13 States That Tax Retirement Income (and 9 That Tax None of It)

The first time a state return came back with Social Security sitting in taxable income, the reaction was disbelief – the assumption had always been that only the federal government touched those benefits. If that line item is sitting on your return too, or you suspect it might be, you are not imagining it.

Thirty-seven states leave retirement income alone. Thirteen do not. And the gap between them is not a rounding error – a state taxing $30,000 of Social Security at even a modest rate is collecting hundreds of dollars a year that a retiree one border over keeps entirely.

This list names all 13 states that take a cut of retirement income, what each one actually goes after – Social Security, pension checks, 401(k) and IRA withdrawals, or all three – and all 9 states that collect none of it. By the end, your own state's exposure is a concrete figure, not a background worry, and the relocation math becomes a real calculation worth running.

Rates and thresholds shift with legislation, so every figure here should be confirmed with the relevant state department of revenue before you act – but the structure of each state's approach is what you need first, and that is what this article delivers.

Quick Tips Before You Start

Where Social Security Faces State Tax

Seven states on this list target Social Security benefits specifically. Some tax them above a relatively low income threshold; others offer a partial subtraction that phases out as income rises. In every case, the question is not just whether the state taxes Social Security—it is whether your income puts you above the line where the tax actually applies.

For a retiree drawing Social Security plus any other income stream, these states create a compounding exposure: once Social Security becomes taxable, the combined bill from two or three taxed streams can add up faster than the headline rate suggests.

1. Connecticut Taxes Social Security Above an Income Limit

It depends on a single number: your adjusted gross income relative to a filing-status threshold. Single filers and married couples sit at different cutoff levels, and the current figures need to be confirmed directly with the CT Department of Revenue Services before you make any decision.

What matters most is how the exemption disappears once you cross that line. The mechanism – whether the exemption vanishes all at once the moment AGI clears the threshold, or shrinks proportionally as income climbs – determines whether a retiree sitting $1,000 over the limit owes tax on a small slice of benefits or suddenly on all of them. That distinction is worth a phone call to CT DRS.

Connecticut also taxes pension payments and IRA or 401(k) withdrawals as ordinary income, with no separate retirement exclusion sitting underneath to soften the blow. A retiree with $30,000 in Social Security and $25,000 in annual IRA withdrawals who clears the AGI threshold faces state tax on both streams at once – no credit from one offsets the other. That compounding exposure is the real number to calculate before assuming Connecticut is affordable in retirement.

2. Kansas Taxes Social Security Once Income Passes a Threshold

Check the Kansas threshold before assuming your income is too modest to trigger a state tax bill on Social Security.

The common mistake is mentally filing Kansas alongside states with high income floors – assuming that only a comfortable six-figure retirement income would land you in taxable territory. Kansas sets its AGI threshold lower than many comparable states, which means a retiree pulling in a moderate Social Security check combined with even a small pension payment can find themselves on the wrong side of the line. The exact dollar level and whether it applies as a clean exclusion below the threshold or as a deduction that shrinks as income rises must be confirmed with the Kansas Department of Revenue, because the two structures produce very different bills for someone sitting just above the cutoff.

There is a quieter trap built into this threshold, too. Social Security benefits receive an annual cost-of-living adjustment from the federal government. If Kansas has not indexed its threshold to keep pace with those adjustments, a retiree whose purchasing power has barely moved can still find themselves newly taxable – not because their real income grew, but because the nominal dollar amount of their benefits did.

Kansas also taxes pension payments and 401(k) withdrawals as ordinary income, with no separate retirement exclusion beyond the Social Security provision. A retiree just over the threshold therefore faces the same layered exposure that appears elsewhere on this list: state tax on Social Security running simultaneously with state tax on every pension or IRA dollar withdrawn.

The fix is straightforward: pull the current Kansas threshold from the Department of Revenue, add up your expected AGI from all retirement income streams, and see exactly where you land – not where you assumed you would.

3. Minnesota Taxes Social Security for Most Retirees

Zero is the amount of additional relief Minnesota offers on Social Security once a retiree's income exceeds the phase-out ceiling for the state's subtraction – and that ceiling is not set especially high.

Minnesota does give retirees a Social Security income subtraction, which sounds like meaningful protection until you look at where the phase-out begins. The subtraction starts shrinking above an AGI that many middle-income retirees – drawing a combination of Social Security, a modest pension, and annual IRA withdrawals – will clear without much difficulty. The current subtraction cap and the exact phase-out range need to be verified with the Minnesota Department of Revenue before you build any relocation estimate around them, because the numbers are set by statute and can change.

