OVERVIEW
The most tax-friendly states for retirees are Florida, Tennessee, Texas, Nevada, New Hampshire, Wyoming, South Dakota, and Alaska—all nine have no state income tax, meaning Social Security benefits, pensions, 401(k) distributions, and IRA withdrawals face zero state income tax. Eight states still tax Social Security in 2026, including Colorado, Minnesota, and Vermont, though most offer partial or full exemptions based on age or income. Choosing a no-income-tax state can save retirees thousands annually.
When retirement is on the horizon, you may be dreaming of relocating to another state. With careful planning, most retirees on a fixed income can afford the cost of living in some of the nation’s most popular retirement destinations.
Retirement taxes are a vital part of stretching your budget to maintain your dream lifestyle throughout your golden years. Tax rates can vary widely by state, having a dramatic impact on your retirement budget. The difference in choosing a low-tax state for retirement could save you thousands each year.
We’ve compiled a list of the most tax-friendly states for retirees and the states with tax burdens retirees might want to avoid.
States With No Income Tax
States that don’t levy taxes on retirement income allow you to do more with a fixed income. Income from workplace retirement accounts, traditional IRAs, and pensions is subject to taxes in most states. In these nine states, you’ll pay no state tax on retirement income. Some states offer additional benefits, such as tax exemptions for property owners over 65 and affordable living costs.
Florida
Florida’s mild climate, miles of coastline, and abundance of activities to support an active lifestyle make it a top retirement destination. The Sunshine State also offers the advantage of no state income tax, helping retirees stretch their budget. Florida’s state sales tax rate is 6%, and local municipalities may add up to 2%. However, groceries and medications are exempt from state sales tax, making necessities more affordable.
Additional Considerations
Florida has no inheritance or estate tax, helping retirees avoid concerns about taxes for heirs. Property taxes in the Sunshine State vary by county, but homestead property tax exemptions up to $50,000 are available for qualifying retirees. Property insurance is also an important consideration, as it can be significantly higher in coastal areas.
Tennessee
Scenic mountain views and small-town living make Tennessee an increasingly attractive retirement state. Tennessee residents also benefit from the absence of a state income tax, meaning all forms of retirement income are exempt from state taxes. Tennessee’s state sales tax rate is higher than average at 7%, with the potential for an additional 2.75% to be added locally. Qualifying food ingredients (not including prepared foods) are taxed at a reduced rate.
Additional Considerations
Tennessee has no state inheritance or estate taxes and lower-than-average property tax rates. Residential properties are taxed at 25% of the assessed value, and residents may be eligible for tax relief and freeze programs under certain circumstances.
Texas
Friendly communities, mild winters, and a slower pace of life make Texas a popular retirement destination. The Lone Star State also has no state income tax, which means all forms of retirement income are safe from state taxes. Texas has a statewide sales tax rate of 6.25%, and local taxing jurisdictions can add up to 2%, making the combined total a little higher than average. Many food products are exempt from sales tax, but prepared foods and candy are subject to sales tax.
Additional Considerations
Texas doesn’t impose a state estate or inheritance tax. However, property taxes can be an added burden. Texas ranks 9th highest in the U.S. for effective property tax rates at 1.245%. Luckily, retirees may be eligible for an “over-65 exemption” to reduce property taxes.
Washington
Known for world-class health care and abundant green spaces, Washington is an appealing place to retire. No state income tax means retirees can stretch their earnings further. Washington’s state tax rate is 6.5%, and local districts can add up to 3.9%, making the combined rate up to 10.4% in some places. Groceries and prescription medicines are exempt from sales taxes, helping retirees save on necessities.
Additional Considerations
Washington has no inheritance tax, but it has an estate tax for properties valued at $3 million or more. Washington also imposes a 7% capital gains tax on gains above $278,000 and a 9.9% rate on gains above $1 million. On average, property taxes in Washington are on the low side, and starting in 2027, taxpayers 61 and older who make less than $74,000 per year will qualify for property tax exemptions.
Nevada
Sunny skies and endless entertainment beckon retirees to make Nevada their permanent home. The Silver State also doesn’t levy a state income tax, allowing you to keep more of your income in your pocket. However, sales tax in Nevada is a little higher than average. Nevada has a 6.85% sales tax rate statewide, and an average combined state and local tax rate of 8.24%
Additional Considerations
Nevada doesn’t impose an estate or inheritance tax, and property tax rates are reasonably affordable, with an effective tax rate of 0.50%. Retirees 62 and older may also be eligible for a partial refund for property taxes if they meet eligibility requirements for the Senior Rebate Program.
New Hampshire
Retirees who prefer cooler weather and a scenic environment are likely to thrive in New Hampshire. Here, you won’t have to worry about income or sales tax, helping you stretch your retirement budget in more ways than one.
Additional Considerations
If the long, cold winters aren’t going to scare you away, the property taxes might. Property tax rates in New Hampshire are determined by municipalities, with tax rates varying widely depending on the community you live in. For example, the difference in property taxes on a $500,000 home in Acworth vs. Charlestown can exceed $10,000. Homeowners 65 and older may be eligible for an exemption to lower property taxes, helping with these costs.
