You have probably been told it, maybe by a well-meaning neighbor: "Move to a state with no income tax and you'll pay way less in retirement." It's the most common relocation advice there is, and for a lot of retirees it's backwards. Retirement taxes by state are not one number, and state income tax is one of three taxes you pay in retirement. A state with no income tax can collect more through property and sales tax than an income-tax state that exempts every dollar of your retirement income. So stop reading one label and start counting three doors. Every figure below is the 2026 tax year, from the sources at the end.
One door instead of three
The advice fools careful people because it answers a real question with part of the answer. "No income tax" is true, and it sounds like "no tax." But a state has more than one way into your budget. Picture three doors money leaves through every year in retirement. The headline slams one of them shut and says nothing about the other two, which a state can widen to make up the difference. Close the front door, leave the side and back doors open, and your total bill goes up after the move.
The three doors every retiree pays through
Here are the three taxes a retiree actually pays, in plain terms:
Door one: income tax. On your pension, your 401(k) and IRA withdrawals, and sometimes your Social Security. It's the only door the "move to Florida" advice ever mentions.
Door two: property tax. On your home, every year, whether your income is $20,000 or $200,000. It doesn't care that you stopped working.
Door three: sales tax. On nearly everything you spend, all year. A state with no income tax and a high sales tax collects at the register instead of on Form 1040.
Add all three against your own numbers and you get your total burden. That's the only figure that answers whether a state is cheaper for you. The label on door one answers almost nothing by itself. Source: IRS, Seniors & Retirees (which retirement income is federally taxable; state treatment is separate).
Doug & Marlene move to Texas "for the taxes"
Doug and Marlene did what the advice said: they left an income-tax state and moved to Texas specifically to escape state income tax. Texas has none, so door one is genuinely shut. Texas also sits among the highest property-tax states in the country. On a $500,000 home, Texas property tax runs about $8,000 a year. Many states exempt most or all retirement income already. If theirs did, they traded a small or zero income-tax bill for a large permanent property-tax bill. They moved for the taxes and their total bill went up. The label told the truth about one door and hid the one that mattered to them. Doug and Marlene are an illustration, not a real household. The three doors are real; the dollar amounts are chosen to show the shape.
Which states have no income tax for retirees, and what do they take back?
There are nine states with no broad income tax for 2026: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. (New Hampshire joined the list in full after repealing its Interest & Dividends tax effective January 1, 2025.) Door one is shut in all nine. Watch what several of them do with doors two and three:
Texas and New Hampshire carry some of the highest property taxes in the country. New Hampshire's effective rate sits around 1.50%. Tennessee has no income tax and one of the highest combined sales taxes. Total everything and the math surprises you: Wyoming's overall burden lands near 7.5%, New Hampshire's near 6.8%. Both are "no income tax" states, and both still collect a meaningful share of your money. "No income tax" never meant no tax. It meant the state gets paid through a different door. Source: state revenue departments and the NCSL fiscal program; confirm the current figure with your own county assessor.
The income-tax states that are quietly the friendliest
Now the part that flips the advice over. People search for states with no income tax for retirees and get the list of nine. The list worth having is longer, because states with no income tax on retirement income include four that do tax wages. Thirteen states charge no retirement tax at all: nothing on Social Security, nothing on pensions, nothing on 401(k) or IRA withdrawals. That's the nine no-income-tax states plus four that do have an income tax: Illinois, Iowa from age 55, Mississippi and Pennsylvania.
Illinois charges a flat 4.95% on wages and exempts pensions, 401(k) and IRA money, and Social Security entirely. Pennsylvania retirement taxes are the clearest example: a flat 3.07% on wages that skips retirement income entirely once you reach your plan's qualifying age. Mississippi exempts Social Security, pensions and 401(k) or IRA withdrawals, taxing other income above $10,000 at a flat 4%. So a retiree in "high-tax Illinois" or "income-tax Pennsylvania" pays $0 in state income tax on their retirement, pays modest property taxes, and comes out ahead of the neighbor who moved to a no-income-tax state with an $8,000 property bill. Source: Pennsylvania Dept. of Revenue, personal income tax (retirement income is not taxed).