Once that subtraction is fully phased out, a Minnesota resident owes state income tax on the same portion of Social Security benefits that the federal government already taxes. There is no state-level buffer left. No credit steps in, and no secondary deduction narrows the base.

The pension and IRA side of the picture is similarly ungenerous. Minnesota taxes those withdrawals as ordinary income under a progressive rate structure, with no dedicated retirement income exemption — and no Roth conversion strategy — separate from the Social Security subtraction. That means larger annual withdrawals don't just add income – they push the marginal rate upward, so the last dollars drawn from a 401(k) are taxed at a higher rate than the first.

Among all states on this list that tax Social Security, Minnesota ranks as one of the least accommodating for middle- and higher-income retirees. That is a useful benchmark when pricing out a potential move to one of the nine states with no income tax.

The annual check-in for a Minnesota retiree comes down to three things: the current year's subtraction cap, your projected AGI across all income streams, and the marginal rate your total income triggers under the progressive schedule. If your AGI has grown – from a COLA increase, a larger required minimum distribution, or a one-time withdrawal – recalculate before filing rather than assuming last year's bill applies.

Running those three numbers once a year takes less than an afternoon and tells you whether your Minnesota tax exposure has shifted. If the gap between what you owe Minnesota and what you would owe in a no-income-tax state keeps widening, that is the signal to make the relocation math formal.

4. Nebraska Is Phasing Out Its Social Security Tax

Most Nebraska retirees still assume the state taxes their Social Security the same way it always has. That assumption may be costing them money they no longer owe.

Nebraska is in the middle of a multi-year legislative phase-out of state income tax on Social Security benefits. Each year, a larger percentage of those benefits is exempt – but the transition is not finished, and the exact exemption percentage for the current tax year must be verified with the Nebraska Department of Revenue before any return is filed. The number changes annually, which means a figure that was accurate last April may already be wrong.

The phase-out covers Social Security only. Pension checks and withdrawals from 401(k)s and traditional IRAs stay fully taxable as ordinary income throughout the entire transition – and will remain so after it is complete. No companion legislation extends relief to those streams. A retiree whose income leans heavily on a pension rather than Social Security will see little change in their Nebraska bill even when the phase-out finishes.

5. North Dakota Taxes Social Security at a Low Rate

North Dakota taxes Social Security benefits as ordinary income, full stop – there is no separate subtraction, no age-based exclusion, no phase-in schedule working in a retiree's favor the way a neighboring state's legislation does.

The saving grace is the rate structure itself. North Dakota sits at the lower end of states that levy a broad income tax, which means the percentage applied to that Social Security income is modest compared with what Connecticut or Vermont would charge on the same dollar amount. Confirm the exact current rates with the North Dakota Office of State Tax Commissioner before building any projection around them, since rates can shift with legislative sessions.

Pension checks and 401(k) and IRA withdrawals land in the same bucket – ordinary income, same low-rate schedule, no carve-out.

Here is where the 'low rate' story can quietly mislead you. A retiree pulling $60,000 a year from a traditional 401(k) on top of Social Security is applying that rate to a substantial base. Even a rate that looks small on paper produces a four-figure annual state tax bill when the withdrawal amount is large enough. The rate is not the whole picture; the base it gets applied to is equally important. Run the actual dollar math against your own income mix before concluding that North Dakota's headline rate makes state tax irrelevant.

6. Rhode Island Taxes Social Security Above a Modest Threshold

A retiree reviewing a Rhode Island state return for the first time expects a short form – and then finds Social Security sitting in taxable income, no exclusion applied, because their combined retirement income cleared a threshold they never thought to check.

Rhode Island does offer an exemption for Social Security benefits, but the income ceiling that triggers it is not set high enough to shelter most middle-income retirees. A household drawing $28,000 in Social Security plus a pension check or a few IRA withdrawals can cross the line without any single income stream feeling unusually large. Before making any assumption about where you land, verify the current dollar threshold and whether it adjusts for inflation each year with the Rhode Island Division of Taxation – if it is not indexed, cost-of-living increases to Social Security alone can push a retiree over the line over time, with no change in real purchasing power.

The mechanism matters as much as the threshold itself.

If the exemption disappears all at once the moment income crosses the line – rather than phasing out gradually – a retiree sitting $500 above the ceiling owes tax on the full Social Security benefit, not just on the $500 of excess income. That cliff structure produces a disproportionate jump in the tax bill for people near the boundary, and it is exactly the kind of detail that changes whether a move makes financial sense. Confirm how the exemption unwinds with RI Division of Taxation; do not assume it phases out gently.

Pension income and 401(k) and IRA withdrawals get no separate treatment – Rhode Island taxes all of it as ordinary income, with no retirement exclusion sitting alongside the Social Security provision.

