15 States That Don't Tax Pension Income

Alabama

Pensions: Retiring to Alabama can be a smart move if you'll be relying heavily on a pension. If you're retiring from the private sector, Alabama won't tax your pension income if it comes from a defined benefit retirement plan (a retirement plan with fixed and pre-determined benefit amount). The state also exempts military retirement pay and income from government pensions.

401(k)s and IRAs: Not all retirement income is tax-exempt in Alabama. Distributions from traditional IRAs and 401(k) plans are taxable. However, the first $6,000 of retirement income received by anyone 65 years of age or older is tax-exempt.

Social Security Benefits: Alabama also doesn't tax Social Security benefits. That's another big plus for retirees in the state.

Income Tax Range: For all taxable income, including 401(k) funds and IRA distributions, the lowest Alabama tax rate is 2% (on up to $1,000 of taxable income for joint filers and up to $500 for all others), while the highest rate is 5% (on more than $6,000 of taxable income for joint filers and more than $3,000 of taxable income for all others).

Alaska

Pensions: In Alaska, you don't have to pay income tax on your pension — or on any income, for that matter. It's one of the states with no income tax.

401(k)s and IRAs: You won't pay income tax on 401(k) and IRA distributions in Alaska either. 

Social Security Benefits: Like most states, Alaska doesn't tax Social Security benefits.

Income Tax Range: Not applicable (no income tax).

Florida

Pensions: If you're looking for a warmer climate, you might consider Florida. But there's more reasons to retire to Florida than just the palm trees and sandy beaches. The Sunshine State doesn't have an income tax, so your pension won't be taxed there.

401(k)s and IRAs: Florida is good to retirees when it comes to 401(k)s and IRAs, too. There are no state taxes on distributions from these retirement savings plans.

Social Security Benefits: As you may have guessed, Florida doesn't tax Social Security benefits, either.

Income Tax Range: Not applicable (no income tax).

Hawaii

Pensions: Hawaii doesn't tax all pension income, but there are some things you should know to avoid a surprise at tax time.

• Retirement distributions from a private or public pension plan are tax-free in Hawaii only if you didn't make contributions to the plan. 
• Employee-contributed retirement plans are partially taxable in Hawaii. (This means you will only pay income tax on the value increase resulting from your contributions.)

401(k)s and IRAs: Distributions from 401(k) plans and IRAs are taxable in Hawaii. 

Social Security Benefits: Hawaii doesn't tax Social Security benefits.

Income Tax Range: For income that is taxed, the lowest Hawaii tax rate is 1.4% (on taxable income up to $4,800 for joint filers and up to $2,400 for single filers). The highest rate is 11% (on more than $400,000 of taxable income for joint filers and more than $200,000 for single filers).

Illinois

Pensions: Illinois is one of the states that won't tax your retirement income, including income from private pensions (as long as it's from a qualified employee benefit plan). You won't pay tax on payments from government or military pensions, either.

401(k)s and IRAs: Distributions from a 401(k) plan are tax-free if the plan is a qualified employee benefit plan. IRA distributions are not taxed, either.

Social Security Benefits: Illinois also doesn't tax Social Security benefits.

Income Tax Range: The Illinois income tax rate is a flat 4.95%.

Iowa

Pensions: Eligible Iowa residents do not need to pay tax on qualified pension income, including income from private pensions. To qualify for the exemption, taxpayers must be at least 55 by the end of the tax year. Additionally, one spouse may qualify for the income exemption even if the other spouse does not. This means that Iowa can tax one spouse and not the other.

Federal government pensions and military pensions are also tax-exempt in Iowa.

401(k)s and IRAs: Iowa won't tax 401(k) and IRA distributions. The same rules for public pension income exemption apply to 401(k) and IRA income.

Social Security Benefits: Iowa does not tax Social Security retirement benefits.

Income Tax Range: Single filers with income up to $6,210 are taxed at a 4.4% rate (up to $12,420 for joint filers). Single filers with income over $31,050 are taxed at a 5.7% rate (over $62,100 for joint filers). Beginning in tax year 2026, Iowa will have a flat 3.9% income tax rate.

