Where you live in retirement can be worth more than you think. State income taxes on pension income range from zero to over 13%, and that difference compounds across a 20- or 30-year retirement. Here's the full picture for 2026.
States with no income tax
Nine states impose no state income tax at all. Pension income, Social Security, investment gains, and wages are all untaxed at the state level.
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
For a retiree collecting $4,000/month in pension income, moving from California to Florida saves roughly $3,800 to $6,000 per year in state taxes, depending on the specific income level. Over 20 years, that's $76,000 to $120,000 in after-tax retirement income.
States that fully exempt pension income
Even some states with income taxes exempt pension income entirely.
Illinois exempts virtually all retirement income from state tax, including pensions, Social Security, and IRA distributions. Illinois has a flat 4.95% income tax rate on wages, but retirement income is carved out completely.
Mississippi exempts all qualified retirement income from state tax, including pensions, Social Security, 401(k) and IRA distributions, and annuity income. The exemption is broad and applies to both public and private pensions.
Pennsylvania exempts all retirement income for residents age 60 and older, including pensions, Social Security, 401(k) and IRA distributions, and annuities. Pennsylvania has a flat 3.07% tax rate on wages, but retirees are essentially untaxed on retirement income.
Alabama exempts most retirement income including defined benefit pensions from public and private employers, Social Security, and income from IRAs and 401(k)s within certain structures. Alabama has a top income tax rate of 5%.
States with significant partial exemptions
New York provides a $20,000 annual pension exemption for taxpayers 59 and older. Federal, state, and local government pensions are often fully exempt from New York state tax. New York has a top state tax rate of 10.9% on high incomes, so the exemption structure matters a lot depending on your income level.
Georgia allows an exemption of up to $65,000 per person (age 62 and older) for retirement income including pensions, Social Security, and investment income. Couples can exempt $130,000 combined. Most Georgia retirees with modest pensions pay little or no state tax.
Colorado allows a $24,000 exemption on pension and Social Security income for taxpayers age 65 and older. Colorado's flat income tax rate is 4.25%. Retirees with pensions under $24,000 pay no state tax on that income.
Iowa fully exempts all retirement income for residents age 55 and older as of 2023 legislation. This includes pensions, Social Security, 401(k) distributions, and IRA income. Iowa made a significant policy shift that puts it effectively in the full-exemption category for retirees.
High-tax states for pension retirees
California taxes all pension income as ordinary income at rates up to 13.3%. There's no pension exemption for public or private sector pensions. CalPERS and CalSTRS pensions are taxable. A $60,000 annual pension in California generates roughly $3,500 to $5,000 in state income tax for a typical retiree.
New Jersey taxes pensions above certain income thresholds. The pension exclusion phases out for taxpayers with gross income over $100,000, and disappears entirely above $150,000. High-income retirees in New Jersey face state taxes comparable to other high-rate states.
Minnesota taxes pension income at rates up to 9.85% with limited exemptions. Social Security is partially taxed. Minnesota doesn't offer broad pension exclusions for private sector retirees.
Connecticut taxes pension income at rates up to 6.99%. There's a pension exemption but it phases out at higher income levels. Connecticut retirees with substantial pension income face meaningful state tax bills.
Oregon taxes pension income at rates up to 9.9%. Oregon doesn't tax Social Security, but most other retirement income including pensions is fully taxable.
Federal pension note
Federal pensions from the Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) are subject to federal income tax regardless of your state. Most states tax federal pension income the same as private pensions, but some states (like Alabama, Kansas, and Mississippi) exempt federal government pensions specifically. Check your state's rules for federal vs. state vs. private pension treatment separately.
Pension lump sums and state taxes
If you take a pension lump sum, the full amount is taxable in the year you receive it at your state's ordinary income rate, in addition to federal tax. A $500,000 lump sum taken in California generates roughly $55,000 to $65,000 in California state income tax alone on top of federal taxes.
Rolling the lump sum directly to an IRA defers both federal and state tax. If you're considering moving states in retirement, doing the rollover first and then changing domicile before taking distributions can reduce your total tax burden significantly. Consult a tax advisor before executing this strategy.
