Quick Answer
Whether you owe state taxes on retirement income depends on your state and income type. Nine states have no state income tax at all, while 23 states don't tax Social Security benefits. However, most states do tax 401(k) and IRA withdrawals as ordinary income at rates ranging from 2.9% to 13.3%.
Best Answer
Sarah Chen, Payroll Tax Analyst
Best for traditional employees with 401(k)s, pensions, and Social Security planning retirement
How state taxes on retirement income work
Most retirement income is subject to state taxes, but the rules vary dramatically by state and income type. While the federal government taxes most retirement income as ordinary income, states have their own policies that can significantly impact your retirement budget.
Types of retirement income and state tax treatment
401(k) and traditional IRA withdrawals are taxed as ordinary income in most states. If you withdraw $50,000 from your 401(k) in California, you'll pay the state's top rate of 13.3% on that income if you're in the highest bracket — that's $6,650 in state taxes alone.
Roth IRA withdrawals are generally tax-free at both federal and state levels, since you already paid taxes when you contributed.
Social Security benefits receive more favorable treatment. According to IRS Publication 915, while the federal government may tax up to 85% of Social Security benefits, 23 states don't tax Social Security at all, and several others only tax it for higher-income retirees.
Pension income treatment varies widely. Some states exempt all pension income, others exempt only government pensions, and some tax all pensions as ordinary income.
Example: $75,000 retirement income across different states
Let's say you have $75,000 in annual retirement income: $35,000 from Social Security, $30,000 from 401(k) withdrawals, and $10,000 from a pension.
Florida (no state income tax): $0 in state taxes
Pennsylvania: $0 on Social Security and pension, roughly $870 on 401(k) withdrawals (2.9% rate)
California: $0 on Social Security, but approximately $2,175 on the $40,000 in 401(k) and pension income (using 2026 tax brackets)
New York: Varies by total income, but could be $1,200-2,000 depending on other deductions
States with no income tax on retirement income
Nine states have no state income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in these states, you'll only owe federal taxes on your retirement income.
States that don't tax Social Security
Twenty-three states don't tax Social Security benefits at all. This includes the nine no-tax states plus Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Virginia, and Wisconsin.
Key factors that affect your state retirement tax bill
What you should do
First, determine your state's specific rules for each type of retirement income you'll receive. Consider using our paycheck calculator to model different withdrawal strategies and their tax impact. If you're planning to move in retirement, research the tax implications — it could save you thousands per year.
Key takeaway: State taxes on retirement income vary dramatically. While 9 states have no income tax and 23 don't tax Social Security, most states will tax your 401(k) and IRA withdrawals as ordinary income, potentially costing thousands annually.
Key Takeaway: State taxes on retirement income vary dramatically, with 9 states having no income tax and 23 states not taxing Social Security, but most states tax 401(k) withdrawals as ordinary income.
State tax treatment of common retirement income sources
| State | Social Security | 401(k)/IRA | Pension | Overall Tax Rate |
|---|---|---|---|---|
| Florida | Not taxed | Not taxed | Not taxed | 0% |
| Texas | Not taxed | Not taxed | Not taxed | 0% |
| Pennsylvania | Not taxed | Taxed at 2.9% | Not taxed | Low |
| Illinois | Not taxed | Not taxed | Not taxed | 0% on retirement |
| California | Not taxed | Taxed up to 13.3% | Taxed up to 13.3% | High |
| New York | Not taxed | Taxed up to 10.9% | Taxed up to 10.9% | High |
More Perspectives
Sarah Chen, Payroll Tax Analyst
Best for remote workers who have flexibility in choosing their retirement state
State tax planning for location-flexible retirees
As a remote worker, you have a unique advantage in retirement planning: you can choose where to establish residency based on tax efficiency, not just job requirements.
Strategic state residency considerations
The difference between high-tax and no-tax states can be substantial. A retiree with $80,000 in annual retirement income could save $3,000-6,000 per year by choosing a tax-friendly state. Over a 20-year retirement, that's $60,000-120,000 in savings.
No-tax states to consider: Texas, Florida, Tennessee, and Nevada are popular with retirees due to no state income tax and relatively low cost of living in certain areas.
Partial-tax states with benefits: Some states tax certain retirement income but not others. For example, Illinois doesn't tax retirement account distributions or Social Security, making it attractive if you have substantial 401(k) savings.
Establishing proper residency
To qualify for a state's tax benefits, you must be a bona fide resident. This typically means:
Some high-tax states like California and New York are aggressive about challenging residency changes, especially for high-income individuals.
Beyond income taxes: total tax picture
Consider all taxes when evaluating states:
A comprehensive analysis should include your expected housing costs, healthcare expenses, and lifestyle preferences alongside tax considerations.
Key Takeaway: Remote workers have unique flexibility to choose tax-friendly retirement states, potentially saving $3,000-6,000 annually by relocating to states with favorable retirement income tax policies.
Sources
- IRS Publication 915 — Social Security and Equivalent Railroad Retirement Benefits
- IRS Publication 590-B — Distributions from Individual Retirement Arrangements (IRAs)
Related Questions
Reviewed by Sarah Chen, Payroll Tax Analyst on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.