Mississippi

Pensions: Mississippi is ranked by Kiplinger as one of the most tax-friendly states for retirees. That's partially because the state doesn't tax pensions (as long as it isn't for early retirement).

401(k)s and IRAs: Mississippi doesn't tax distributions from these plans. 

Social Security Benefits: Mississippi doesn't tax Social Security benefits, either.

Income Tax Range: Income over $10,000 is taxed at 4.7% for 2024.

Nevada

Pensions: Nevada won't tax your pension income because it doesn't have an income tax.

401(k)s and IRAs: With no income tax, there's also no tax on 401(k) or IRA distributions.

Social Security Benefits: Social Security benefits are not taxed in Nevada. 

Income Tax Range: Not applicable (no income tax).

New Hampshire

Pensions: New Hampshire does not have a general income tax. The state currently imposes a tax on interest and dividends (I&D) instead (although it's being phased out and will be completely repealed in 2025). That means there is no tax on your pension income if you retire to the Granite State.

401(k)s and IRAs: With no income tax, your 401(k) and IRA distributions are tax-free, too.

Social Security Benefits: There is no state tax on Social Security benefits.

Income Tax Range: For 2024, there's a flat 3% tax on interest and dividends only (4% for 2023), but this tax will be repealed in 2025.

• 3% for 2024
• 2% for 2025
• 1% for 2026. 
• Repealed on January 1, 2027.

Pennsylvania

Pensions: There is some good news for retirees in Pennsylvania. For one thing, the Keystone State doesn't tax pension income you receive from an eligible employer-sponsored retirement plan (unless you retire early).

401(k)s and IRAs: There is more good news when it comes to your 401(k) and IRA distributions. Pennsylvania won't tax these, either (unless you take them early).

Social Security Benefits: Your Social Security benefits aren't taxable in Pennsylvania.

Income Tax Range: Pennsylvania has a flat income tax rate of 3.07%. However, municipalities and school districts can tax your income, too.

South Dakota

Pensions: South Dakota has no income tax, so there's no state tax on your pension income.

401(k)s and IRAs: There is no South Dakota income tax on withdrawals from your 401(k) or IRA, either.

Social Security Benefits: South Dakota won't tax your Social Security retirement benefits.

Income Tax Range: Not applicable (no income tax).

Tennessee

Pensions: Retirees in Tennessee don't pay tax on their pension income, because there's no income tax in Tennessee.

401(k)s and IRAs: There's also no Tennessee income tax on 401(k) or IRA distributions.

Social Security Benefits: Tennessee retirees don't pay state income tax on Social Security retirement benefits.

Income Tax Range: Not applicable (no income tax).

Texas

Pensions: No state tax on your pension income might be one reason to move to Texas. In fact, the Lone Star State doesn't impose an income tax at all.

401(k)s and IRAs: Texas won't tax your 401(k) or IRA withdrawals. 

Social Security Benefits: Of course, because there's no income tax, there's no tax on your Social Security benefits in Texas.

Income Tax Range: Not applicable (no income tax).

Washington

Pensions: In the great Northwest, Washington State could be a terrific place to retire if you're living off a pension. That's because Washington is yet another state that doesn't impose an income tax.

401(k)s and IRAs: The Evergreen State won't tax distributions from your 401(k) or IRA.

Social Security Benefits: Social Security benefits are tax-exempt in Washington, too.

Income Tax Range: Not applicable (no income tax). However, Washington imposes a 7% capital gains tax (tax on stocks, bonds, etc.) if annual profits exceed $250,000. 

Wyoming

Pensions: Wyoming doesn't have an income tax, so you don't have to worry about a state tax hit on your pension. 

401(k)s and IRAs: Wyoming is also very taxpayer-friendly when it comes your retirement savings plans. There are no taxes on withdrawals from 401(k) plans and IRAs.

Social Security Benefits: Like most other states, Wyoming doesn't tax your Social Security benefits.

Income Tax Range: Not applicable (no income tax).

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