Use the interactive pension tax by state tool to see the specific treatment in your state. For lump sum present value calculations, use the main PensionMath calculator. For required minimum distribution planning once funds are in an IRA, see the RMD calculator.
The IRA rollover and state pension tax exemption trap
Many states that fully exempt public pension income from state income tax do not extend that exemption to IRA distributions. This creates a specific risk for retirees who roll pension lump sums into traditional IRAs: the money enters a tax-advantaged vehicle at the federal level but loses its state tax exemption permanently. Understanding this before making the rollover election can save thousands of dollars annually in state taxes over a 20 to 30 year retirement.
Illinois fully exempts retirement income from most Illinois public retirement systems (IMRF, TRS, SURS, CTPF) from Illinois state income tax. But IRA distributions are taxable in Illinois at 4.95%. A retired Illinois teacher who takes a lump sum from TRS and rolls it to a traditional IRA will pay 4.95% Illinois income tax on every subsequent IRA distribution -- income that would have been completely exempt as TRS monthly pension payments. On $40,000/year of IRA distributions, that is $1,980/year in avoidable Illinois state tax every year of retirement.
New York exempts pension income from New York State government plans, but subsequent IRA distributions do not receive the same exemption. Pennsylvania exempts retirement income from state-qualified pension plans for residents age 60 and above, but this exemption does not automatically extend to IRA distributions. New Jersey has similar complexity: different income categories receive different treatment, and converting from exempt pension income to IRA distributions can change the state tax result significantly.
The decision to take the pension annuity versus lump sum has a state tax dimension that is often overlooked in the federal-focused analysis. For retirees in states with pension income exemptions, the annuity path preserves the exemption indefinitely. The lump sum rollover path trades the state-exempt annuity stream for a taxable IRA. Run the state tax math explicitly before rolling to an IRA from a public pension in a state with a pension income exemption.
Military retirement pay and state taxes: a complete exemption map
Military retirement pay has a distinct state tax exemption profile that differs significantly from civilian pension tax treatment. As of 2026, the large majority of states fully exempt military retirement pay, while others provide partial exemptions or age-based thresholds.
States that fully exempt military retirement pay include Alabama, Alaska, Arizona, Arkansas, Connecticut, Florida, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Missouri (for veterans 62 and older), Nebraska (for veterans 67 and older), Nevada, New Hampshire, North Carolina, North Dakota, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Washington, Wisconsin, Wyoming, and several others. The list has expanded substantially in the last decade as states compete for military retiree populations.
California is the most significant outlier for military retirees. California provides no special exemption for military retirement pay beyond the standard senior exemptions. A retired officer living in California pays California income tax on military retirement income at rates up to 13.3% depending on total income. The combination of California's high tax rates and lack of military retirement exemption makes California one of the most costly states for military retirees on an income tax basis.
For military retirees who also qualify for a civilian pension -- federal employees who had both military service and a second FERS career -- the state tax treatment of each income stream may differ. Most states that exempt military pay also exempt FERS and CSRS income under the federal equal treatment rule. Understanding the treatment of both streams together determines the total state tax burden in retirement.
Federal pension income: FERS and CSRS state tax rules
Federal pensions (FERS and CSRS) are subject to a specific federal preemption rule: states cannot tax federal retirement income more heavily than they tax comparable state government pension income. Under 4 U.S.C. Section 111, federal pensions must receive the same state tax treatment as state government pensions. Most states that broadly exempt public pension income extend that exemption to federal pensions under this rule. States that tax state government pension income at ordinary rates also tax FERS and CSRS at the same rates.
The equal treatment rule matters most in states that partially exempt pension income. If a state exempts the first $20,000 of state employee pension income, it must exempt the first $20,000 of federal pension income as well. States cannot create a separate, less favorable category for federal pensions. Virginia, Maryland, and several other states with large federal employee populations have pension income exemptions that explicitly apply to FERS and CSRS benefits on equal terms with state government pensions.
Maryland partially exempts pension income from state income tax for retirees 65 and older, with an exemption of up to $36,200 for joint filers. This exemption applies to FERS and CSRS income. Virginia provides a $12,000 deduction for individuals age 65 and older, applicable to federal pensions. For the large federal employee populations in Maryland and Virginia, these partial exemptions reduce but do not eliminate state income tax on pension income. Retirees in these states who want to minimize state income tax often consider relocating to states with full federal pension exemptions, such as Pennsylvania or Florida.
