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Here's Where Retirees Can Avoid Paying State Taxes on Their Retirement Income

Moving could help you save more of your income.

By Chris Lewis, CEPF , Edited by Becca Borawski Jenkins

Updated Sept. 23, 2026

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Part of developing a solid retirement plan is deciding where to live. For many retirees, that means staying in place, while others may want to move to a state that is more tax-friendly.

There are several states that don't have an individual income tax, as well as a few others that exempt military retirement pay and Social Security income. Here are a few examples of some tax-advantageous places to live in retirement.

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9 states have no broad individual income tax at all

If you don't want to pay state income taxes at all, there are currently nine states that don't have income taxes, whether you're currently working or retired. These states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Of course, just because these states don't have income taxes, you'll still have to pay federal income taxes. Additionally, these states compensate for the lack of income taxes in different ways, such as having higher property taxes or sales taxes, for example. Still, retirees should run the numbers to see whether moving to one of these states could save them on taxes.

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38 exempt military retirement pay

In addition to the nine states that don't charge income taxes, there are also 29 states that don't tax military retirement income. These states are, according to Military.com, Alabama, Arizona, Arkansas, Connecticut, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Utah, West Virginia, and Wisconsin.

Some other states offer deductions or some exemptions on military pay, but these are the ones that exempt military pay entirely. Retirees who have military pay may want to consider relocating to one of these states if they're currently paying taxes on military pay.

42 states don't tax Social Security

Interestingly, a majority of states do not tax Social Security benefits. However, that means eight states still do. These include Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. That doesn't mean that some retirees won't qualify for deductions or exemptions. Those typically vary by your income.

However, keep in mind that even if most states don't tax Social Security, retirees will still have to pay federal income taxes, depending on their income.

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6 states that have income tax but exempt retirement income

There are also six states that do have income tax, but they exempt some or all of retirement income. These are Arkansas, Illinois, Iowa, Mississippi, Pennsylvania, and South Carolina. Each state has slightly different rules for these tax breaks. For example, Arkansas exempts up to $6,000.

State income tax is only one piece of the puzzle

Of course, the state income taxes you pay are only one piece of the puzzle. It's also important to consider the property taxes and sales taxes in your state. Sometimes, high property taxes can cancel out any savings you may receive from having no state income taxes.

The overall cost of living matters too. Some areas of the country have much higher grocery and utility costs. Some states have affordable housing, while other states are incredibly expensive even for smaller homes. For those reasons, retirees need to calculate the entire financial picture of their cost of living before making a decision to move based on one factor.

Other considerations when deciding where to live in retirement

There are also intangibles to consider. Retirees may want to live close to their children and grandchildren, even if housing is more expensive. Some retirees may also prefer to live in areas with nicer weather or more activities. Health care is important too; some parts of the country may have specific medical facilities that retirees need to live near depending on their health conditions.

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Where to get help with retirement planning if you need it

If you're overwhelmed with the idea of deciding where to live in retirement, working with a financial planner can help. They can look at your total income, your cost of living, your current assets, and talk to you about your retirement goals. Using this information, a financial planner can help you develop a retirement plan, including a withdrawal plan that could help your nest egg last longer.

Bottom line

One of the financial mistakes many retirees make is living in a place that is too expensive. Whether it's the cost of living, price of groceries, property taxes, or income taxes, there are some states that are more favorable for retirees than others.

While there are many reasons retirees have to stay where they are, considering moving to a place that is more tax-advantageous could help some retirees make their nest eggs last longer.

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