Maximize Your Retirement: Which States Don't Tax Social Security and Retirement Income

The Tax Advantage: States Without Income Taxation

Nine states have completely eliminated state income tax, making them attractive havens for retirees seeking to preserve their earnings. These jurisdictions are:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

The distinction is important: eight of these nine states have no income tax whatsoever. New Hampshire operates differently, currently taxing interest and dividend income while exempting earned income—though this policy will shift in 2025 when dividend and interest income become tax-free. Some lawmakers are attempting to reinstate taxes for higher earners, so monitor legislative developments if you’re considering relocation.

However, before celebrating, remember that states recoup tax revenue through alternative channels. Sales taxes and property taxes often run higher in no-income-tax states, so a comprehensive tax analysis matters more than any single metric.

Which States Don’t Tax Social Security Benefits?

For retirees relying on Social Security, the bigger question becomes: which states don’t tax social security? The encouraging answer: 41 states plus Washington, D.C., provide full protection for Social Security benefits. These include Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, and Wyoming.

This represents significant progress. In 2016, thirteen states taxed Social Security benefits. Today, only nine states still do: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Even in these states, income thresholds and age considerations typically spare lower-income and older retirees from taxation.

The Social Security Administration reports an average monthly benefit of $1,979—approximately $23,750 annually. Yet rising concerns about benefit sustainability loom; without legislative intervention, future reductions may occur.

States Exempting All Retirement Income

A special category exists for four states that exclude retirement income from taxation even while taxing general income: Illinois, Iowa, Mississippi, and Pennsylvania.

Combining all these policies reveals which states don’t tax any retirement income whatsoever. These thirteen jurisdictions protect your Social Security, earned income, dividends, interest, retirement account distributions, and pension income from state taxation:

• Alaska
• Florida
• Illinois
• Iowa
• Mississippi
• Nevada
• New Hampshire
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

Remember: state taxes represent only part of the equation. Federal taxation continues for most Americans. Your Social Security benefits may face federal taxation depending on your overall income level.

Crafting Your Retirement Strategy

Tax optimization enhances but doesn’t replace comprehensive retirement planning. Create detailed estimates of your financial requirements, identify realistic income sources, and build diversified revenue streams. Consider dividend-yielding stocks, pensions, Social Security, annuities, and retirement account distributions working in concert.

Understanding which states don’t tax social security and retirement income represents a meaningful planning tool—but pair this knowledge with broader strategies addressing healthcare, longevity risk, and lifestyle needs for retirement security.