State tax changes for 2026 pension retirees should watch
Missouri increased its public pension deduction from $10,000 to $13,000 for single filers and from $20,000 to $26,000 for married filers effective 2026. The deduction applies to MOSERS and MPERS benefits but not to private-sector pensions above the deduction limit. Missouri continues to tax Social Security income above federal provisional income thresholds, which differs from several neighboring states that fully exempt Social Security.
West Virginia continued phasing in its pension and Social Security exemption. For 2026, 65% of Social Security benefits are exempt from West Virginia state income tax, up from 50% in 2024. West Virginia is on a trajectory toward full Social Security exemption under current law. State pension income from the West Virginia PERS and STRS systems follows a similar phase-out schedule.
Iowa eliminated state income tax on retirement income effective 2023 for Iowans 55 and older. Social Security, pensions, 401(k) distributions, and IRA distributions are all tax-free at the state level for qualifying Iowa retirees. For Iowans who have not yet retired, this change substantially improves the after-tax retirement income picture. Iowa now ranks among the most favorable states for retiree taxation despite its historically moderate-to-high general income tax rates.
Colorado offers an age-based pension income exemption that increases at age 65: the first $24,000 of combined Social Security and pension income is exempt from Colorado state income tax for residents 65 and older. Retirees approaching 65 in Colorado may find it advantageous to delay income-generating events until after crossing the age threshold to take maximum advantage of the exemption.
The retirement relocation decision: quantifying state tax savings
Relocating from a high-tax state to a no-tax or low-tax state is a meaningful financial decision for high-pension retirees, but one that requires a complete analysis rather than comparing income tax rates in isolation. State income tax is often not the largest financial consideration in a relocation decision, but it is the most easily quantifiable component.
A retiree with $80,000/year in pension income moving from California to Florida avoids approximately $6,000 to $7,500 in annual California state income tax. Over a 25-year retirement, the nominal saving is $150,000 to $187,500. In present value terms at 3% discount rate, it is approximately $105,000 to $130,000. That is a meaningful number, but it must be weighed against the full cost of relocation: cost of living differences, housing cost differentials, proximity to family and medical care, and non-financial quality-of-life factors.
Florida property insurance costs have risen 50 to 100% in many counties since 2020 due to hurricane risk and insurer withdrawals from the market. A California retiree who moves to coastal Florida to avoid California income tax and then faces $8,000/year in property insurance versus $2,000/year in California has offset a significant portion of the tax saving with insurance cost. Texas property taxes are among the highest in the nation at roughly 1.5 to 2.5% of appraised value annually, and largely offset the income tax advantage for homeowners with significant property values.
The most financially rigorous analysis compares total annual cost of living in retirement across candidate states, not just income tax rates. Tax savings alone are rarely sufficient justification for a relocation that also involves leaving social networks, familiar healthcare providers, and proximity to family. But for retirees who are relocating anyway for other reasons, choosing the destination with the most favorable tax treatment for their specific income sources -- pension, IRA, Social Security, investment income -- meaningfully improves lifetime after-tax income.
Social Security and state income taxes in 2026
Social Security benefits are taxed federally for higher-income retirees but treated differently by states. As of 2026, 41 states and the District of Columbia do not tax Social Security benefits at all. Nine states still tax Social Security income to some degree: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia (though West Virginia is phasing out its SS tax). The rules and thresholds vary.
Colorado provides a Social Security and pension income exemption for residents 65 and older of up to $24,000 combined, so some SS income may be sheltered. Connecticut taxes Social Security only for higher earners: single filers with adjusted gross income over $75,000 and joint filers over $100,000 are subject to Connecticut's SS tax. Minnesota taxes SS at ordinary income rates for higher earners but has an exemption that phases out at $88,000 AGI for single filers. Missouri fully exempts SS income for single filers with AGI under $100,000, effectively exempting most retirees.