Honorable Mentions
Climate is often one of the biggest factors in finding the ideal retirement destination, which means states with colder climates are more likely to be overlooked. These states are among the most tax-friendly for retirees, but they are also known for harsh winters.
- Wyoming: Also known for low property taxes and lower sales tax
- South Dakota: Low property taxes and low overall tax burden
- Alaska: Residents are eligible for a permanent fund dividend ($1,000), but should consider the burdens of remote living and the higher cost of living
States that Tax Social Security
Taxes on Social Security can make states less tax-friendly for retirees. There are still 8 states that tax Social Security in 2026. However, many of these states have full or partial exemptions for retirees. Tax on other types of retirement income may also apply.
- Colorado: Full exemption for taxpayers 65+; taxpayers ages 55–64 can deduct up to $75,000 (single) or $95,000 (joint) of Social Security benefits, with a $20,000 deduction for those who exceed those thresholds
- Connecticut: Full exemption for taxpayers earning less than $75,000 ($100,000 joint), no more than 25% is taxed for higher earners
- Minnesota: Full exemption for taxpayers earning less than $84,490 ($108,320 joint)
- Montana: Taxpayers 65+ may subtract $5,500 from taxable income; note that several other retirement income deductions have been repealed in recent years
- New Mexico: Full exemption for taxpayers earning less than $100,000 ($150,000 joint)
- Rhode Island: Full exemption for retirees who have reached full retirement age and meet income requirements
- Utah: Offers a Social Security tax credit that offsets most or all state taxes for moderate-income retirees
- Vermont: Full exemption for taxpayers earning less than $55,000 ($70,000 joint), partial exemptions up to $64,999 ($79,999 joint)
FAQ: Retirement Taxes by State
Which states have no income tax?
Nine states have no state income tax: Florida, Tennessee, Texas, Washington, Nevada, New Hampshire, Wyoming, South Dakota, and Alaska. In these states, retirement income from pensions, 401(k)s, IRAs, and Social Security is free from state income tax.
What are the most tax-friendly states for retirees?
The most tax-friendly states for retirees include Florida, Tennessee, Texas, Nevada, Wyoming, South Dakota, and New Hampshire. Florida and Nevada also have no estate or inheritance tax. Wyoming and South Dakota combine no income tax with low property taxes and an overall low tax burden.
Which states tax Social Security benefits?
Eight states tax Social Security in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. However, most of these states offer full or partial exemptions based on age or income. For example, Colorado fully exempts taxpayers aged 65 and older, and New Mexico exempts those earning under $100,000 ($150,000 for joint filers).
Which states have no estate or inheritance tax?
Most states have no estate tax. Among the no-income-tax states, Florida, Tennessee, Texas, Nevada, Wyoming, South Dakota, and Alaska have no estate or inheritance tax. Washington is the exception; it has an estate tax on estates valued at $3 million or more. New Hampshire also has no estate or inheritance tax.
Do property taxes vary a lot by state?
Yes, dramatically. Texas has one of the highest effective property tax rates at 1.245%, while Nevada’s is just 0.50%. However, many states offer senior exemptions. Florida provides a homestead exemption up to $50,000, and Texas offers an over-65 exemption. Always check local rates alongside state income tax when comparing retirement destinations.
Which states have the highest sales tax?
Among tax-friendly retirement states, Tennessee’s combined rate can reach 9.75%, and Washington’s can reach 10.4% in some areas. Nevada’s average combined rate is 8.24%. These higher sales taxes can offset some of the savings from the absence of an income tax, especially for retirees who spend heavily on goods and services. However, many states exempt groceries and medications from sales tax.
Should I move to a tax-friendly state for retirement?
It depends on your full financial picture. The difference between a tax-friendly state and one that taxes retirement income can save thousands annually. However, taxes are just one factor—climate, health care access, cost of living, proximity to family, and lifestyle all matter. A state with no income tax but high property taxes or high insurance costs may not save as much as expected. Compare total costs, not just income tax rates.
Can choosing the right state really save me money in retirement?
Yes. For those on a fixed income, state taxes on Social Security, pensions, and retirement account withdrawals can add up significantly. Moving from a state that taxes all retirement income to one with no income tax could save thousands per year. Factor in property tax exemptions for seniors, estate tax protections for heirs, and sales tax exemptions on groceries and medications, and the cumulative savings over a 20- to 30-year retirement can be substantial.
Start Your Search in a Tax-Friendly State
Most retirees are on a fixed income, making tax breaks a crucial part of budget planning. Choosing a tax-friendly state for retirement can help you reduce costs on essentials and enjoy the lifestyle you’ve always longed for. Many of these tax-friendly states are home to 55+ communities that offer affordable housing and a range of on-site amenities. Visit 55places to learn more about retirement communities and how they can work alongside tax breaks to help you stretch your budget.
- Insights and market stats
- Instant new home alerts
- Answers from local 55+ experts
