Retirement Taxes by State 2023

Retirees continue to pay taxes in retirement. Taxes will be calculated much like how they are before retirement and it is important to estimate the amount one will pay in retirement so that finances can be planned accordingly. If a person is relocating to a different state for retirement, it is important to examine the state taxes on retirement benefits. Some states are friendlier for retirees tax-wise than others, and because retirees have special financial concerns, taxes can be a large factor when deciding where it is best to retire. Special financial concerns for retirees include whether Social Security benefits are taxable at the state level, property taxes, and how retirement account and pension withdrawals are taxed.

There are seven states with no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. New Hampshire imposes income taxes only on dividends and interest while Washington only imposes a tax on capital gains income. These nine states are considered to be “tax-friendly” or “most-tax friendly” for retirees among others.

The ten most tax-friendly states for retirement (in no particular order) are Alaska, Florida, Georgia, Kentucky, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, and Wyoming. Some states allow tax exemption for military personnel or emergency services personnel or allow deductions up to a certain amount. Some states do not offer any retirement income tax benefits. These states are considered to be “not tax-friendly,” “least tax-friendly,” or “mixed.”

The ten least tax-friend states for retirement (in no particular order) are Connecticut, Indiana, Kansas, Maryland, Minnesota, Nebraska, New Mexico, Utah, Vermont, and Wisconsin. In addition to income tax, retirees must also consider sales, property, estate, and inheritance tax rates. Below is a table of each state’s tax-friendliness for retirement categorized by most tax-friendly, tax-friendly, least tax-friendly, not tax-friendly, and mixed.

Retirement Taxes by State 2023

Notes:
- Retirement tax friendliness is measured on a five-point scale from 1 (least friendly) to 5 (most friendly).
- States which are considered retirement tax friendly often have low or no income tax, low or no tax on retirement income, and/or low property and sales taxes.
- States which are considered retirement tax unfriendly often have minimal tax breaks for retirees and retirement income, and/or higher property and sales taxes.
- Detailed per-state tax information may be found through the links in the Additional Details column

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State
Retirement Taxes by State
Additional Details
Link
Arizona5 - Most FriendlyArizona tax profileSource
Colorado5 - Most FriendlyColorado tax profileSource
Delaware5 - Most FriendlyDelaware tax profileSource
District of Columbia5 - Most FriendlyDistrict of Columbia tax profileSource
Hawaii5 - Most FriendlyHawaii tax profileSource
Idaho5 - Most FriendlyIdaho tax profileSource
Nevada5 - Most FriendlyNevada tax profileSource
South Carolina5 - Most FriendlySouth Carolina tax profileSource
Tennessee5 - Most FriendlyTennessee tax profileSource
Wyoming5 - Most FriendlyWyoming tax profileSource
Alabama4 - Tax-FriendlyAlabama tax profileSource
Arkansas4 - Tax-FriendlyArkansas tax profileSource
California4 - Tax-FriendlyCalifornia tax profileSource
Florida4 - Tax-FriendlyFlorida tax profileSource
Georgia4 - Tax-FriendlyGeorgia tax profileSource
Kentucky4 - Tax-FriendlyKentucky tax profileSource
Louisiana4 - Tax-FriendlyLouisiana tax profileSource
Mississippi4 - Tax-FriendlyMississippi tax profileSource
Virginia4 - Tax-FriendlyVirginia tax profileSource
Washington4 - Tax-FriendlyWashington tax profileSource
Alaska3 - NeutralAlaska tax profileSource
Maine3 - NeutralMaine tax profileSource
Maryland3 - NeutralMaryland tax profileSource
Montana3 - NeutralMontana tax profileSource
New Mexico3 - NeutralNew Mexico tax profileSource
North Carolina3 - NeutralNorth Carolina tax profileSource
North Dakota3 - NeutralNorth Dakota tax profileSource
Oklahoma3 - NeutralOklahoma tax profileSource
Oregon3 - NeutralOregon tax profileSource
Utah3 - NeutralUtah tax profileSource
West Virginia3 - NeutralWest Virginia tax profileSource
Indiana2 - Not FriendlyIndiana tax profileSource
Massachusetts2 - Not FriendlyMassachusetts tax profileSource
Michigan2 - Not FriendlyMichigan tax profileSource
Minnesota2 - Not FriendlyMinnesota tax profileSource
Missouri2 - Not FriendlyMissouri tax profileSource
New Hampshire2 - Not FriendlyNew Hampshire tax profileSource
Ohio2 - Not FriendlyOhio tax profileSource
Pennsylvania2 - Not FriendlyPennsylvania tax profileSource
Rhode Island2 - Not FriendlyRhode Island tax profileSource
South Dakota2 - Not FriendlySouth Dakota tax profileSource
Connecticut1 - Least FriendlyConnecticut tax profileSource
Illinois1 - Least FriendlyIllinois tax profileSource
Iowa1 - Least FriendlyIowa tax profileSource
Kansas1 - Least FriendlyKansas tax profileSource
Nebraska1 - Least FriendlyNebraska tax profileSource
New Jersey1 - Least FriendlyNew Jersey tax profileSource
New York1 - Least FriendlyNew York tax profileSource
Texas1 - Least FriendlyTexas tax profileSource
Vermont1 - Least FriendlyVermont tax profileSource
Wisconsin1 - Least FriendlyWisconsin tax profileSource
showing: 51 rows

Retirement Taxes by State 2023

Sources