States That Don’t Tax Retirement Income: Pensions, Benefits, Military Pay

Nine states charge no personal income tax at all, so pensions, 401(k) and IRA withdrawals, Social Security, and military retirement pay are all free of state tax there: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Every other state treats each type of retirement income on its own terms, which is why no single list can answer the question.

For the 2025 tax year, 41 states and Washington, D.C., do not tax Social Security benefits at all, 37 states exempt military retirement pay in full, and a much smaller group exempts pensions and 401(k) withdrawals. A state can exempt your military pension and still tax the money you draw from your 401(k). Federal tax sits underneath all of it, wherever you live, though the IRS added a deduction of up to $6,000 per person aged 65 and over for 2025 through 2028.

Which of these is you?

• Choosing where to retire: your income mix decides this, so a single ranking of states will not answer it.
• Already drawing a pension or taking withdrawals: several states exempt the income only once you have met your plan’s retirement conditions, and the date you take the money matters.
• Retired from the military: the exemption is far more common than for civilian pensions. Two states appear on almost every published list that do not belong there.
• Worried your old state can still tax you: federal law says it generally cannot, once you have genuinely moved.

Below is each kind of retirement income, the states that exempt it, the states that exempt only part of it, and which state gets to tax you.

Which States Do Not Tax Any Retirement Income?

Nine states tax no personal income of any kind, so every category of retirement income is exempt there. Among the states that do have an income tax, Iowa comes closest to matching them: it fully exempts retirement income from age 55 onward. Illinois, Mississippi, and Pennsylvania exempt withdrawals from pensions and retirement accounts, subject to the condition covered in the next section.

The Nine States With No Income Tax at All

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming charge nothing on pensions, retirement account withdrawals, Social Security, or military retirement pay.

Washington carries one caveat for retirees. It taxes long-term capital gains above the standard deduction of $278,000 for 2025, so selling a large stock portfolio is subject to tax. Drawing down an IRA is not, because the Washington Department of Revenue exempts retirement account assets and real estate from that tax.

These nine raise their money in other ways, and the amounts differ sharply between them. Our guide to states with no income tax compares all nine on property and sales taxes for the same house and covers the income tax Washington adds from 2028.

Iowa Exempts Retirement Income From Age 55

Age is the whole test in Iowa. Wages are taxed as usual, but from age 55 onward, the state stops taxing retirement income of any kind, and the same applies at any age to taxpayers who are disabled or to surviving spouses. The Iowa Department of Revenue applies it to pensions, annuities, self-employed retirement plans, deferred compensation, and IRA distributions. For a retiree over 55 living on retirement income, Iowa works like a no-tax state.

Which States Don’t Tax Pensions and 401(k) Withdrawals?

Illinois, Iowa, Mississippi, and Pennsylvania exempt pension and retirement account income in full, on top of the nine states with no income tax, and Michigan reaches a full exemption in 2026. Eight more are exempt from a fixed amount. In Illinois, Mississippi, and Pennsylvania, the exemption depends on meeting your plan’s retirement conditions, so an early withdrawal may still be taxed.

Illinois Subtracts Income From Qualified Plans Only

Illinois charges a flat 4.95% and subtracts the federally taxable portion of income from qualified plans, including 401(k)s, IRAs, SEPs, government and military retirement plans, and Social Security. Illinois Publication 120 confirms that early distributions from qualified plans and IRAs are included in the subtraction.

The limit is what counts as qualified. Non-qualified plans, non-governmental deferred compensation, and lump sums where you elected ten-year averaging on federal Form 4972 stay taxable in Illinois.

Pennsylvania Exempts Distributions Only After You Have Retired

Pennsylvania has a flat 3.07% tax and does not tax Social Security. It also leaves distributions from an eligible employer plan alone, but the exclusion depends on whether you have retired under the plan’s terms, and the account type does not settle it. The Pennsylvania Department of Revenue excludes payments “commonly recognized as old age or retirement benefits paid to persons retired from service after reaching a specific age or after a stated period of employment,” and notes that a plan’s federal qualification does not settle the question for Pennsylvania.

