Retirement Taxes By State 2020

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, Texas, Washington, and Wyoming. New Hampshire and Tennessee impose income taxes only on dividends and interest (which Tennessee is getting rid of in 2020). 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:

  1. Alaska
  2. Florida
  3. Georgia
  4. Kentucky
  5. Mississippi
  6. Nevada
  7. New Hampshire
  8. Pennsylvania
  9. South Dakota
  10. 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:

  1. Connecticut
  2. Indiana
  3. Kansas
  4. Maryland
  5. Minnesota
  6. Nebraska
  7. New Mexico
  8. Utah
  9. Vermont
  10. 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 2020

State Retirement Tax Friendliness 2020 Pop.
AlabamaTax-Friendly4,908,621
AlaskaMost Tax-Friendly734,002
ArizonaMixed7,378,494
ArkansasNot Tax-Friendly3,038,999
CaliforniaMixed39,937,489
ColoradoMixed5,845,526
ConnecticutLeast Tax-Friendly3,563,077
DelawareTax-Friendly982,895
District of ColumbiaMixed720,687
FloridaMost Tax-Friendly21,992,985
GeorgiaMost Tax-Friendly10,736,059
HawaiiTax-Friendly1,412,687
IdahoMixed1,826,156
IllinoisMixed12,659,682
IndianaLeast Tax-Friendly6,745,354
IowaNot Tax-Friendly3,179,849
KansasLeast Tax-Friendly2,910,357
KentuckyMost Tax-Friendly4,499,692
LouisianaTax-Friendly4,645,184
MaineMixed1,345,790
MarylandLeast Tax-Friendly6,083,116
MassachusettsNot Tax-Friendly6,976,597
MichiganNot Tax-Friendly10,045,029
MinnesotaLeast Tax-Friendly5,700,671
MississippiMost Tax-Friendly2,989,260
MissouriMixed6,169,270
MontanaNot Tax-Friendly1,086,759
NebraskaLeast Tax-Friendly1,952,570
NevadaMost Tax-Friendly3,139,658
New HampshireMost Tax-Friendly1,371,246
New JerseyMixed8,936,574
New MexicoLeast Tax-Friendly2,096,640
New YorkNot Tax-Friendly19,440,469
North CarolinaNot Tax-Friendly10,611,862
North DakotaTax-Friendly761,723
OhioMixed11,747,694
OklahomaNot Tax-Friendly3,954,821
OregonNot Tax-Friendly4,301,089
PennsylvaniaMost Tax-Friendly12,820,878
Rhode IslandNot Tax-Friendly1,056,161
South CarolinaTax-Friendly5,210,095
South DakotaMost Tax-Friendly903,027
TennesseeTax-Friendly6,897,576
TexasTax-Friendly29,472,295
UtahLeast Tax-Friendly3,282,115
VermontLeast Tax-Friendly628,061
VirginiaTax-Friendly8,626,207
WashingtonTax-Friendly7,797,095
West VirginiaNot Tax-Friendly1,778,070
WisconsinLeast Tax-Friendly5,851,754
WyomingMost Tax-Friendly567,025