Taxes by State

You should consider all state taxes when planning your retirement. However, some states are more tax-friendly than others. Depending on your retirement location, you may owe some or all of the following taxes:

• Sales taxes
• Excise taxes
• License taxes
• Income and investment income taxes
• Property taxes
• Estate and inheritance taxes

For additional context, the guide The Top 10 Most Tax-Friendly States For Retirement explains various state and local taxes that affect your ability to retire comfortably or stay in your home as you age in place. Our Best and Worst States for Retirement guide also helps you determine your options for a retirement destination.

To see the tax burdens in your preferred retirement destinations, select a state above or click one of the listings below.

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Taxes In Your State

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

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How Retirement Income Taxes Vary by State

15 states do not tax pension income at all: Alabama, Alaska, Florida, Hawaii, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Other states have more complex rules, which can vary by type of retirement income (such as Social Security, pensions, IRAs, and 401(k)s) and are often based on income thresholds.

For example, New Hampshire’s tax interest and dividends (I&D tax) has been fully repealed effective January 1, 2025. Oregon taxes most retirement income at the top rate while allowing a credit of up to $7,500 for retirement distributions.

As of 2025, nine states still tax Social Security benefits: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. These states either tax Social Security directly at the state level or provide limited exemptions or thresholds to reduce the impact.

Many states offer deductions or credits for lower-income retirees to reduce or eliminate state tax on Social Security or pension income. West Virginia is phasing out its tax on Social Security benefits, with full repeal expected by 2026.

Several states fully exempt pension income; for instance, states like Alabama, Florida, Hawaii, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming exempt pension income entirely.

The states that do not tax pensions are New Hampshire, Pennsylvania, Alaska, South Dakota, Illinois, Washington, and Wyoming, and others offer full or partial pension exemptions.

Many states provide partial exemptions, credits, or phase-ins; others tax all types of retirement income depending on income level.

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State Income, Property, and Sales Taxes Impacting Retirement in 2025

In addition to taxes on retirement benefits, other state and local fees or levies (sales, property, licensing) can significantly affect retirement costs.

State Income and Investment Income Taxes

Eight states have no tax on Social Security benefits, and several states have no personal income tax at all—including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Other states with relatively low tax rates across many income levels include Arizona, Colorado, Illinois, Indiana, Michigan, New Mexico, North Dakota, Ohio, Pennsylvania, and Utah. Many of these provide generous deductions for retirees.

• Idaho did away with its graduated income tax rate and introduced a flat rate of 5.3% on taxable income over $2,500 ($5,000 for joint filers) beginning on January 1, 2025; the threshold will adjust annually for inflation.
• Several states have adjusted or reduced income tax rates recently, including Arkansas, Mississippi, and North Carolina.

State and Local Sales Taxes

45 states plus D.C. impose state sales/use taxes. There is still no statewide sales tax in Alaska, Delaware, Montana, New Hampshire, and Oregon—though local taxes may apply in some locations.

States with some of the highest base sales tax rates include California, Mississippi, Tennessee, and others; local taxes can push combined rates significantly higher. We’ve provided this information in our state profiles.

• New Mexico decreased its sales tax rate from 5.00% to 4.875% in July 2023.
• Kansas lowered the state sales tax on groceries to 2% on January 1, 2024, before phasing it out completely by January 1, 2025. Local taxes on groceries will still apply.

State and Local Property Taxes

The national average effective property tax rate remains near 1%; New Jersey continues to have among the highest fees (~2.1-2.2%), while states like Alabama remain among the lowest (~0.3-0.4%).

Many states and localities still provide property tax relief for seniors—via exemptions, credits, abatements, or deferrals—subject to age and income limits. Some renter-relief programs exist as well.

State Estate and Inheritance Taxes

Estate and inheritance taxes remain factors to consider. In addition to the federal estate tax (up to 40%), several states impose additional estate or inheritance taxes. 12 states and D.C. impose estate taxes, and five impose an inheritance tax. Maryland is the only state that imposes both.

• Connecticut currently uses a graduated estate tax with rates up to 12% in 2025.
• Iowa phased out its inheritance tax effective in 2025, so there is now no inheritance tax in Iowa.

Estate and inheritance tax laws continue to evolve, so stay updated if you plan retirement or estate planning.

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Sources

1. State-specific tax and revenue departments are using a list of each state’s tax agency website from TaxAdmin.org
2. State individual income tax rates and brackets, according to The Tax Foundation
3. State and local sales tax rates, according to The Tax Foundation