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States That Dont Tax Pensions 2021

Many hardworking citizens look forward to when they get to retire. After nearly a lifetime of work, many Americans get to finally cash in on their retirement plan, like a pension plan.

A pension plan is a type of retirement plan that is made up of contributions from the employer. In some cases, the employee may also contribute to the plan, and the employer can make these funds up to a set limit or certain percentage.

A pension plan assures a person that they will have an income following retirement. Unfortunately, though, in many states, pension funds can be taxed just like ordinary income.

Laws vary from state to state regarding how pensions are taxed. In some cases, at least a portion is taxed based on the amount of money in the plan and the retiree's age. However, in other states, pensions aren't taxed at all. Let's take a look at the states that don't tax pensions.

  • Alabama: This state doesn't tax pension income from defined benefit retirement plans.
  • Alaska: Because Alaska doesn't have an income tax, you won't pay taxes on your pension or other income.
  • Florida: Like Alaska, Florida doesn't have an income tax, so your pension will not be taxed.
  • Hawaii: Public and private pensions aren't taxed in Hawaii, with one exception. Any portion that you contributed will be taxed.
  • Illinois: Private pensions from qualified employee benefit plans are exempt from taxation in Illinois.
  • Mississippi: Pensions used after the age of 59.5 are not taxed in Mississippi.
  • Nevada: No income tax in Nevada means that your pension will not be taxed after retirement.
  • New Hampshire: New Hampshire is another state with no income taxes, so there is no tax on pension income. There is, however, taxes on interest and dividends.
  • Pennsylvania: The only time pensions are taxed in this state is when you retire early.
  • South Dakota: There are no income taxes in the state of South Dakota.
  • Tennessee: Taxes are only paid on interest and dividends in this state, not on pensions.
  • Texas: No personal income tax means that Texans can hold onto their pension funds.
  • Washington: Washington is another state without an income tax.
  • Wyoming: Like many other states on this list, Wyoming does not have an income tax.

States That Dont Tax Pensions 2021

State 2021 Pop.
Alabama4,934,193
Alaska724,357
Florida21,944,577
Hawaii1,406,430
Illinois12,569,321
Mississippi2,966,407
Nevada3,185,786
New Hampshire1,372,203
Pennsylvania12,804,123
South Dakota896,581
Tennessee6,944,260
Texas29,730,311
Washington7,796,941
Wyoming581,075

States That Dont Tax Pensions 2021