Ellen was already tax-free and about to move anyway
Ellen lives in Pennsylvania and was ready to pack up for a no-income-tax state to "finally stop paying." She nearly missed one number: Pennsylvania already skips her retirement income. Her state income tax on the pension and the withdrawals is effectively zero. She was about to uproot her life, leave her family and her doctors, and pick up a new property-tax bill somewhere else, all to chase a zero she already had. Staying put was her smartest tax move. The headline was never going to tell her that, because it only knows about door one.
Gary panicked about a tax he doesn't pay
Gary is 67 and lives in Colorado, one of the eight states that still tax Social Security, and it was costing him sleep. But "still taxes Social Security" almost never means it taxes your Social Security. Most of those eight apply income limits, and Colorado exempts older retirees outright: from age 65 you subtract your full Social Security benefit from state taxable income. Gary pays $0 in Colorado tax on his. He was losing sleep over a rule that by the state's own math doesn't reach him. Between 55 and 64, Colorado gives the full subtraction if AGI is at or under $75,000 single, $95,000 joint. Source: Colorado Dept. of Revenue, information for retirees.
The list that's shrinking, and the gotchas nobody prints
The Social Security picture keeps getting friendlier. Eight states still tax it in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont. In 2020 the list ran to 13. West Virginia finished phasing its tax out on January 1, 2026, and Nebraska dropped it for 2025. That leaves 41 states plus DC that don't tax Social Security at all. Separately, 16 states don't tax pension income, and Michigan is phasing its retirement-income tax out entirely under Public Act 4 of 2023, so most pensions and 401(k) or IRA income are fully exempt by the 2026 tax year. Source: state revenue departments and the NCSL fiscal program; confirm the current figure with your own county assessor.
But a few edge cases can bite, so flag them before you move:
• Iowa's exemption starts at 55, so a 52-year-old early retiree there still pays tax on retirement income.
• The early-withdrawal trap: in Mississippi and Pennsylvania, a withdrawal taken before age 59½ may not count as "retirement income," which means it can be taxed.
• A fourth door, for a few: 15 states plus DC levy an estate or inheritance tax. It rarely reaches anyone, since exemptions run into the millions, and Maryland's estate exemption is $5 million per individual for 2026. Two labels do mislead here. Washington has no income tax and a steep estate tax. Pennsylvania exempts your retirement income and has an inheritance tax. Only worth a thought if you're leaving a large estate.
The calm move: total the three doors against your own numbers
Write down your retirement income mix: Social Security + pension + 401(k)/IRA withdrawals + any work income. For each state you're weighing, check three things: does it tax Social Security? does it exempt pensions and withdrawals? and what's the property-tax rate on a home your price, plus the sales tax? Compare total burden rather than the income-tax headline, and remember that some income-tax states, Illinois, Pennsylvania and Mississippi among them, rank as the friendliest for retirees. Don't relocate for taxes alone. Family, healthcare and cost of living usually dwarf the difference.
How to compare two states in five minutes
Skip the "best states to retire" lists. Retirement tax rates by state are only half a picture anyway, because the taxation of retirement income by state is decided by exemptions rather than by the headline rate. They rank a state for an average person who isn't you. Take the two states you actually care about and run each through the three doors with your own numbers. Door one: your taxable retirement income times the state's treatment, which is often zero once you find the exemption. Door two: the property-tax rate times the home you'd really buy. Door three: your rough annual spending times the sales-tax rate. Add the three. The smaller sum wins, and it's very often not the state with the "no income tax" badge.
Free guide: when to claim Social Security
Before you optimize where your income is taxed, get the when right. The real math on 62 against 67 against 70: the permanent reduction, the delayed-retirement credits and the break-even that decides it, on one page you can walk through in a few minutes.