Money taken out before you have met the plan’s age or service conditions falls outside that exclusion and is taxable to the extent it exceeds contributions you already paid Pennsylvania tax on. Pennsylvania taxes those contributions going in, which is why qualified distributions come out clean.

Mississippi Exempts Pensions Once You Have Met the Plan’s Terms

Mississippi exempts the first $10,000 of taxable income per spouse and charges 4.4% above it for 2025, dropping to 4.0% for 2026. Social Security, Railroad Retirement, and VA payments are exempt outright. Pensions and annuities are exempt where you have met the plan’s retirement requirements, and the Mississippi Department of Revenue states that early distributions do not count as retirement income and may be taxed.

Michigan Deducts 75% for 2025 and All of It From 2026

Michigan is phasing back in a full retirement deduction over four years. For 2025, a taxpayer born between 1946 and 1966 can deduct up to $49,423 filing singly or $98,846 filing jointly, which is 75% of the full private retirement deduction. From 2026, when it reaches 100% and opens to everyone born after 1945, according to the Michigan Department of Treasury. People born before 1946 keep their existing treatment, which already fully exempts public pensions.

Eight States Exempt a Fixed Amount Instead

Where a state caps the exemption, the cap sometimes covers a typical pension completely and sometimes barely touches it.

State	Who qualifies	How much is exempt
New Jersey	Age 62+ with total income of $150,000 or less	Up to $100,000 joint, $75,000 single
Georgia	Age 65+	Up to $65,000 per person
Missouri	Public pension recipients	Up to $47,633 per person
Kentucky	Any age	$31,110 per person, plus pre-1998 service in full
Colorado	Age 65+	$24,000 per person
New York	Age 59 and a half or older	$20,000 per person, plus government pensions in full
South Carolina	Age 65+	$10,000 of retirement income plus $15,000 against any income
Alabama	Age 65+	$6,000 per person, plus defined benefit pensions in full

Hawaii Splits the Pension by Who Funded It

Hawaii exempts the part of a pension funded by your employer and taxes the part funded by your own contributions and salary deferrals. A 401(k) built mainly from your own pay is largely taxable in Hawaii, while a traditional employer-funded pension is not. For a hybrid plan, the state applies an employer-cost-to-total-cost ratio.

Which States Still Tax Social Security Benefits?

Nine states tax Social Security benefits for the 2025 tax year: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Seven of the nine exempt benefits entirely below an income threshold, so most retirees living in them pay nothing. The other 41 states and Washington, D.C., do not tax benefits at all.

Seven of the Nine Exempt Benefits Below an Income Line

You will see “eight states” widely repeated. That is the 2026 answer arriving a year early, because West Virginia is still taxing part of the benefit in 2025.

State	Benefits are exempt when	Above that line
Colorado	Age 65+, any income. Ages 55 to 64 with AGI up to $75,000 single or $95,000 joint	Ages 55 to 64 fall back to a $20,000 cap
Connecticut	AGI under $75,000 single or $100,000 joint	No more than 25% of the federally taxable benefit is taxed
Minnesota	AGI under $84,490 single or $108,320 joint	Phases out, gone at $120,490 and $144,320
Montana	No separate exemption	Taxed to the extent it is taxed federally
New Mexico	AGI under $100,000 single or $150,000 joint	Fully taxable
Rhode Island	Full retirement age reached and AGI under $107,000 single or $133,750 joint	Fully taxable
Utah	A credit applies in place of an exemption	Credit shrinks above $54,000 single or $90,000 joint
Vermont	AGI up to $55,000 single or $70,000 joint	Phases out, gone at $65,000 and $80,000
West Virginia	AGI up to $50,000 single or $100,000 joint	65% exempt for 2025, fully exempt from 2026

West Virginia Is in Its Final Year of Taxing Benefits

West Virginia has been withdrawing from this tax in stages for filers above its income thresholds: 35% of the benefit is exempt for 2024, 65% for 2025, and 100% for 2026 and beyond. The West Virginia Tax Division publishes the schedule. Filers under $50,000 single or $100,000 joint were fully exempt throughout.

