Quick Answer
State taxation of retirement income varies widely: 9 states have no income tax, 13 states don't tax retirement income at all, and others offer partial exemptions. For example, Pennsylvania exempts all retirement income while California taxes it at regular rates up to 13.3%.
Best Answer
Robert Kim, Tax Return Analyst
Retirees or pre-retirees planning their tax strategy across different states
How states tax retirement income varies dramatically
State taxation of retirement income falls into four main categories, and the differences can cost or save you thousands annually. According to the Tax Foundation, retirees can face state tax rates ranging from 0% to over 13% on the same retirement income.
The four categories of state retirement tax treatment
No state income tax (9 states): Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming impose no state income tax on any income, including retirement distributions.
Full retirement income exemption (13 states): These states have income taxes but exempt retirement income entirely: Alabama, Hawaii, Illinois, Iowa, Louisiana, Massachusetts, Michigan, Mississippi, New York, Pennsylvania, and others.
Partial exemptions with limits: Many states exempt the first $X of retirement income. For example, Georgia exempts up to $65,000 per person age 62-64, and unlimited amounts for those 65+.
Full taxation: States like California, Connecticut, and Vermont tax retirement income at regular income tax rates.
Example: $60,000 annual retirement income across different states
Key factors that affect state retirement taxation
Type of retirement income matters: Some states distinguish between different sources. Connecticut taxes 401(k) distributions but exempts teacher pensions. Others treat all retirement income equally.
Age thresholds: Many states offer better treatment once you reach certain ages. Missouri exempts all retirement income for taxpayers 62+, while Georgia's exemption increases at 65.
Income limits: Partial exemption states often phase out benefits at higher income levels. Colorado's $24,000 exemption (2026) only applies to taxpayers with federal adjusted gross income under specific thresholds.
Military pension special treatment: Most states exempt military retirement pay entirely, even if they tax other retirement income.
Federal vs. state taxation coordination
Remember that federal taxation remains the same regardless of your state. According to IRS Publication 590-B, traditional 401(k) and IRA distributions are federally taxable as ordinary income. State treatment is completely separate and varies by state law.
Roth IRA and Roth 401(k) distributions remain federally tax-free in retirement and are also exempt from state taxes in all states that have income taxes.
What you should do
First, research your current state's specific retirement income tax rules, as they change frequently. Second, if you're planning to relocate in retirement, factor state tax treatment into your decision alongside cost of living and other factors.
Use our return scanner to identify if you're missing any state-specific retirement income deductions or credits you may be entitled to.
Key takeaway: The difference between living in a retirement-friendly state versus a high-tax state can exceed $50,000 over a 10-year retirement period on $60,000 annual retirement income.
Key Takeaway: State retirement income taxation varies from 0% to over 13%, potentially costing or saving tens of thousands over retirement.
State retirement income tax treatment comparison for major retirement-destination states
| State | 401(k)/IRA Tax | Pension Tax | Social Security Tax | Notes |
|---|---|---|---|---|
| Florida | No state tax | No state tax | No state tax | No income tax at all |
| Texas | No state tax | No state tax | No state tax | No income tax at all |
| Pennsylvania | Exempt | Exempt | Exempt | All retirement income exempt |
| North Carolina | Taxed | Taxed | Exempt | Regular income tax rates |
| California | Taxed | Taxed | Exempt | Up to 13.3% marginal rate |
| New York | Taxed | Varies | Exempt | NY pensions may be exempt |
More Perspectives
Michelle Woodard, Tax Policy Analyst
Retirees who changed states during retirement or are considering a move
State changes during retirement create unique tax situations
Moving states during retirement can trigger complex tax scenarios that many people overlook. The key issue is establishing legal residency in your new state while ensuring you've properly severed ties with your old state.
Timing matters for tax residency
Most states use a "domicile test" to determine residency. If you move from New York (which taxes retirement income) to Florida (no income tax) mid-year, you'll need to file part-year returns in both states. The income earned while a New York resident gets taxed by New York, even if received after your move.
Common mistakes when relocating
Maintaining old state connections: Keeping your old driver's license, voter registration, or primary bank accounts can trigger audits. High-tax states like California and New York are particularly aggressive about challenging residency changes.
Not understanding source rules: Some retirement income may remain taxable in your old state regardless of where you live. New York, for example, can tax NY state pension income even if you move to Florida.
Documentation you need
Maintain detailed records of your move date, new state driver's license, voter registration, and utility connections. These become crucial if either state challenges your residency change.
Key takeaway: Moving states during retirement requires careful planning and documentation to avoid dual-state taxation conflicts.
Key Takeaway: State moves during retirement require proper residency establishment and documentation to avoid dual taxation.
Robert Kim, Tax Return Analyst
Retirees receiving retirement income sourced from different states than where they live
Multi-state retirement income creates filing complexity
When your retirement income originates from a different state than where you live, you often face multi-state filing requirements and potential double taxation scenarios.
Source state rules vary significantly
Pension source taxation: If you worked in Pennsylvania but retired to Florida, Pennsylvania generally cannot tax your private company pension. However, if you receive a Pennsylvania state employee pension, PA may continue taxing that income.
401(k) and IRA distributions: These are typically taxed only by your resident state, not the state where your former employer was located or where the account is administered.
Credit for taxes paid to other states
When you must pay tax to multiple states on the same income, your resident state typically provides a credit for taxes paid to the source state. However, the credit is limited to the amount of tax your resident state would impose on that income.
Example: Multi-state tax scenario
Retired teacher living in North Carolina, receiving pension from Virginia:
Key takeaway: Multi-state retirement income often requires filing returns in multiple states, but credits typically prevent true double taxation.
Key Takeaway: Multi-state retirement income typically requires multiple state returns, but credits prevent double taxation in most cases.
Sources
- IRS Publication 590-B — Distributions from Individual Retirement Arrangements (IRAs)
- Tax Foundation State Tax Policy — State Individual Income Tax Rates and Brackets
Reviewed by Robert Kim, Tax Return Analyst on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.