The concrete move here is straightforward: pull Rhode Island's current income tax rate schedule and the Social Security exemption threshold together in the same calculation. Take your expected total retirement income, check whether it clears the threshold, apply the state rate to the taxable portion, and write down that annual dollar figure. Rhode Island also carries one of the higher overall costs of living in the country – housing, property taxes and overlooked deductions, and everyday expenses stack on top of the income tax bill. That single number, the annual state tax on your retirement income, is what you hold up against the full cost of relocating to one of the nine states that collect none of it.

7. Vermont Taxes Social Security for Middle- and Higher-Income Retirees

Most retirees assume that once they clear the federal Social Security threshold, the state piece is a smaller, parallel version of the same math. Vermont reframes that assumption fast.

Vermont does offer a Social Security exemption, but it phases out once income climbs past a threshold that is not set especially high – confirm the current figure and the phase-out mechanics with the Vermont Department of Taxes before running any numbers. What that means in practice is that a retiree with a moderate pension plus Social Security can find themselves above the line before they expect it, with the exemption shrinking or gone.

The rates make this sting more than it might elsewhere. Vermont runs a progressive income tax schedule with some of the higher marginal rates in the Northeast, so every dollar that clears the exemption is taxed at a rate that climbs with total income. Pension payments and IRA or 401(k) withdrawals receive no separate retirement income exclusion – they go into the same taxable pile, at the same progressive rates, with no parallel relief to offset the Social Security hit.

The compounding problem is real. Lose the Social Security exemption, add a pension check, pull $20,000 from a traditional IRA, and Vermont is taxing all three streams at once – while the marginal rate on the last dollars keeps rising. The reframe worth making here: Vermont is not a light-touch state that clips a narrow slice of retirement income. For a middle-income retiree drawing from multiple streams, it functions more like a full-exposure state with a low income floor.

Where All Retirement Income Streams Are Taxed

Two states on this list go further than just targeting Social Security. Montana and New Mexico expose pensions, 401(k) and IRA withdrawals, and Social Security benefits to state income tax—sometimes with limited relief for lower earners, but often with no meaningful offset for anyone drawing income from multiple streams.

For a retiree with a pension check, a regular IRA withdrawal, and Social Security arriving every month, these states represent the broadest exposure on this list. The dollar difference between staying and moving to a no-tax state is largest here—and the strongest argument for running the full relocation math.

8. Montana Taxes Social Security, Pensions, and Withdrawals

Montana is the state where the partial-relief story stops. Every income stream a retiree draws from – Social Security, a pension check, and every dollar pulled from a 401(k) or traditional IRA – goes into state taxable income. A limited exemption exists for pension and annuity income, but it applies only at lower income levels; verify the current cap with the Montana Department of Revenue before counting on it.

Once income climbs past that threshold, higher-income retirees get essentially no shelter across any of the three streams. Montana's progressive rate structure means the marginal rate on the last retirement dollars is higher than on the first, so a retiree combining Social Security with a pension and large 401(k) withdrawals ends up paying the top rate on a meaningful slice of their income – not a rounding error.

That said, the relocation math is not as straightforward as the income tax headline makes it look. Montana has no state sales tax, and for a household spending $40,000 to $50,000 a year on groceries, gas, and everyday goods, that exemption puts real money back on the table. A no-income-tax state that charges 6% or 7% in sales tax quietly closes a chunk of the gap.

The starting point, if Montana is your current state, is simple: find the retirement income lines on last year's state return and total what was actually collected. That single number – not the rate, but the real dollar amount – is what a relocation scenario has to beat.

9. New Mexico Taxes All Retirement Income but Exempts Lower Earners

New Mexico does tax Social Security, pension income, and 401(k) and IRA withdrawals – but the picture has changed materially in recent years, and a retiree working from information that is even five years old may be carrying a higher estimate of their exposure than the current law actually produces.

Recent legislation has expanded the retirement income deduction that shelters lower-income residents from state tax on those three streams. The deduction phases out above an income ceiling, so higher-income retirees still face the full New Mexico income tax without offset once income clears the cap – verify the current deduction amounts and phase-out levels with New Mexico Taxation and Revenue before assuming anything. One other cost to fold in: New Mexico levies a gross receipts tax that works like a sales tax, and that affects everyday spending in ways an income tax comparison alone will miss.

If you evaluated New Mexico as a relocation candidate before the deduction expansion passed, the current calculation is worth running again from scratch.