For pension retirees who also receive Social Security, the combined state tax picture matters. A retiree in a state that taxes both pension income and Social Security income faces a higher effective state tax rate on total retirement income than the marginal rate on either source alone. Conversely, a retiree who moves to a state that exempts both pension income and Social Security -- such as Florida, Texas, Pennsylvania (for those 60+), or Illinois -- effectively pays zero state income tax on the two largest sources of retirement income.
Property taxes, sales taxes, and the total retiree tax burden
Income tax is only one component of the state tax burden for retirees. Property taxes and sales taxes affect retirement cash flow substantially and are not captured in pension income exemption comparisons. The states most commonly associated with retirement-friendly tax treatment on income -- Florida, Texas, Nevada -- are not uniformly favorable when all taxes are considered.
Texas has no income tax, but average effective property tax rates are among the highest in the nation at 1.5 to 2.0% of appraised value. On a $400,000 home, that is $6,000 to $8,000/year in property taxes. Texas does offer a homestead exemption and an additional exemption for residents 65 and older (at least $10,000 off the assessed value for school district taxes in most counties), but the net property tax burden remains high by national standards. A retiree moving from a high-income-tax state like California ($400 billion state budget heavily funded by income tax) to Texas to save income tax may find that their total state and local tax burden is similar after factoring in Texas property taxes.
Florida also has no income tax, but average effective property tax rates run 0.8 to 1.1% in most counties, and property insurance costs have risen dramatically due to hurricane risk and insurer withdrawals from the market. In some coastal counties, property insurance for a $400,000 home now costs $8,000 to $12,000/year, more than the income tax savings from leaving a moderate-tax state. Nevada has no income tax and relatively modest property taxes (average 0.5% effective rate), making it one of the more comprehensively favorable states for retirees on a total tax basis.
The total retiree tax burden index published annually by Kiplinger and other financial publications ranks states by combining estimates of income tax, property tax, and sales tax for a typical retiree income profile. These rankings shift every year as states change rates and exemptions, and a state that ranked highly for retirees 5 years ago may have changed materially since then. Any relocation decision based on state tax treatment should use current data from the state's revenue department rather than general reputation.
Using this site to model state pension tax impact
The state pension tax tool on this site covers the income tax treatment of pension income, IRA distributions, and Social Security for every US state and the District of Columbia. Enter your expected annual pension income, IRA withdrawals, and Social Security amount to see the state-by-state tax cost comparison. The tool updates annually and reflects the current year's exemption amounts, phase-out thresholds, and age requirements.
For retirees comparing specific states, the most useful output is the after-tax income comparison: how much of your gross retirement income do you keep in state A versus state B, given your specific income mix. A retiree with $40,000 from a public pension and $20,000 from Social Security gets a very different state tax result than a retiree with $40,000 from an IRA and $20,000 from Social Security, even at the same gross income, because the exemption categories treat each income source differently. The tool models those distinctions rather than applying a single effective rate to all retirement income.
State tax laws change annually. Illinois has faced repeated budget pressure that generates proposals to modify its pension income exemption. Colorado adjusts its exemption thresholds. Missouri expanded its deduction for 2026. Retirees who made location decisions based on state tax treatment 5 to 10 years ago should verify that the exemptions they counted on are still in place and still apply to their specific income sources. A confirmed-annually review of your state's pension tax treatment takes 15 minutes and ensures that your retirement income plan reflects the current rules, not the rules that applied when you built the plan. The tool also models the difference between taking a pension annuity versus rolling a lump sum to an IRA in your specific state. For retirees in states with pension income exemptions, this comparison is often the most valuable output the tool provides -- showing exactly how much the state tax cost changes based on the form of your retirement income, not just the amount. Run this comparison before any distribution election, before any IRA rollover from a public pension, and before any relocation decision that turns on state tax treatment. The numbers are specific to your situation and cannot be reliably estimated from general rules of thumb. A retiree in Illinois, New York, or Pennsylvania who is evaluating a lump sum election has a materially different state tax calculation than a retiree in California or New Jersey. The tool accounts for each state's specific rules rather than applying a generic pension exemption estimate. State tax treatment of retirement income is one of the few retirement variables fully within your control at the time you retire. Use the tool to make that decision with accurate data rather than assumptions.