Top US states do not tax your Social Security, 401(k) or IRA or pension income, and thus retirement becomes easier and more comfortable. By 2025, most of the states are simplifying the lives of retirees who do not pay taxes on retirement income sources such as Social Security, withdrawals in accounts such as 401(k) and IRA, as well as pensions funds. Here you can check in detail on what states provide this freedom when it comes to finances, how the mechanism operates, and what you must know in order to be able to keep more of your retirement funds.
Retirement is not an occasion to be stressed. Upon retirement, you may receive Social Security, or a personal retirement investment (such as a 401(k) or IRA), a company pension, among other savings. The vast majority of the population anticipates paying federal taxes, some of them, however, are unaware that, in addition, there are also states that take a bite out of this revenue.
The taxes paid to the state may increase very fast, and in case you rely on constant monthly pay, they may become very expensive. The location you live during retirement can save you thousands of dollars per annum. That is why knowing the rules of a state is very significant to one who has plans in his/her future.
Top U.S. States With No Taxes on Social Security, IRA, or Pension Income
With the most recent update of 2025, a number of states allow you to receive all or the vast majority of your retirement income without any additional payment of state taxes. These states enable the retired individuals to enjoy more money to spend on their needs, dreams or family.
- Arkansas: You can receive up to 6000 dollars annually on IRA or pension plans without incurring state tax provided you are over 59 and a half years of age.
- Illinois: In this state, all the retirement income remains tax-free. The social security, pension money and the retirement account withdrawals can be spent without any concern.
- Iowa: Income on retirement account and pension is not taxed once one turns 55. The Social Security income is never taxed in Iowa.
- Mississippi: No retirement income tax in the state. This implies that there are no state taxes on Social Security, pension, and retirement account draw-downs. Caution Early withdrawals could still be treated as ordinary income.
- New Hampshire: There is no taxation of social security and pension income. Taxation on interest and dividends on retirement accounts was previously taxed by the state but it is not applicable anymore this year.
- Pennsylvania: Retirees receive all their pension, retirement account, and Social Security income tax-free in the state.
- South Carolina: You receive a tax deduction on retirement account funds and pensions. You are allowed to deduct up to 3,000 in case you are under 65. The deductible is up to $ 10,000 in case you are 65 years old or above. All the Social Security benefits are not taxed.
States With No Income Tax At All
There is another category of states that do not tax the income at all. This benefits not only the retirees, but all individuals who make money. All ordinary work income, the retirement withdrawals, pensions and the Social Security are not subject to taxation in these states; in case you are the resident of the state:
- Alaska
- Florida
- Nevada
- South Dakota
- New Hampshire
- Tennessee
- Texas
- Washington
- Wyoming
Individuals usually relocate to such states to pay reduced taxes, sun, or to have new experiences. To retirees, such states have even more in order to unwind and have fun.
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Only 9 States That Still Have A Social Security Tax
Social security is the primary source of retirement income to many Americans. The positive aspect: You will not be taxed in almost all states on your Social Security income. These states are the only ones that tax Social Security:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia (This tax will be eliminated in 2026)
Thus, in 41 states and Washington, DC, the Social Security money is drained to retirees tax-free. This further makes the place to stay selection even bigger when you know that Social Security is going to become the majority of your retirement.
It is important to remember that the federal government still has the power to tax your social security income depending on your total combined income. The percentage of taxation of each individual will vary, as it is based on the other income.
Federal Social Security Tax Calculation
Although your state does not impose taxes on your Social Security benefits, the IRS can. The IRS determines whether and how much you should pay it as follows:
- Total gross income, adjusted.
- Add a half of your annual Social Security benefit then.
- Include any nontaxable interest that you receive (on some bonds or accounts).
This amount is referred to as combined income. The IRS provides brackets of the amount of your Social Security that can be taxed:
| Percentage of Taxable Benefits Added to Income | Filing Single | Married, Filing Jointly |
| 0% | Less than $25,000 | Less than $32,000 |
| Up to 50% | $25,000 to $34,000 | $32,000 to $44,000 |
| Up to 85% | More than $34,000 | More than $44,000 |
The value that is taxed is added to your other income and taxed at your standard tax rate. These percentages do not imply that the government levies tax on your benefits at that rate but simply that amount of your Social Security can be regard as income.
Retirement Tax Laws
Retirement income is taxed (or not taxed) by states because of a myriad of reasons. In other cases, they may wish to attract more retirees to spend in the local economies. In other circumstances, they have used alternative sources of generating income such as sales tax, tourism or industry. The retirees who move into states with no income tax tend to invest more time in this state purchasing houses and constructing new lives.
In the situation of retirees, the need to relocate to a state where such taxes do not exist may translate to increased cash in the pocket, increased home-cooked meals, and an increased number of holidays or specials. It is also prudent to plan ahead since a dollar saved on taxes can be used to purchase medicine, gifts, or tickets to visit family members.
Latest Updates in 2025
In certain states the rules are updated every year. For example The state of West Virginia is eliminating state Social Security tax by 2026. The phase-out of taxation on retirement account interest and dividends in the state of New Hampshire is no longer in progress in 2025. South Carolina has simplified its 10,000 retirement income deduction to more people above 65 years. These updates are good news. It implies that more states are improving the life of retirees and everyone will find it easy in planning future life.
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How to Maximize your Retirement Income
To have greater freedom in retirement with money, remember the following tips, Study the tax laws of your state annually since they are liable to change. Learn how much you will pay in taxes before you migrate using government retirement calculators. Meet with a financial advisor to discuss individual retirement plans and sources of income. Look into regional programs that provide additional benefits to the elderly such as discounts or free services. Even a small amount of planning and data can help you to retire on more peaceful, joyful, and prosperous.
States that have the highest number of benefits to retirees
According to low taxes and easy life, the following are some of the best places retired Americans would love to be:
- Florida: There are no income taxes, the climate is warm, and there are numerous retiree communities.
- Tennessee: No state income tax, welcoming towns and good medical facilities.
- Pennsylvania: There are no taxation requirements on social security and retirement income, as well as on numerous scenic locations.
- Texas: The state has no tax on income; communities are large and diverse.
- South Dakota/Wyoming: There is no tax on state income, no commotion.
Every state has got something different to offer. The trick is that you have to find a place that is considered to be the home and allows you to retain most of your money. Retirement is an enormous change of life. You have to take your time and make a decision on what is important to you. Others prefer to be close to family members by choosing the states nearby. Others go very far to seek a new existence or warmer climate.