Partial Relief: Exemptions and Credits Limit the Bite

Four states on this list do tax retirement income—but they also offer subtractions, deductions, or credits that can meaningfully reduce what you actually owe. The relief is not available to everyone, and it phases out as income rises, but for retirees whose income falls in the right range, the effective tax bill can be far lower than the headline rate suggests.

The critical word in all four cases is 'phases out.' Whether you are inside or outside the relief window determines whether you owe modest tax or the full freight—and knowing exactly where that window sits is the most important fact-finding task for retirees in these states.

10. Colorado Taxes Retirement Income but Offers Age-Based Subtractions

Colorado's retirement tax bill can drop to nearly nothing – or stay real – depending entirely on one number: the age-based subtraction figure confirmed with the CO Department of Revenue for the current filing year.

Here is the repeatable structure. Residents 65 and older subtract a combined allowance covering Social Security plus other retirement income before any tax is calculated; the state then applies its flat rate to whatever remains above that ceiling. Pull the current subtraction cap from the CO Department of Revenue, add up your expected Social Security and retirement income, subtract the allowance, and multiply the remainder by the flat rate. That arithmetic gives you Colorado's annual bill in one pass – no progressive brackets shifting the result as income climbs, just a single rate on a single remainder.

A retiree with modest Social Security and a small pension may find the subtraction wipes out most of the taxable base, leaving a bill close to zero. Someone drawing heavily from a large 401(k) balance will still owe real money on every dollar above the ceiling. Whether the subtraction remains available at higher income levels or disappears above a threshold is the detail to confirm first – it changes which category you fall into.

11. Missouri Taxes Social Security but Exempts Most Lower-Income Retirees

For a retiree whose total income sits well below Missouri's phase-out floor, the state tax bill on Social Security can be close to zero.

That generosity is real – and it is also conditional. Missouri's Social Security deduction is structured to shrink as income rises, and the phase-out thresholds are not especially high. A retiree drawing Social Security plus a moderate amount from an IRA each year may find themselves partway up that reduction curve, where the deduction has already started to disappear. At that point, they owe partial tax on Social Security and full ordinary-income tax on every IRA withdrawal dollar at the same time. That double exposure – partial Social Security tax stacked on top of unshielded withdrawal income – is the phase-out trap, and it arrives faster than most people expect.

The income-source problem makes it uneven in a second way.

Missouri offers a limited exemption for certain public pension payments, but private pension income and 401(k) withdrawals receive no comparable protection. Two retirees with identical total incomes can face meaningfully different Missouri bills depending on whether their money comes from a government pension or a private-sector 401(k). Verify current deduction amounts and phase-out levels with the MO Department of Revenue before drawing any conclusion about your own exposure – the thresholds are set by statute and can shift.

The honest comparison worth making here is with states earlier on this list where middle-income retirees face a real bill regardless of income level. Missouri does not do that to lower-income retirees.

If total retirement income is genuinely modest – Social Security as the primary source, minimal withdrawals – Missouri's burden is lighter than most states on this list. That distinction matters. The problem is that 'modest' has a specific dollar ceiling in Missouri's statute, and a retiree who drifts above it through cost-of-living adjustments to Social Security or slightly higher withdrawals in a given year can cross into the phase-out zone without any deliberate change in their finances.

The trade-off is worth naming plainly: Missouri's deduction is a real benefit for the retirees it fully covers, but it is not a flat exemption, and it does not extend to the most common private-sector retirement account. Anyone in the middle income range needs to run the actual numbers before treating Missouri as a low-tax state for retirement.

12. Utah Uses a Tax Credit to Offset Retirement Income Tax

Utah puts the full amount of Social Security and other retirement income into the taxable base first, then reduces what you owe through a credit applied against the resulting bill.

That sequence matters because it is structurally different from a subtraction that shrinks the income base before tax is calculated. With Utah's approach, the flat rate runs against the full income figure, and the credit – whose current amount and phase-out ceiling should be confirmed with the Utah State Tax Commission – comes off the resulting liability. Once income exceeds the credit's phase-out level, the full flat-rate bill applies with no offset at all. The math after that point is straightforward: flat rate, full retirement income, no relief. Verify the credit amount and phase-out threshold before assuming any reduction applies to your situation.

One specific trap is worth knowing even if it does not apply to you yet. The credit is nonrefundable, which means a retiree whose total Utah tax liability is smaller than the credit amount loses the unused portion entirely – it does not carry forward and does not generate a refund. For a very-low-income retiree, an upfront exclusion from the taxable base would have been more valuable than a credit that exceeds what they owe. If that describes your situation, the net Utah bill may still be small, but the credit is not doing as much work as the headline suggests.

