for anyone receiving retirement income. New Hampshire recently joined this club after phasing out its tax on interest and dividends. Think about what that means: your Social Security, 401(k) withdrawals, IRA distributions, and pension checks arrive completely untouched by state taxation.
It sounds almost too good to be true, yet it’s the reality for retirees in these locations. These states simply don’t charge any income tax on any resident. Instead, these states collect enough revenue from other sources (like sales tax, or business taxes) to fund their state’s governmental operations. Wyoming residents, for instance, enjoy complete freedom from state income taxes while facing relatively low property taxes as well.
Still, there’s a catch worth mentioning. Nevada boasts no income tax but charges some of the highest sales taxes in the nation. Washington state implemented a capital gains tax that could affect wealthier retirees with significant investment income.
Four More States That Protect All Retirement Income
In addition to the nine states above that don’t have an income tax at all, four states do not tax retirement income: Illinois, Iowa, Mississippi and Pennsylvania. These states maintain general income taxes on wages and other earnings but carve out complete exemptions for retirement distributions.
Illinois stands out with its straightforward approach. Illinois charges a flat state income tax of 4.95%, but all retirement income is exempt from paying the tax. This includes pension payments, as well as distributions from retirement plans such as 401(k)s and IRAs. Iowa offers similar protection but adds an age requirement. As of 2023, Iowa residents over the age of 55 are no longer taxed on their retirement income thanks to a 2022 law. Iowa now has a flat rate of 3.9 percent on taxable income, following a law that was passed in May 2024.
Mississippi provides one of the most generous setups for retirees. The state exempts all qualifying retirement income while maintaining relatively low tax rates on other income. Pennsylvania rounds out this group with its flat tax rate, but retirement income remains completely shielded. There’s a caveat, though: early withdrawals from retirement accounts might not qualify for these exemptions and could face both taxes and penalties.
Recent Victories: States That Just Eliminated Social Security Taxes
Social Security retirement recipients in Kansas, Missouri, and Nebraska no longer have to pay state income taxes on their benefits under legislation that took effect for the 2024 tax year. These three states made headlines by fully eliminating taxes on Social Security benefits starting in 2024, delivering a major win for retirees that is now firmly in place.
The financial impact is staggering. Ending the tax will save the state’s retirees a total of approximately $100 million annually in Kansas alone. Missouri’s elimination is even more dramatic. The change will save residents $309 million in tax payments annually, according to financial experts tracking the legislation. Nebraska accelerated its timeline after originally planning a gradual phase-out.
Missouri’s approach is particularly generous. The state now provides full exemptions for Social Security benefits. Kansas previously taxed benefits for anyone with adjusted gross income above a certain threshold but scrapped that entirely. West Virginia is following suit with a multi-year phase-out that completes in 2026.
The Nine States Still Taxing Social Security
As of 2025, there are just nine states that tax Social Security: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont and West Virginia. However, most of these states offer significant exemptions or income thresholds that protect many retirees from actually paying these taxes.
Colorado provides generous exemptions based on age. Beginning in 2025, individuals ages 55–64 can deduct all federally taxable Social Security income if their AGI is $75,000 or less for individuals and $95,000 or less for couples filing jointly. For those 65 and older, federally taxable Social Security benefits are no longer subject to state taxation. New Mexico also offers high thresholds. Single filers earning up to $100,000 per year won’t have their Social Security benefits taxed at the state level. New Mexico won’t tax Social Security benefits for joint filers who earn up to $150,000 per year.
Minnesota uses a more complex system with income-based subtractions that benefit lower and middle-income retirees. Montana takes the least generous approach, essentially mirroring federal taxation rules with only modest state-level deductions. Vermont and Utah provide partial exemptions based on income levels, making them somewhat friendlier than they initially appear.
Smart Money: Understanding the Full Tax Picture
Here’s the thing: focusing solely on income tax creates an incomplete picture. Sales taxes, property taxes, and cost of living all factor into how far retirement dollars actually stretch. Nevada charges no income tax but levies substantial sales taxes. New Hampshire eliminated its income tax on interest and dividends but maintains relatively high property taxes in certain areas.
The highest state sales taxes in 2025 are in California (7.25%), Indiana, Mississippi, Rhode Island and Tennessee (7.0% in each). On the flip side, the lowest state sales taxes are in Colorado (2.9%), Alabama, Georgia, Hawaii, New York, and Wyoming (4.0% in each). Property taxes vary wildly even within states, depending on counties and municipalities.
Some states offer property tax relief programs specifically for seniors. Circuit breaker programs and homestead exemptions can dramatically reduce property tax burdens for retirees who meet income requirements. Estate and inheritance taxes represent another consideration for those planning to leave assets to heirs. The smartest approach involves calculating your entire expected tax burden across all categories before making any major relocation decisions. Where you ultimately land might surprise you once you run the complete numbers.
