Nine states currently levy no personal income tax, a key starting point for retirees seeking lower state tax bills. Those states are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming and New Hampshire. Some sources treat Washington as a special case because it taxes capital gains for high earners, so published shortlists can vary. Social Security, pensions, military pay and other retirement income are handled very differently across states, and experts say you must weigh income-tax rules together with sales, property and estate taxes and local cost of living to judge the real impact. Use the USAFacts benchmark that the average U.S. Taxpayer paid 8.9% of income in state-level taxes in 2020 to gauge how a move would change your after-tax spending power.

1. Inventory every source of income

Start with a clear list of your expected retirement receipts. Break out Social Security, employer or government Pensions, IRA and 401(k) distributions, Military retirement pay, and taxable investment income. Multiple consumer guides agree that the composition of your retirement income is the single most important input to any state comparison.

Worked example: Jane expects $24,000 a year in Social Security, $18,000 from a public pension, and $10,000 of taxable interest. That mix matters because some states exempt Social Security fully but tax pensions or investment income. Map each line to the states you plan to consider.

2. Screen candidate states by income-tax rule

Cut your long list quickly by two simple screens. First, shortlist states that have no personal income tax. A USAFacts-based analysis reported by one source lists seven such states: Alaska, Wyoming, Florida, Nevada, South Dakota, Texas and Washington. Another analysis in the set also centers its retiree shortlist on states with no income tax, naming South Dakota, Tennessee, Iowa, Wyoming, Nevada and Texas among top choices. A third source counts nine no-income-tax states and treats Washington as a special case because it taxes capital gains on high earners. The counts differ across sources, so expect some variation in published shortlists.

Second, keep states that explicitly exempt the type of retirement income you rely on. That filter typically weeds out many states quickly.

Screen checklist:

  • Does the state levy a personal income tax at all?
  • If yes, does the state exempt Social Security?
  • Does the state exempt public or private pensions, military retirement pay, IRA/401(k) distributions, or specific investment income?

Worked example: If you rely primarily on Social Security, a state that exempts Social Security but levies a modest pension tax may still be a good fit. If most of your income comes from taxable investments, a zero-income-tax state that still taxes capital gains could cost you more than you expect.

3. Map state rules for each income line

For every candidate state, list the statute language or tax guidance that applies to each receipt on your inventory. The synthesis bundle shows that detailed exemptions and counts vary by source, so use official state tax publications to confirm eligibility rules and effective dates. One source reported that 42 states don't tax Social Security, that 37 states don't tax most military retirement pay, and that 16 states exempt pension income. Those tallies appear only in that source within this set and are therefore single-sourced here.

Treat single-source numbers as provisional until you verify them with state authorities.

Basically, worked example: If a guide says Mississippi exempts 401(k) distributions, confirm with the Mississippi Department of Revenue whether that exemption applies to your plan, whether there are income thresholds, and whether the exemption changed after the guide published.

4. Add sales, property and estate/inheritance taxes

Don’t stop at income taxes. The USAFacts-based analysis used in one source combines income, sales, property and other state levies into an overall tax-burden figure, and it shows that a low or zero income tax can be offset by other levies. South Dakota, for example, is described in multiple sources as having no personal income tax and no estate tax, but it still raises revenue through sales and property levies. One source gives a combined state and local sales tax rate of 6.11% and an average statewide property tax rate of 1.14% for South Dakota.

Mastheads

Checklist for each state:

  • Combined state and local sales tax rate.
  • Average or effective property tax rate and typical local additions.
  • Presence of estate, inheritance or gift taxes.

Worked example: Two retirees compare Texas and Mississippi. Texas has no personal income tax, but property taxes tend to be higher in some counties. Mississippi exempts many retirement receipts but applies a flat rate to other income. Carry both sides of the ledger to see which state leaves more after-tax cash.

Taxes matter in dollars, not just percentages. One consumer guide in the set frames tax treatment alongside median household income and average property taxes so retirees can translate percent differences into expected budget effects. For instance, Mississippi’s median household income is cited at $35,467 in one analysis, and that same analysis shows an average effective property tax rate of 0.76%. Those context numbers help you decide whether a lower effective tax rate actually raises your spending power given local prices for housing, health care and services.

Worked example: If your projected after-tax income is 6% higher in State A but housing and health care cost 15% more there, the tax gain may not cover the higher living costs. Tie the dollars to your likely expenses before you move.

Policy shifts can flip a state’s attractiveness. One source reports state-level changes that took effect January 1, 2025, including Iowa’s move to a flat 3.8% tax and the repeal in New Hampshire of its tax on interest and dividends. Those reports appear only in that source within this bundle and are therefore single-sourced here. Another source provides a snapshot of Mississippi’s income-tax structure for taxable income beyond exempt retirement receipts, saying the state applies a flat 4.4% rate on other income above $10,000 and that the rate was set to fall to 4.0% in 2026. Because these items aren't cross-verified in this file, confirm effective dates, transitional rules and any later amendments directly with state tax agencies or official publications before you rely on them.

