Retirement Taxes by State: The Complete 2026 Guide for Every Retiree
Retirement Taxes by State: The Complete 2026 Guide for Every Retiree
Two retirees. Same $120,000 annual income. Same Social Security benefit, same pension, same IRA balance. One lives in Wyoming. The other lives in California. The California retiree pays roughly $7,200 more in state income taxes every year. Over a 25-year retirement, that’s more than $180,000 in after-tax spending capacity — gone.
Where you retire is one of the most powerful tax decisions you’ll ever make. And yet most people spend more time researching which refrigerator to buy than analyzing how their state treats retirement income.
This guide covers all 50 states — how each treats Social Security, pension income, 401(k)/IRA withdrawals, and other retirement income sources in 2026. Whether you’re planning a move, already retired, or helping a parent decide where to settle, this is your reference.
The Four Categories of State Retirement Taxation
Before we dive state by state, here’s how to think about the landscape:
Category 1: No State Income Tax — Nine states. Everything is tax-free at the state level (with some nuances on property and sales taxes).
Category 2: Income Tax, But All Retirement Income Exempt — Four states. You pay state tax on wages, but once retired, you owe nothing on Social Security, pensions, 401(k)s, or IRAs.
Category 3: Partial Exemptions — Most states. Social Security may be exempt but pensions are taxed, or there’s an income threshold above which benefits become taxable.
Category 4: Most Retirement Income Taxed — A handful of states treat retirement income like ordinary wages, subject to full state income tax rates.
Oregon falls into Category 3 — and if you live here, there are real planning opportunities worth knowing about.
Category 1: The 9 States With No Income Tax
These states don’t tax ANY income — wages, Social Security, pensions, 401(k)s, IRAs, or investment gains (with minor exceptions noted).
| State | State Sales Tax | Avg. Property Tax Rate | Notes |
|---|---|---|---|
| Alaska | 0% | 1.04% | No state income or sales tax. No estate tax. |
| Florida | 6.0% | 0.91% | Most popular retirement state. Humid summers. No estate tax. |
| Nevada | 6.85% | 0.55% | Low property taxes. Hot and dry. |
| New Hampshire | 0% | 1.57% | Repealed Interest & Dividends Tax in 2025. High property taxes. |
| South Dakota | 4.2% | 1.08% | No estate tax. Cold winters. |
| Tennessee | 7.0% | 0.54% | High combined sales tax. Low property taxes. Growing popularity. |
| Texas | 6.25% | 1.60% | Very high property taxes offset the income tax savings. |
| Washington | 6.5% | 0.87% | 7% capital gains tax on gains over $270K, but NOT on retirement distributions. |
| Wyoming | 4.0% | 0.55% | Consistently ranked best state for retiree taxes. Low everything. |
The catch with “no income tax” states: Texas retirees with a $500,000 home pay roughly $8,000/year in property taxes. Tennessee’s combined state/local sales tax averages 9.6% — second highest in the nation. Always model the total tax burden, not just the income tax line.
Category 2: Income Tax But Fully Exempt Retirement Income
These four states levy income taxes on wages, but retirees pay zero state income tax on Social Security, pensions, and retirement account distributions.
| State | Income Tax Rate | What’s Exempt |
|---|---|---|
| Illinois | 4.95% flat | All retirement income — pensions, 401(k), IRA, Social Security — fully exempt |
| Iowa | 3.9% flat | All retirement income exempt (effective 2023) |
| Mississippi | 4.0% flat | All qualified retirement distributions exempt (early withdrawals may be taxed) |
| Pennsylvania | 3.07% flat | All retirement income exempt after age 59½ — pensions, 401(k), IRA, Social Security |
The underappreciated gem here is Pennsylvania. A retiree drawing entirely from Social Security + IRA distributions pays zero Pennsylvania state income tax — despite the 3.07% rate on wages. This is a meaningful planning opportunity for pre-retirees in the northeast.
