12 States That Will Not Tax Your Retirement Distributions

12 States That Will Not Tax Your Retirement Distributions 

Taxes are one of the largest expenses in your retirement budget. Consider moving to one of the 12 states which don't tax distributions of pensions or defined contributions plans like 401(k).

These places could help you to stretch your nest egg by retiring in them

No tax

Nine states don't tax income from retirement plans because it is income. These nine states are

  1. Alaska
  2. Florida
  3. Nevada
  4. New Hampshire
  5. South Dakota
  6. Tennessee
  7. Texas
  8. Washington
  9. Wyoming

The three remaining states, Illinois, Mississippi, and Pennsylvania, don't tax distributions made from 401(k), IRAs, or pensions. 

Alabama and Hawaii do not tax pensions but tax distributions from both 401(k), plans and IRAs.

It's not a one-size-fits-all proposition to tax retirement plan distributions. 

34 states, for example, don't tax military pension income. 

The nine states that do not have income taxes are the ones listed above. 

Other states: Arizona, Alabama. Arkansas, Connecticut. Hawaii. Illinois. Indiana. Iowa. Kansas. Minnesota. Mississippi. Missouri. Nebraska. New Jersey. New York. North Carolina. North Dakota. Ohio. Pennsylvania. Utah. West Virginia. California, Vermont, Virginia, and Washington, D.C. fully taxes military retirement income. 

Other states only allow partial military pay allowances. Virginia does not allow recipients of the Congressional Medal of Honor to exclude their income from military retirement.

Not all income is exempt from tax, and you may not have had to pay any tax on it. However, 27 states tax certain income for retirement. These states typically limit the tax amount based on income levels.

Taxes don't cover everything

Certain states that have low or zero income taxes also have higher sales or property taxes. Illinois, for example, does not tax retirement income but has the highest property and sales taxes in the United States. However, other low-tax states might have less programs you might find useful, such as senior centers or public transportation.

The final decision about where you will live in retirement is based on your ability to afford it and what makes you happy. You may decide that the additional taxes you pay are worth it if you have a grandchild or a child in high-tax states.

Also these searches may be of interest to you, they are:  

  • What is the maximum amount I can contribute to my 401(k), retirement account in 2022
  • What is the maximum amount I can contribute to my IRA account in this year's fiscal year?
  • IRS offers taxpayers PINs for fraud prevention

This is our disclosure:  This summary is for informational purposes only. This summary is not intended to be a recommendation for or give advice for any company or individual.

choose 401k or ira
how to use the 4% rule
2.10 Ways to Increase Your Retirement Savings Regardless of Your Age
Seven Reasons to Roll Over Your 401(k) To An IRA
Live well retire wealthy optin

Get the Live Well Retire Wealthy Newsletter

Skip to content