Pension Tax by State 2026: Which States Don't Tax Pension Income
See how your state treats pension income. Some states exempt it entirely. Others tax it at full income tax rates. The difference can be thousands of dollars per year.
Rules checked October 2026 against each state's revenue department, statutes or official instructions. Tax year 2026 unless a row names another year.
Rules checked October 2026. State tax laws change every year, so confirm with your state revenue department or a tax advisor before deciding where to retire.
The best states to retire for pension tax purposes
The clearest wins are the nine states with no tax on pensions. Florida, Texas, and Nevada get the most attention. Alaska and Wyoming have no income tax either, though fewer retirees consider them. New Hampshire, which repealed its interest and dividends tax in 2025, is the option for northeastern retirees who don't want to move far.
Beyond those nine, Illinois, Mississippi, and Pennsylvania exempt pensions from qualified plans despite having income taxes, and Alabama exempts defined-benefit pensions, public or private. A Pennsylvania retiree with a $60,000 SERS pension pays no Pennsylvania income tax on it. An Illinois retiree with a $60,000 TRS pension pays none either.
Iowa joined them in 2023. Retirement income is fully excluded for residents 55 and older, including IPERS pensions, private pensions and IRAs. Under 55, pensions are taxed at Iowa's flat 3.8%.
Michigan changed the most. For 2026, every retiree can deduct up to $67,610 of public and private retirement income ($135,220 joint), whatever their birth year. Georgia is close behind: $65,000 per person at 65 or older covers most pensions, so a 66-year-old drawing $50,000 from ERS Georgia owes no Georgia tax on it. Georgia gives nothing under 62, though, unless you're disabled.
Arizona's appeal is its flat 2.5% rate, not its exclusion. Federal and Arizona government pensions get only a $2,500 subtraction, private pensions get none, and military retired pay is fully exempt. On a fully taxable $50,000 pension, 2.5% is $1,250 before Arizona's own deductions.
States to watch out for
California taxes every pension dollar, CalPERS and CalSTRS included. The top rates mostly hit high earners: for 2026 the 9.3% bracket starts at $75,197 of taxable income for single filers. A single retiree with $60,000 of California taxable income owes $2,095 before credits under the 2026 schedule, about 3.5%. That's real money every year, but well short of the 9% or 13% figures that get quoted.
New Jersey hinges on income. At 62 or older, with total income of $100,000 or less, you can exclude up to $100,000 of pension income (joint) or $75,000 (single). Between $100,000 and $150,000 only part is excluded, and above $150,000 none is. Social Security doesn't count toward that income, because New Jersey doesn't tax it. Public and private pensions get the same treatment, and the top rate is 10.75%.
Minnesota and Oregon are high-rate states with narrow pension breaks. Minnesota's public pension subtraction covers only service that wasn't under Social Security, and its rates reach 9.85%. Oregon taxes PERS pensions at rates up to 9.9%; only federal and military pensions earned before October 1991 get a subtraction.
Connecticut is generous below its income limits and harsh above them. Pensions are 100% exempt when federal AGI is under $75,000 single or $100,000 joint, with no age test. The exemption steps down from there and disappears at $100,000 single or $150,000 joint. Taxable Social Security counts toward that AGI, so a pension plus Social Security can cross the line.
Federal vs state pension tax
Federal tax doesn't change with your address. The IRS taxes pension income as ordinary income at rates from 10% to 37%, with no pension exclusion. A single filer under 65 with a $60,000 pension and nothing else owes $5,020 for 2026 after the $16,100 standard deduction. At 65 or older, the extra $2,050 standard deduction and the $6,000 senior deduction (2025 through 2028) cut that to $4,054. That bill is the same in Florida or California.
State tax sits on top. A single California retiree with about $60,000 of state taxable income pays 8% to California on the last dollar and 12% to the IRS, so 20 cents of each extra pension dollar goes to tax. In Florida, the same dollar costs 12 cents. Our pension income tax calculator runs both for your numbers.
Social Security follows different rules at both levels. Federally, up to 85% of benefits can be taxable depending on your combined income, and your pension counts toward that. Most states don't tax Social Security at all. Eight tax it for some retirees in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. West Virginia finished its phase-out this year.
How to reduce pension taxes
If you haven't retired yet and you have some flexibility, state of domicile is the single most powerful lever. Establishing residency in a no-tax state before your pension begins can save you five or six figures over a retirement. It's not just about forwarding your mail. You need a real address, a driver's license, voter registration, and you need to actually live there for most of the year. Some states are aggressive about auditing former residents who claim to have moved for tax purposes.
Roth conversion is a second tool. Pension income is taxable as ordinary income, except for any after-tax contributions you made, because most of it was never taxed going in. But if you have a supplemental 401(k) or IRA balance, converting some of that to a Roth before retirement creates tax-free income in retirement. That lets you fill lower tax brackets with pension income and draw from Roth for the rest, potentially keeping your total income below state exemption thresholds.
Timing matters too. If you retire mid-year, you might have both W-2 wages and pension income in the same tax year. That can push you into a higher bracket temporarily. Some retirees choose to retire in January rather than the middle of the year to avoid stacking income in one calendar year.
For the RMD side of retirement income, our RMD calculator can help you model required distributions from your TSP, IRA, or 401(k). Those withdrawals count as ordinary income and interact with your pension income and Social Security thresholds.
One more thing: the state where you earned the pension can't follow you. Federal law (4 U.S.C. 114, enacted in 1996) bars states from taxing the retirement income of nonresidents, including government pensions, qualified plan payments and military retired pay. If you worked in California for 30 years and retire to Nevada, only Nevada's rules apply, and Nevada has no income tax.
Related tools
Pension Lump Sum Calculator
IRS 417(e) present value for private sector pensions
RMD Calculator
Required minimum distributions from your IRA or 401(k)
Texas Pension Guide
ERS and TRS benefits, no income tax advantages
Florida Pension Guide
FRS pensions and the no-income-tax advantage
Pennsylvania Pension Guide
Eligible pensions exempt despite a 3.07% income tax rate
Illinois Pension Guide
Qualified retirement income exempt despite a 4.95% flat rate
Frequently asked questions
Which states do not tax pension income?
Nine states have no tax on wages or pensions: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Illinois, Mississippi, and Pennsylvania exempt pensions from qualified plans, Alabama exempts defined-benefit pensions, and Iowa has excluded retirement income for residents 55 and older since 2023.
Does California tax pension income?
Yes. California taxes pension income as ordinary income, including CalPERS and CalSTRS pensions. Rates run from 1% to 12.3%, plus 1% on taxable income over $1 million. The only pension-specific break is a military retirement exclusion of up to $20,000 for 2025 through 2029, for AGI of $125,000 or less ($250,000 joint).
Is Social Security taxed differently from pensions?
Yes. Social Security has its own state rules. Most states that tax pensions don't tax Social Security; eight (Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont) tax it for some retirees. Federally, up to 85% of benefits can be taxable depending on your combined income.
Can I move to another state to avoid pension taxes?
Yes, but you must establish genuine domicile in the new state. Simply forwarding mail isn't sufficient. You need to change your voter registration, driver's license, and spend the majority of the year there. Some states, particularly California and New York, are aggressive about auditing former residents who claim to have moved for tax purposes.
Does it matter which state I earned the pension in?
For which state taxes it, no. Federal law (4 U.S.C. 114, enacted in 1996) bars a state from taxing the pension income of someone who doesn't live there. If you worked in California for 30 years and retire to Florida, California can't tax your CalPERS pension. Where the pension came from can still matter in your new state, since many states exempt only their own government pensions.