Best States to Retire for Taxes (2026)

The right state can mean thousands more in your pocket each year. Here is what makes a state tax-friendly for retirees, and which ones spare Social Security, pensions, and 401(k)s.

FreedomRankings EditorialUpdated June 4, 20267 min read

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What makes a state tax-friendly?
No tax on retirement income
States that tax Social Security
Don’t forget property & sales tax
How states rank on economy

Where you retire can swing your after-tax income by thousands of dollars a year. The most tax-friendly states leave Social Security, pensions, and 401(k) withdrawals alone — and only a shrinking handful still tax retirement benefits. Here's how to read the map.

The short version

13 states don't tax retirement income — the 9 no-income-tax states plus Illinois, Iowa, Mississippi, and Pennsylvania.
Only 8 states still tax Social Security in 2026, and most of those offer deductions or income limits.
Property and sales taxes can outweigh income-tax savings — judge the whole bill.
The right state can mean $3,000–$10,000+ a year in extra after-tax income.

What makes a state tax-friendly for retirees?

Retirees draw income differently than workers — mostly from Social Security, pensions, and retirement accounts — so the taxes that matter most are:

Income tax on retirement income — is Social Security, pension, and 401(k)/IRA income taxed?
Property tax — usually a retiree's biggest ongoing state-level cost.
Sales tax — it quietly taxes everyday spending on a fixed income.

A great retirement-tax state keeps all three modest. Focusing on just one can be misleading.

States that don't tax retirement income

Thirteen states won't touch your retirement income at all. Nine have no income tax of any kind; four more keep an income tax but specifically exempt retirement income:

States that don’t tax retirement income

13 · June 2026

States where Social Security, pensions, and 401(k)/IRA withdrawals go untaxed — either because there’s no income tax or because retirement income is specifically exempt.

Highlighted states have no income tax at all; the rest keep an income tax but exempt retirement income.

Illinois and Pennsylvania are especially notable — they have an income tax for workers, but exempt Social Security, pensions, and 401(k)/IRA withdrawals, making them quietly some of the most retiree-friendly states in the country.

The list of states taxing Social Security keeps shrinking — down to just eight in 2026, most with generous deductions or income thresholds:

States that still tax Social Security

8 · June 2026

The 8 states that still tax Social Security benefits in 2026 — though most offer deductions, credits, or income limits that spare lower- and middle-income retirees.

The list keeps shrinking — West Virginia is phasing its Social Security tax out by 2026. The other 42 states don’t tax benefits at all.

Don't forget property and sales tax

This is where "best state to retire" lists go wrong. A no-income-tax state can still be expensive for a retiree if it leans hard on property or sales tax:

A retiree who owns a home should weigh property taxes heavily — they're paid every year regardless of income.
A retiree who spends most of their income feels sales tax more than income tax.

How states rank on economic freedom

Our economic-freedom score captures the total tax load — income, sales, and property — plus regulation, so it's a useful starting point for narrowing your list:

Top 10 states — Economic FreedomLive data

See all 50 states ranked on Economic Freedom

See the full tax-burden & economic-freedom ranking

All 50 states ranked on total tax load, regulation, and business climate — with a color-coded map.

Frequently asked questions

Which states don’t tax retirement income?

The nine no-income-tax states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) tax no retirement income, and four more — Illinois, Iowa, Mississippi, and Pennsylvania — specifically exempt it despite having an income tax.

Which states still tax Social Security in 2026?

Just eight: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont — and most of those offer deductions or income limits. West Virginia is phasing its tax out by 2026.

Is a no-income-tax state always best for retirees?

Not necessarily. A state with no income tax but high property or sales taxes could cost a retiree more than a state that taxes income but exempts retirement income. Look at the full picture.

How much can the right state save a retiree?

It varies, but the difference between a tax-friendly and tax-heavy state can easily be $3,000–$10,000+ a year in after-tax retirement income, depending on income, home value, and spending.

Sources

Tax Burden by State: all 50 ranked

See total tax and economic freedom for every state — income, sales, and property combined.

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