Several Thresholds Moved for 2025

Colorado extended its uncapped Social Security subtraction to ages 55 to 64 for the first time. Utah raised its threshold from $45,000 to $54,000 single and from $75,000 to $90,000 joint. Vermont raised its full-exemption ceiling by $5,000 in each filing status. Minnesota indexed its thresholds upward. A comparison built on 2024 figures will put several of these states in the wrong column.

Which States Don’t Tax Military Retirement Pay?

Thirty-seven states exempt military retirement pay in full: the nine with no income tax, plus 28 with an income tax that specifically exempts military retirement. Thirteen states exempt only part of it or attach a condition. Washington, D.C., is the only place left that taxes military retirement pay without any relief, and it became the only one to do so during the 2025 tax year.

Twenty-Eight States With an Income Tax Exempt Military Retirement Pay in Full

State	Military retirement pay
Alabama	Exempt in full
Arizona	Exempt in full since 2021
Arkansas	Exempt in full since 2018
Connecticut	Exempt in full
Hawaii	Exempt in full
Illinois	Exempt in full
Indiana	Exempt in full since 2022
Iowa	Exempt in full
Kansas	Exempt in full
Louisiana	Exempt in full
Maine	Exempt in full, including survivor benefits
Massachusetts	Exempt in full
Michigan	Exempt in full
Minnesota	Exempt in full, with no income limit
Mississippi	Exempt in full
Missouri	Exempt in full
Nebraska	Exempt in full since 2022
New Jersey	Exempt in full, including survivor benefits
New York	Exempt from state, New York City and Yonkers tax
North Dakota	Exempt in full since 2019
Ohio	Exempt in full
Oklahoma	Exempt in full since 2022
Pennsylvania	Exempt in full
Rhode Island	Exempt in full since 2023, with no age or income test
South Carolina	Exempt in full since 2022, at any age
Utah	A credit cancels the tax in full
West Virginia	Exempt in full since 2019
Wisconsin	Exempt in full, including Survivor Benefit Plan payments

Add the nine states with no income tax, and the total reaches 37, where a military pension carries no state tax at all.

North Carolina Requires 20 Years of Service, and Kentucky Caps Post-1997 Credit

Both states appear on most published lists of states that fully exempt military retirement pay. Neither belongs there.

North Carolina’s deduction is complete but conditional. The North Carolina Department of Revenue allows it only where you served at least 20 years in the uniformed services or were medically retired under Chapter 61 of Title 10. A service member who separated at 12 years with retirement pay does not qualify. Retirees vested by August 12, 1989, are covered separately under the Bailey settlement.

Kentucky caps the exclusion at $31,110 for service credit earned after 1997. Service credit earned before January 1, 1998, is exempt in full through Schedule P, so a career spanning that date splits into two calculations.

Thirteen States Exempt Only Part of It, or Attach a Condition

State	What is exempt for 2025
California	Up to $20,000, with AGI under $125,000 or $250,000 joint
Colorado	$15,000 under age 55, then the general pension subtraction
Delaware	Up to $12,500
Georgia	Up to $17,500 under age 62, more with Georgia earned income
Idaho	Part of a deduction capped at $48,216 single or $72,324 joint, age 62+ or disabled
Kentucky	$31,110 for service after 1997, with pre-1998 service exempt in full
Maryland	Up to $20,000 from age 55, $12,500 below it
Montana	Half of it for five years, matched to Montana’s earned income
New Mexico	Up to $30,000
North Carolina	All of it, after 20 years of service or medical retirement
Oregon	Only the part earned before October 1991
Vermont	All of it below $125,000 AGI, phasing out to nothing at $175,000
Virginia	Up to $40,000

The Exemption Covers Retired Pay, Not the Rest of Your Income

A state exemption is written around military retired pay, and three other sources that a military retiree usually lives on each follow a different rule. The Thrift Savings Plan is the one that catches people, because it sits outside the military exemption in most states.