Category 3: Partial Exemptions (Most States Fall Here)
States Still Taxing Social Security (Only 8 Remain in 2026)
As recently as 2020, thirteen states taxed Social Security benefits. That number has dropped to just eight. Here’s the current list:
| State | How Social Security Is Taxed |
|---|---|
| Colorado | Partially taxed. Ages 55–64: $20,000 exclusion. Ages 65+: $24,000 exclusion. |
| Connecticut | Exempt if AGI below $75,000 (single) / $100,000 (joint). Above thresholds: up to 25% of benefits taxed. |
| Minnesota | Exempt if AGI below ~$86,410 (single) / ~$110,780 (joint). Phased out above thresholds. |
| Montana | Deduction of $5,500 (single) / $11,000 (joint). Additional exemption up to $20,000 above income threshold. |
| New Mexico | Exempt if AGI below $100,000 (single) / $150,000 (joint). Fully taxed above thresholds. |
| Rhode Island | Exempt if at or past full retirement age AND income below $101,000 (single) / $126,250 (joint). |
| Utah | 4.55% flat rate. Tax credit of up to $450 reduces tax on Social Security. Credit phases out at higher incomes. |
| Vermont | Exempt if AGI below $65,000 (single) / $85,000 (joint). Partially taxed above; fully taxed at higher incomes. |
The trend is clear: States are rapidly moving away from taxing Social Security. If you live in one of these eight, there may be planning strategies to reduce your taxable income below the exemption threshold.
State-by-State Breakdown: All 50 States
Here is a condensed reference for every state. ✅ = Exempt/Not Taxed. ⚠️ = Partially Taxed. ❌ = Fully Taxed.
A
Alabama — Social Security ✅ | Pensions ✅ (defined benefit) | 401k/IRA ⚠️ (some exemption) | Top rate 5%
Alaska — No state income tax ✅ on everything
Arizona — Social Security ✅ | Pensions ⚠️ (partial exemption) | 401k/IRA ❌ | Flat 2.5% (low!)
Arkansas — Social Security ✅ | Pensions ✅ (up to $6,000 exempt) | 401k/IRA ⚠️ | Top rate 3.9%
C
California — Social Security ✅ | Pensions ❌ | 401k/IRA ❌ | Top rate 13.3% — one of the worst states for retirement taxes
Colorado — Social Security ⚠️ (see above) | Pensions ⚠️ ($24,000 exclusion age 65+) | 401k/IRA ⚠️ | Flat 4.4%
Connecticut — Social Security ⚠️ (see above) | Pensions ⚠️ (50% exempt for some) | 401k/IRA ⚠️
D
Delaware — Social Security ✅ | Pensions ✅ (up to $12,500 exempt age 60+) | 401k/IRA ⚠️ | Top rate 6.6%
F
Florida — No state income tax ✅
G
Georgia — Social Security ✅ | Pensions ✅ (up to $65,000 exempt age 65+) | 401k/IRA ✅ (up to $65,000 exempt) | Flat 5.39%
H
Hawaii — Social Security ✅ | Pensions ✅ (many exempt) | 401k/IRA ❌ | Top rate 11% — but very high cost of living
I
Idaho — Social Security ✅ | Pensions ⚠️ | 401k/IRA ❌ | Flat 5.695%
Illinois — No retirement income taxed ✅ (see Category 2 above)
Indiana — Social Security ✅ | Pensions ⚠️ ($4,000 exemption for many) | 401k/IRA ⚠️ | Flat 3.05%
Iowa — No retirement income taxed ✅ (see Category 2 above)
K
Kansas — Social Security ✅ (exempt if AGI ≤ $75,000) | Pensions ⚠️ | 401k/IRA ❌ | Top rate 5.7%
Kentucky — Social Security ✅ | Pensions ⚠️ ($31,110 exempt) | 401k/IRA ⚠️ | Flat 4%
L
Louisiana — Social Security ✅ | Pensions ✅ (public pensions exempt) | 401k/IRA ⚠️ | Top rate 3%