Worked example: If you expect significant taxable investment income, verify whether New Hampshire’s repeal of the interest-and-dividends tax fully removes that tax for your account types, and whether the repeal includes grandfathering rules for phased-out credits or transitional filings.

Project your post-retirement income streams and apply state-specific exemptions, rates and anticipated sales and property tax liabilities. Divide projected state tax payments by projected income to yield an effective state-tax share. The USAFacts framework used in one source is an example of this combined-burden approach. That source reports that nationally in 2020 the average American paid 8.9% of income in state-level taxes. Alaska had the lowest average overall-burden figure at 5.4%, followed by Tennessee, New Hampshire, Wyoming and Florida in the low-burden group.

Worked example: Compute two scenarios for a household with $60,000 of retirement income. Scenario A lives in a zero-income-tax state with higher property tax and a 6% sales tax. Scenario B lives in a low-income-tax state with modest sales tax and lower housing costs. Run both through the same projection worksheet and compare the effective tax rates and the dollar difference in annual after-tax income.

If relocation is on the table, pair the tax calculation with lifestyle, health care access and service considerations. Consumer guides in the set recommend ranking candidates by expected after-tax spending power plus nonfinancial fit. A move that saves taxes but leaves you far from medical care or your social network may not be worth it.

Checklist for relocation decisions:

  • Projected after-tax spending power compared across states.
  • Access to primary and specialist health care services for your needs.
  • Local amenities, family proximity, and climate or mobility considerations.
  • Timing costs such as moving expenses and any real-estate taxes or transfer fees.

Worked example: A retired couple favors South Dakota for its lack of income tax and no estate tax, but they add living-cost and health-care access checks. After modeling taxes and expected medical travel costs, they compare the net benefit to staying in their current state where their support network is stronger.

Several consumer-facing guides in the set highlight overlapping shortlists of retiree-friendly states, but they weight variables differently. One guide places Mississippi, South Dakota, Iowa, Tennessee, Wyoming, Nevada and Texas among the most advantageous for retirees based on retirement-income exemptions and low cost of living. Another guide’s state-by-state entries call out Arkansas, Illinois, Iowa, Mississippi, New Hampshire and Pennsylvania as states that exempt some or all forms of retirement income, and it summarizes state-by-state exemptions along with estate and inheritance tax details. The variation reflects different editorial choices about how much weight to give retirement-income exemptions versus broader fiscal measures and the vintage of underlying data.

Two specifics repeated across the bundle:

  • Mississippi is named by multiple sources as retiree-friendly because it exempts Social Security, U.S. Department of Veterans Affairs payments, pensions, and 401(k) and IRA distributions from state income tax, and it doesn't levy estate, gift or inheritance taxes. One analysis adds that Mississippi applies a flat 4.4% rate on other income above $10,000, with that rate scheduled to fall to 4.0% in 2026. Those details appear in a single source in this bundle and should be confirmed with state authorities.
  • South Dakota is noted by more than one source as having no personal income tax and no estate tax, while collecting revenue through sales and property levies. One source reports a combined state and local sales tax of 6.11% and an average statewide property tax rate of 1.14% for South Dakota.

Before you move or change residency for tax reasons, run this final checklist:

  • Inventory and categorize all expected income lines.
  • Shortlist states with no income tax or with explicit exemptions for your income types.
  • Confirm state rules and effective dates with official state tax publications or the relevant state tax agency.
  • Factor in sales, property, and estate or inheritance taxes.
  • Adjust for cost of living and median income to convert rates into dollars.
  • Rank candidates by projected after-tax spending power and nonfiscal fit.
  • Seven states are commonly cited as having no personal income tax: Alaska, Wyoming, Florida, Nevada, South Dakota, Texas and Washington, but sources differ on the exact count and special cases.
  • Tax treatment of Social Security, pensions and military pay varies widely; one source reports 42 states don't tax Social Security, 37 don't tax most military retirement pay, and 16 exempt pension income, but those tallies are single-sourced in this bundle.
  • Always add sales, property and estate taxes to your model. USAFacts-based analysis shows that overall state tax burden matters: the average U.S. Taxpayer paid 8.9% of income in state-level taxes in 2020.
  • Confirm any reported rule changes directly with state tax agencies, especially items that are single-sourced here such as Iowa’s reported move to a 3.8% flat tax and New Hampshire’s reported repeal of interest-and-dividends tax.

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Use the USAFacts benchmark: in 2020 the average U.S. Taxpayer paid 8.9% of income in state-level taxes, and Alaska had the lowest average overall burden at 5.4%, with Tennessee, New Hampshire, Wyoming and Florida also among the lowest-burden states. Treat that benchmark as your yardstick when you compute an effective state-tax rate for each candidate, and confirm all state-specific rules with official state tax authorities.

This article was created with AI assistance.