Income	Federal treatment	State treatment
VA disability compensation	Not part of federal gross income	Never reaches the state return in states that start from federal AGI
Survivor Benefit Plan annuity	Fully taxable, because premiums come out of retired pay before tax	Eight of the 28 states name survivor payments in the exemption
Thrift Savings Plan withdrawals	Taxed like a 401(k)	Generally outside the military exemption, and measured against the state’s general pension rules

VA disability compensation is exempt from tax under 38 U.S.C. 5301, and the IRS keeps it out of gross income. Hence, it never enters a state calculation that begins with your federal figure. New Jersey, which defines income in its own way, lists it as exempt directly. Combat-Related Special Compensation is tax-free in the same way. Concurrent Retirement and Disability Pay is not and does not follow your retired pay.

Survivor Benefit Plan premiums come out of retired pay before federal tax, so the annuity a surviving spouse receives is fully taxable federally. Maine, Michigan, Minnesota, New Jersey, New York, Ohio, South Carolina, and Wisconsin name Survivor or Survivor Benefit Plan payments in their exemptions. California, Maryland, Vermont, and Virginia extend their capped exemptions to them as well. Pennsylvania and Illinois say nothing either way, which is worth asking about rather than assuming.

The Thrift Savings Plan is a defined contribution plan treated as a Section 401(a) trust, not as retirement pay, so a military exemption usually does not apply to it. Virginia Tax says so outright, and Wisconsin taxes TSP distributions while fully exempting military retirement. In most other states, a TSP withdrawal is measured against the general pension rules covered earlier on this page, which are usually capped and often age-gated.

California Now Excludes Up to $20,000 of Military Retirement Pay

California taxed military retirement pay in full until 2025. For tax years 2025 through 2029, it excludes up to $20,000 for filers with federal AGI under $125,000, or $250,000 for joint filers. The Franchise Tax Board sets out the conditions. That change left Washington, D.C., as the only jurisdiction taxing military retirement pay without any relief.

Can My Former State Still Tax My Pension After I Move?

Generally, no, and this is settled by federal law rather than by each state. A federal statute at 4 U.S.C. 114 bars any state from taxing the retirement income of someone who is not a resident or domiciliary of that state. It covers 401(k)s, IRAs, 403(b) annuities, SEPs, 457 plans, government plans, and uniformed service retirement pay.

The Protection Depends Entirely on Having Moved

The statute settles what a former state may do. It does not settle whether you are still a resident of it, and that question is decided mainly by domicile.

A state’s claim on your income rests on whether it still counts as your permanent home. That is your domicile; it can be a U.S. state or a foreign country. You have exactly one, and you keep it until you establish a new one. Buying a house in Florida while keeping a California license, a California voter registration, and a family home in California does not change it. Our guide to changing your state residency covers the steps to establish the new state, and domicile against residence covers how one state can apply two tests to you in the same year.

California, New York, Virginia, South Carolina, and New Mexico look hardest at whether a departure was real, sometimes years later. If you are leaving one of those, our guides to California’s residency rules and Virginia’s residency rules cover how each one is weighed.

Move Before the First Distribution Where You Can

A payment is generally taxed by the state you lived in when you received it. Retiring in a state that taxes pensions, drawing for two years, then moving to Florida means those two years were taxable, and the federal protection starts only once the move is real. Making the move first means they never were. Where you can, time it early in a tax year to keep the part-year return simple.

Does Federal Tax Still Apply If My State Doesn’t Tax Retirement Income?

Yes. State and federal taxes are separate systems, and a state exemption does not affect your federal return. Social Security becomes partly taxable federally once your combined income passes $25,000 filing singly or $32,000 filing jointly, thresholds that have never been adjusted for inflation. Moving to Florida does not change that.

