Discover the 13 States Exempting Retirement Income from Taxes in 2025: Full List Revealed

While it’s a civic duty to pay taxes, many retirees seek ways to preserve their income by minimizing deductions. Fortunately, there are several states where retirement income isn’t taxed. Although relocating primarily for tax reasons might not be the sole factor in your decision, it’s definitely an aspect to consider in your retirement planning.

Retirement-Friendly States Without Income Tax

By 2025, nine states will not impose any income tax on retirees or other residents. Instead, these states generate revenue through other means, such as sales and property taxes. These states include:

1. Alaska
2. Florida
3. Nevada
4. New Hampshire
5. South Dakota
6. Tennessee
7. Texas
8. Washington
9. Wyoming

New Hampshire, which previously taxed dividends and interest income, has eliminated these taxes as of 2025, making it completely tax-free for retirees. Even though these states offer lower tax burdens, retirees should still expect to pay federal taxes and possibly local taxes depending on specific locations within these states.

States with Tax Exemptions for Retirees

Other states may still tax general income but offer exemptions specifically for retirees. These exemptions vary by state and include:

• Illinois: Income from 401(k) plans, pensions, and Social Security is not taxed.
• Iowa: Residents 55 or older are exempt from taxes on 401(k) and IRA withdrawals, as well as Social Security income.
• Mississippi: There is no tax on income from 401(k)s, IRAs, or Social Security, provided you meet certain conditions.
• Pennsylvania: Income from IRAs, 401(k)s, and Social Security benefits is not taxed. Pensions are also exempt if you are 60 or older.

States Where Social Security Income Is Taxed

While many states exempt Social Security income from taxes, there are a few exceptions where this income is taxable at the state level. These states are:

1. Colorado
2. Connecticut
3. Minnesota
4. Montana
5. New Mexico
6. Rhode Island
7. Utah
8. Vermont
9. West Virginia

Note that West Virginia is in the process of phasing out taxes on Social Security benefits, with plans to eliminate them entirely by 2026. This will eventually offer significant tax relief to retirees residing in West Virginia.

While the absence of state income tax can significantly improve a retiree’s financial situation, it’s vital to consider all aspects of relocation, including property taxes and overall cost of living, which might be higher in some states. For example, property taxes in Tampa, Florida, have increased by 60% since 2019, and the median home price in Tennessee has risen from under $250,000 to nearly $390,000. Before making a move, it’s wise to perform a thorough cost comparison and even consider staying in the prospective state for an extended period to truly understand the financial and lifestyle implications of such a decision.