M
Maine — Social Security ✅ | Pensions ⚠️ ($30,000 deduction) | 401k/IRA ⚠️ | Top rate 7.15%
Maryland — Social Security ✅ | Pensions ⚠️ (up to $34,300 exempt) | 401k/IRA ⚠️ | Top rate 5.75% + local taxes
Massachusetts — Social Security ✅ | Pensions ✅ (state/municipal pensions exempt) | 401k/IRA ❌ | Flat 5%
Michigan — Social Security ✅ | Pensions ✅ (most exemptions effective 2026) | 401k/IRA ✅ (effective 2026) | Flat 4.05%
Minnesota — Social Security ⚠️ (see above) | Pensions ❌ | 401k/IRA ❌ | Top rate 9.85%
Mississippi — No retirement income taxed ✅ (see Category 2 above)
Missouri — Social Security ✅ (exempt below ~$85,000 AGI) | Pensions ⚠️ | 401k/IRA ⚠️ | Top rate 4.8%
Montana — Social Security ⚠️ (see above) | Pensions ⚠️ | 401k/IRA ❌ | Top rate 6.75%
N
Nebraska — Social Security ✅ (fully exempt 2025+) | Pensions ⚠️ | 401k/IRA ❌ | Top rate 5.84%
Nevada — No state income tax ✅
New Hampshire — No state income tax ✅ (as of 2025)
New Jersey — Social Security ✅ | Pensions ✅ (up to $100,000 exempt age 62+, income-limited) | 401k/IRA ✅ (same exemption) | Top rate 10.75%
New Mexico — Social Security ⚠️ (see above) | Pensions ⚠️ | 401k/IRA ❌ | Top rate 5.9%
New York — Social Security ✅ | Pensions ✅ (NY state/local pensions + military fully exempt) | 401k/IRA ⚠️ ($20,000 annual exemption) | Top rate 10.9%
North Carolina — Social Security ✅ | Pensions ⚠️ (Bailey settlement pensions exempt) | 401k/IRA ❌ | Flat 4.5%
North Dakota — Social Security ✅ | Pensions ⚠️ | 401k/IRA ❌ | Top rate 2.5% (very low)
O
Ohio — Social Security ✅ | Pensions ⚠️ (retirement income credit up to $200) | 401k/IRA ❌ | Top rate 3.5%
Oklahoma — Social Security ✅ | Pensions ⚠️ ($10,000 exemption) | 401k/IRA ⚠️ ($10,000 exemption) | Top rate 4.75%
Oregon — Social Security ✅ | Pensions ⚠️ (retirement income credit up to $450) | 401k/IRA ❌ (fully taxed) | Rates 4.75%–9.9% ← See detailed Oregon section below
P
Pennsylvania — No retirement income taxed ✅ after age 59½ (see Category 2 above)
R
Rhode Island — Social Security ⚠️ (see above) | Pensions ⚠️ | 401k/IRA ⚠️ | Top rate 5.99%
S
South Carolina — Social Security ✅ | Pensions ✅ (up to $15,000 exempt, $30,000 age 65+) | 401k/IRA ⚠️ | Top rate 6.2% (phasing down to 6%)
South Dakota — No state income tax ✅
T
Tennessee — No state income tax ✅
Texas — No state income tax ✅
U
Utah — Social Security ⚠️ (see above) | Pensions ⚠️ (retirement credit up to $450) | 401k/IRA ❌ | Flat 4.55%
V
Vermont — Social Security ⚠️ (see above) | Pensions ⚠️ | 401k/IRA ❌ | Top rate 8.75%
Virginia — Social Security ✅ | Pensions ⚠️ ($12,000 deduction age 65+) | 401k/IRA ⚠️ ($12,000 deduction) | Top rate 5.75%
W
Washington — No state income tax ✅ (7% capital gains tax on gains over $270K, not applicable to retirement distributions)
West Virginia — Social Security ✅ (fully phased out in 2026!) | Pensions ⚠️ | 401k/IRA ❌ | Top rate 5.12%
Wisconsin — Social Security ✅ | Pensions ⚠️ (partial exemption) | 401k/IRA ❌ | Top rate 7.65%
Wyoming — No state income tax ✅
Oregon Retirees: What You Need to Know
Since we work with clients throughout Oregon and 21 other states, let’s go deeper on Oregon.