Social Security Is Taxed Federally Above Two Fixed Thresholds

Combined income means half your benefits plus all your other income, including tax-exempt interest. Up to 50% of the benefit becomes taxable above $25,000 single or $32,000 joint, and up to 85% above $34,000 single or $44,000 joint, as the IRS sets out in Publication 915. Because the thresholds are fixed by statute, each year’s cost-of-living increase pushes more retirees above them.

A Deduction of Up to $6,000 Applies From Age 65

For 2025 through 2028, a taxpayer aged 65 or older can deduct up to $6,000, and a couple in which both qualify can deduct $12,000. It is available whether or not you itemize. Each person’s $6,000 shrinks by 6 cents for every dollar of modified AGI above $75,000 single or $150,000 joint, so it runs out at $175,000 and $250,000. The IRS sets out the conditions, including that married couples must file jointly.

The Deduction Did Not Make Social Security Tax-Free

A good deal of coverage in 2025 reported that Social Security had become tax-free. It did not. The new deduction reduces taxable income for people over 65, which can wipe out the tax a retiree owes overall, but it leaves the rules that decide how much of a benefit is taxable exactly as they were. Publication 915 for 2025 returns still applies the same $25,000 and $32,000 thresholds. Our guide to what the One Big Beautiful Bill changed for Social Security covers how the two interact.

What Happens to My Retirement Income If I Live Abroad?

Being domiciled in one of the nine no-tax states means no resident state return while you are away, as long as no income is sourced to another state. Your federal return continues wherever you live, because it follows citizenship. State filing follows domicile.

The Foreign Earned Income Exclusion Does Not Cover Retirement Income

The exclusion applies only to income earned for services performed abroad. The IRS states that foreign earned income does not include pension or annuity payments, including Social Security, and separately treats dividends, interest, and capital gains as unearned income.

For a retiree abroad living on a pension, retirement account, Social Security, and investment income, there is no income that the exclusion can reach. Relief comes instead from the Foreign Tax Credit or a treaty. That credit applies against foreign tax, not U.S. state tax, which is a separate question people often run into.

Foreign Pensions Follow the Same State Rules

A pension earned working abroad is generally treated like a domestic pension for state purposes. In the nine no-tax states, it is exempt. In Illinois or Pennsylvania, it may qualify for the same exemption as a U.S. plan. However, the conditions vary, and the federal treatment is a separate question governed by the relevant treaty. Our guide to foreign pensions and U.S. tax covers the federal side, and what to do with a foreign pension when you come home covers the move itself.

Coming Home Means You Get to Choose

If you severed your old domicile and spent years overseas, you return with a foreign domicile and no state claiming you. That is the rarest position in state tax, and it is worth using: pick the state before the first pension payment lands. Our guidance for expats returning to the U.S. covers the rest of the re-entry, and state taxes while living abroad covers the years before it.

If retiring overseas is still on the table, our guide to countries that do not tax foreign retirement income covers where the same question leads outside the U.S.

Frequently Asked Questions

No Single State Is Best, Because Each Kind of Income Is Taxed Separately

A state can exempt your military pension, cap your 401(k) exemption, and tax your Social Security all in the same year. Which state fits you depends on which of the four kinds of income you have, and the answer is usually better than people expect.

• Start with your income mix: a military retiree can choose from 37 states; someone living on 401(k) withdrawals has far fewer; and someone drawing Social Security alone has 41, plus Washington, D.C.
• Read the condition, not the headline: Pennsylvania, Mississippi, and Illinois exempt retirement income only once you have retired under your plan’s terms, and North Carolina only after 20 years of service.
• Your old state cannot follow you: federal law bars a state from taxing the retirement income of someone who no longer lives there, so what matters is documenting your move.
• An old gap is fixable: if you left a state without filing a part-year return, or have been abroad for years without ever closing the file, that is ordinary catch-up work.

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This article is for informational purposes only and should not be considered tax advice. State tax rules vary and change frequently, individual circumstances differ, and several of the figures above are scheduled to change in the next tax year. Consult a qualified tax professional or an accountant with expertise in state residency and retirement income for advice specific to your situation.