Get the free guide→Is a no-income-tax state really cheaper to retire in?
Is a no-tax state really cheaper to retire in? It depends, and often it isn't. "No income tax" is true, and it closes one of three doors. States with no income tax frequently make up the difference through property or sales tax. Meanwhile Illinois, Pennsylvania and Mississippi exempt your entire retirement income and can be cheaper overall. Doug and Marlene moved for the taxes and their bill went up. Ellen was about to move for a zero she already had. Gary lost sleep over a tax his own state doesn't charge him. Don't memorize the states. Memorize the three doors and add them up against your own numbers. Check the rule. Not the slogan.
Related
Go deeper: is the 22% Social Security cut in 2032 real?, how Social Security is actually taxed, and the four property-tax tools for homeowners 65+.
Sources
• Kiplinger: States that tax Social Security benefits (2026)
• AARP: 9 states with no income tax
• CNBC Select: 13 states that don't tax retirement income
• Kiplinger: States that won't tax your pension
• Colorado Dept. of Revenue: Information for retirees (Social Security subtraction)
• SSA: Income taxes and your Social Security benefit
• IRS: Seniors & Retirees tax information
Not financial advice. This article is educational only — not personal financial, tax, or legal advice. State tax law changes every year; the figures here are the 2026 tax year, drawn from the sources above. Your own state, income mix, and home value decide your actual bill. Run your own numbers, or talk to a tax professional who knows your state, before you relocate or change your plan.
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Common questions
Is a no-income-tax state really cheaper to retire in?
Not always, and often it is backwards. State income tax is only one of three taxes you pay in retirement: income, property, and sales. The nine no-income-tax states recoup the money through property and/or sales tax, so total burden is the number that matters, not the income-tax label. A no-income-tax state with high property taxes can cost a homeowner more per year than an income-tax state that exempts every dollar of retirement income, such as Pennsylvania or Illinois.
What are the three taxes retirees actually pay by state?
One, state income tax, on pensions, 401(k)/IRA withdrawals, and sometimes Social Security. Two, property tax, on your home, every year, regardless of income. Three, sales tax, on everything you spend. The 'move to a no-income-tax state' headline only closes door one. A full comparison weighs all three against your own income mix and home value.
Which states have no income tax in 2026?
Nine states have no broad income tax for the 2026 tax year: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire became fully income-tax-free after repealing its Interest and Dividends tax effective January 1, 2025. But several of these recover the revenue through property or sales tax. Texas and New Hampshire are among the highest property-tax states in the country.
Which states don't tax any retirement income?
Thirteen states tax no retirement income at all, meaning no tax on Social Security, pensions, or 401(k)/IRA withdrawals: the nine no-income-tax states plus Illinois, Iowa (age 55 and up), Mississippi, and Pennsylvania. That is the surprise: some income-tax states are among the friendliest for retirees. Illinois charges a flat 4.95% on wages but exempts pensions, 401(k)/IRA, and Social Security entirely; Pennsylvania's flat 3.07% skips retirement income once you reach the plan's qualifying age.
Which states still tax Social Security in 2026?
Eight states still tax Social Security benefits in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont, down from 13 states in 2020. Most apply income limits, so lower- and middle-income retirees are often fully exempt. In Colorado, for example, filers 65 and older can subtract their full Social Security benefit, paying $0 state tax on it. Forty-one states plus DC do not tax Social Security at all.
Should I move to another state just to save on retirement taxes?
Rarely on taxes alone. First add up all three doors, income, property, and sales tax, against your own income mix and home value, because a no-income-tax state can cost more than an income-tax state that exempts your retirement income. Then remember that family, healthcare, and cost of living usually dwarf the tax difference. And watch the edge cases: Iowa's exemption starts at 55, an early withdrawal before 59½ may not count as retirement income in Mississippi or Pennsylvania, and a few states levy an estate or inheritance tax.