Oregon’s retirement tax profile:
| Income Type | Oregon Treatment |
|---|---|
| Social Security | ✅ Fully exempt — Oregon does NOT tax your Social Security benefit |
| 401(k) & IRA withdrawals | ❌ Fully taxed at Oregon income tax rates |
| Pension income | ⚠️ Partially taxed — a retirement income credit of up to $450 applies |
| Wages/Part-time work | ❌ Fully taxed at 4.75%–9.9% |
| Sales tax | ✅ None — Oregon has no sales tax |
Oregon income tax brackets (2025–2026):
- 4.75% on income up to ~$18,400 (single) / ~$36,800 (joint)
- 6.75% on income ~$18,400–$125,000 (single)
- 8.75% on income ~$125,000–$250,000 (single)
- 9.9% on income over ~$250,000 (single)
Oregon’s Retirement Income Credit: Retirees may claim a credit of up to $450 on qualifying pension/retirement income. This is modest — but it’s something.
The Oregon Tax Reality for a Typical Retiree:
Consider a married Oregon couple with:
- $36,000 in Social Security (exempt — $0 Oregon tax)
- $30,000 in IRA withdrawals
- $15,000 in pension income
- Total: $81,000 combined income
Their Oregon taxable income = $45,000 (IRA + pension only, SS excluded). Estimated Oregon tax: approximately $2,500–$3,200, offset by the retirement income credit.
Contrast with Washington state: The same couple pays zero state income tax in Washington. On a 25-year retirement, that’s potentially $60,000–$80,000 in savings — enough to fund several years of “playcheck” spending.
The Big Planning Questions
1. Should I consider moving to a tax-friendlier state?
Maybe — but run the full numbers first. Factor in:
- Property taxes (Texas’s can exceed $8,000/year on a $500K home)
- Sales taxes (Tennessee averages 9.6% combined)
- Cost of living differences
- Medicare network availability (out-of-network risks)
- Estate/inheritance taxes (Washington has an estate tax above ~$2.2M)
A move from Oregon to Nevada saves income tax but may increase property and sales tax burden. The right answer depends on your complete financial picture.
2. Can I reduce my taxable income in Oregon?
Absolutely. Strategies include:
- Roth conversions — convert traditional IRA to Roth IRA during low-income years; future Roth withdrawals are not taxed
- Health Savings Account (HSA) distributions for qualified medical expenses are tax-free
- Optimize Social Security timing — delaying Social Security increases your guaranteed benefit without increasing state tax burden (Oregon doesn’t tax SS anyway)
- Annuity income structuring — income from certain annuities may be partially or fully excluded depending on structure
3. What about estate taxes?
Oregon has its own estate tax with an exemption of just $1 million — one of the lowest in the country. This affects more Oregonians than people realize, especially those with appreciated real estate. Proper estate planning (trusts, gifting strategies, life insurance) can significantly reduce this exposure.
If your estate may exceed $1 million, this deserves immediate attention.
The States Where Retirees Win Most on Taxes
If pure retirement income tax minimization is the goal, these states offer the best combination:
- Wyoming — No income tax, low property tax, low sales tax. The complete package.
- Nevada — No income tax, very low property tax.
- Tennessee — No income tax, low property tax (watch the sales tax).
- Pennsylvania — Keeps its residents; all retirement income exempt after 59½.
- Iowa — Flat 3.9% on wages but all retirement income fully exempt.
- Florida — No income tax, no estate tax, low property tax relative to home values.
The Most Important Takeaway
Where you live is a financial decision, not just a lifestyle decision.
The difference between a tax-friendly state and a high-tax state can exceed $150,000–$200,000 in after-tax income over a 25-year retirement. And yet most retirees never have a single conversation with a financial professional about state-level tax planning.
Whether you’re planning to stay in Oregon, considering a relocation, or simply want to make the most of the tax rules in your current state — there are real strategies available right now.
Talk to Someone Who Knows These Rules
At Legacy Wealth Services, we work with retirees and pre-retirees across 22 states. We help you:
- Understand exactly how your state taxes your specific income sources
- Model Roth conversion strategies to reduce future taxable income
- Structure Social Security and annuity income to minimize state taxes
- Plan estates to stay under Oregon’s $1 million estate tax threshold
Ready to see what your retirement tax picture actually looks like?
Call us: 503-832-8555 Schedule a no-cost retirement tax review: Book online →
Rodney Cummings | Legacy Wealth Services | Oregon License #18847712 | Licensed in 22 states
This article is for educational purposes only and does not constitute tax advice. Please consult a qualified tax professional for guidance specific to your situation.