Best States to Retire for Taxes in 2026: Complete Guide
Where you retire can save (or cost) you thousands per year in taxes. Here's the complete breakdown of the most tax-friendly states for retirees in 2026.
The 9 No-Income-Tax States
These states charge zero state income tax on any income — wages, retirement withdrawals, Social Security, everything:
| State | Income Tax | Property Tax (avg rate) | Sales Tax | Retirement Score |
|---|---|---|---|---|
| Florida | None ✅ | 0.86% | 6.0% | ★★★★★ |
| Texas | None ✅ | 1.68% | 6.25% | ★★★★ |
| Nevada | None ✅ | 0.53% | 6.85% | ★★★★★ |
| Wyoming | None ✅ | 0.56% | 4.0% | ★★★★★ |
| South Dakota | None ✅ | 1.14% | 4.5% | ★★★★ |
| Tennessee | None ✅ | 0.64% | 7.0% | ★★★★ |
| Washington | None ✅ | 0.93% | 6.5% | ★★★★ |
| Alaska | None ✅ | 1.17% | 0% | ★★★ |
| New Hampshire | None ✅ | 1.86% | 0% | ★★★ |
Top picks: Florida, Nevada, and Wyoming
These three combine no income tax with low property taxes AND moderate sales tax. For a retiree withdrawing $60K/year from retirement accounts, that's $0 in state income tax vs. $3,000-$6,000 in states like California or New York.
States That Don't Tax Social Security (2026)
As of 2026, 41 states and DC do not tax Social Security benefits. The states that still tax some or all SS income:
| State | SS Taxation | Details |
|---|---|---|
| Colorado | Partial | Exempt under $20K (single) / $24K (married) if 65+ |
| Connecticut | Partial | Exempt if AGI under $75K (single) / $100K (married) |
| Minnesota | Partial | Subtraction up to $5,450 (single) / $7,050 (married) |
| Montana | Follows federal | Taxed same as federal (up to 85%) |
| New Mexico | Follows federal | Exempt if AGI under $100K (single) / $150K (married) |
| Rhode Island | Partial | Exempt if AGI under $101,000 (both) |
| Utah | Partial | Non-refundable credit offsets for lower incomes |
| Vermont | Partial | Exempt if AGI under $50K (single) / $65K (married) |
| West Virginia | Phasing out | Fully exempt by 2026 (phased elimination) |
States That Exempt Retirement Income
Several states with income taxes still exempt most or all retirement income (401k, IRA, pension withdrawals):
- Alabama: Pensions fully exempt. 401k/IRA taxed as regular income.
- Hawaii: Employer-sponsored pensions exempt. 401k/IRA taxed.
- Illinois: All retirement income exempt (401k, IRA, pension, SS).
- Iowa: All retirement income exempt starting 2023.
- Mississippi: All retirement income exempt. Flat 5% rate otherwise.
- Pennsylvania: All retirement income exempt once age 59½.
💡 Hidden gems: Illinois, Mississippi, and Pennsylvania
These states have income taxes but fully exempt retirement income. If your only income in retirement comes from 401k/IRA withdrawals, pensions, and Social Security, your effective state income tax rate is 0% — same as Florida or Texas, often with lower cost of living.
The 5 Worst States for Retirement Taxes
- California: Top income tax rate 13.3%. Taxes all retirement income including SS (for high earners at federal level). No retirement income exemption.
- New York: Top rate 10.9%. Exempts first $20,000 of pension income but taxes 401k/IRA withdrawals. High property taxes.
- Connecticut: Top rate 6.99%. Taxes SS for higher earners. High property taxes. High cost of living.
- Minnesota: Top rate 9.85%. Partially taxes SS. Cold weather adds to heating costs.
- Oregon: Top rate 9.9%. No sales tax (good) but taxes ALL retirement income with no exclusions.
Property Taxes: The Hidden Cost
Income tax gets the attention, but property tax can matter more for retirees with paid-off homes. On a $350,000 home:
| State | Effective Rate | Annual Tax on $350K Home |
|---|---|---|
| Hawaii | 0.29% | $1,015 |
| Alabama | 0.39% | $1,365 |
| Nevada | 0.53% | $1,855 |
| Florida | 0.86% | $3,010 |
| Texas | 1.68% | $5,880 |
| New Jersey | 2.23% | $7,805 |
| New Hampshire | 1.86% | $6,510 |
Texas has no income tax but the highest property taxes of any no-income-tax state. If you own an expensive home, the property tax bill can exceed what you'd pay in income tax in a moderate-rate state.
How to Think About Retirement Tax Planning
1. Look at Your Total Tax Picture
Don't just look at income tax. Calculate: income tax + property tax + sales tax + healthcare costs. A state with 5% income tax but $1,000/year property taxes might be cheaper than Texas with 0% income tax but $6,000/year property taxes.
2. Your Income Sources Matter
If your retirement income comes primarily from Social Security + pension, a state like Illinois (which exempts both) is effectively tax-free. If it comes from taxable brokerage accounts, a true no-income-tax state is better.
3. Don't Move Just for Taxes
Moving away from family, friends, and community to save $3,000/year in taxes rarely makes people happier. Factor in cost of living, healthcare access, climate, and proximity to family before making a decision based solely on tax savings.
4. Consider the Roth Conversion Window
If you live in a high-tax state now but plan to move to a no-income-tax state in retirement, wait to do Roth conversions until after you move. Converting in Florida = 0% state tax on the conversion. Converting in California = up to 13.3%.
Calculate Your Retirement Income Needs
Know exactly how much you can safely spend — wherever you retire.