13 States That Don’t Tax Retirement Income

Where you pick to invest your golden years can affect how far your savings will go.

Retirement earnings isn’t taxed in 13 states– suggesting you can prevent paying Uncle Sam on circulations from your 401( k), individual retirement account and pension payments. In a lot more states, your Social Security payments are tax-exempt.

Below, CNBC Select lays out which mentions let retired people off the hook, in addition to the very best business to open a pension with.

Because retirement earnings originates from various sources, there’s not a single technique that all 50 states take when it concerns taxing it.

Some states don’t have income tax, while others make exemptions for retirement income. Most states don’t tax Social Security benefits, and there are a few states that tax 401(k) plans and IRA distributions but not pensions.

Of course, there are a lot of nuances surrounding the taxation of retirement income. Even if they tax distributions, almost all states offer some form of tax relief for retirees, whether it’s a tax cap, an income limit on exemptions or other breaks.

And, as state tax laws are always changing, it’s important to stay up-to-date with your state tax commission.

No income tax

Nine states don’t tax any income, whether it’s a paycheck or income from your 401(k), IRA, pension payments or Social Security check.

• Alaska
• Florida
• Nevada
• New Hampshire (does tax interest and dividends)
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

No income tax on retirement income

In addition, four states with income tax make an exception for retirement income like 401(k)s, IRAs and pension distributions, as well as Social Security benefits.

No tax on Social Security

Currently, only 11 states tax Social Security benefits and several of them are in the process of phasing it out.

These 39 states and the District of Columbia do not tax Social Security benefits.

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Nevada
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• South Dakota
• Tennessee
• Texas
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

No tax on pensions

These 15 states don’t tax pension income. (Note: Other states may provide a credit or exemption for a portion of pension income.)

• Alabama (does tax 401(k) and IRA distributions)
• Alaska
• Florida
• Hawaii (does tax 401(k) and IRA distributions)
• Illinois
• Iowa
• Mississippi
• Nevada
• New Hampshire
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

The lowest-hanging fruit when it comes to retirement accounts is signing up for your employer’s 401(k) — especially if they offer to match your contributions. The money that employees themselves contribute is taken from pre-taxed income, which lowers your taxable income for the year.

If your employer doesn’t offer a 401(k) — or if you want to supplement it — a Roth IRA is a great way to maximize your retirement savings. You contribute after-tax dollars, so your withdrawals later in life are tax-free. Having both a 401(k) and a Roth IRA allows you to diversify your portfolio and take advantage of different tax benefits and withdrawal options.

You’ll find the best Roth IRAs at big-name brokerages like Charles Schwab and Fidelity, while robo-advisors like Wealthfront also offer Roth IRAs as part of their automated investing options.

Tax laws shouldn’t be the sole factor in determining where you spend your retirement, but they’re certainly something to consider. Not all states treat retirement income the same, whether it’s a 401(k), IRA or Social Security.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every retirement article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of investing products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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