13. West Virginia Is Phasing Out Its Social Security Tax Too

The phase-out headline feels like the story is finished – West Virginia is getting rid of its Social Security tax, so the worry is gone. That feeling is worth slowing down on.

West Virginia is mid-transition on Social Security, moving through a multi-year phase-out where the exempt percentage climbs each year. The current year's exact figure shifts with the schedule, so before you file – or before you price a move – confirm the live percentage directly with the WV State Tax Department, because last year's number may not be this year's number.

The phase-out stops at Social Security. Pension income and 401(k) or IRA withdrawals stay fully taxable as ordinary income throughout the transition and after it completes. No companion legislation extends the relief to those streams.

That gap is where the real calculation lives. A retiree whose monthly income runs primarily through a pension check, not a Social Security deposit, will still owe West Virginia ordinary-income tax on that money even once the Social Security exemption is fully in place. The headline gives a partial answer to a question that has three parts.

Nebraska is running a nearly identical legislative clock – Social Security phased out, pensions and account withdrawals still taxed. Two states, same structure, same blind spot. If pension income is a significant part of the picture, the Social Security phase-out is genuinely good news, but the full retirement income tax bill is the number that decides whether staying or moving makes sense.

Frequently Asked Questions

If I move to a no-income-tax state mid-year, do I owe my current state tax for the months I lived there?

Yes. Most states tax income earned or received while you were a resident, regardless of where you live when you file. A part-year resident return is typically required for the year you move, splitting income between the old state and the new one. The exact rules vary by state—your current state's department of revenue will have a part-year residency form and instructions, and a CPA familiar with both states can make sure the transition is handled correctly.

Does living in a no-income-tax state mean I pay no tax on my 401(k) withdrawals?

You still owe federal income tax on traditional 401(k) and IRA withdrawals regardless of where you live—the federal rules do not change by state. What the nine no-income-tax states eliminate is the state-level layer on top of that. For a retiree in a high-rate taxing state, that state layer can represent several hundred to several thousand dollars a year depending on withdrawal size, so it is meaningful even though the federal bill remains.

Nebraska and West Virginia are phasing out their Social Security tax. Does that mean I should stay put if I live there?

It depends on your full retirement income picture. The phase-out covers Social Security only—pension income and 401(k) and IRA withdrawals remain taxable in both states throughout and after the transition. If Social Security is your primary income stream and the rest is modest, staying until the exemption is complete may make sense. If you draw a substantial pension or plan large IRA withdrawals, those streams are unaffected by the phase-out, and the relocation math may still favor a no-tax state.

Is it really worth moving just for the retirement income tax savings?

For some retirees, yes—for others, no. The move only makes financial sense if the annual tax savings exceed the annualized cost of relocating, and if offsetting expenses like higher property taxes or a higher cost of living do not erase the gain. The honest answer is that it depends on the total dollar amounts involved and on factors beyond tax that only the retiree can weigh. Run the actual calculation with real numbers before making a decision either way.

My state has a retirement income exemption—how do I know if I qualify for it?

The most reliable source is your state's department of revenue website, which should have the current threshold, the phase-out range (if any), and the income definition used to determine eligibility. 'Income' for this purpose is often adjusted gross income rather than gross income, which can differ meaningfully if you have deductions. If the exemption phase-out is close to your projected income level, a CPA or fee-only financial planner can model the exact exposure across a range of withdrawal scenarios.

Do the nine no-income-tax states make up for lost revenue in other ways that hurt retirees?

Some do. Texas, for example, has notably high property tax rates in many counties, which can offset a significant portion of the income tax savings for a homeowner. Washington enacted a capital gains tax above $250,000. New Hampshire does not tax wages or retirement income but recently completed the repeal of its investment income tax. The complete picture for any no-tax state requires looking at property taxes, sales and use taxes, and any targeted levies alongside the income tax benefit.

Running the Real Numbers on Your State's Retirement Tax Bill

Start with last year's state return. Find every line where the state collected tax from Social Security, pension payments, or retirement account withdrawals, and add those dollars up. That total – not a rate, not a percentage, but the actual amount – is what a move to one of the nine no-income-tax states would return to you annually, before any cost-of-living difference enters the picture.

If your retirement income runs heavily through a pension or large 401(k) drawdowns, the exposure is biggest in states like Montana, New Mexico, Connecticut, Vermont, and Minnesota, where all three streams face tax with limited relief at middle and higher incomes. That is where the relocation math is least hypothetical and most worth pricing seriously.

The bill that surprised a Vermont retiree who thought state taxes on Social Security were not a real number – that is the calculation this article exists to make visible. Pull the return, total the lines, and then decide. The move may or may not make sense once you price it fully, but now at least the tax side of it is a number, not a worry.