US States with Retirement Income Tax Benefits: A Guide

Retirement planning involves careful consideration of various factors, including the impact of state taxes on retirement income. Many states offer tax benefits to retirees, making them attractive destinations for those seeking to maximize their retirement savings.

States with No Income Tax

Several states do not impose a state income tax, which means retirement distributions are not taxed at the state level. These states include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming.

States with Retirement Income Exemptions

Some states offer specific exemptions for retirement income. Illinois exempts most retirement income, including Social Security. Mississippi also exempts all forms of retirement income from taxation.

Pennsylvania does not tax retirement income from employer-sponsored plans, old-age benefits, or disability retirement. Iowa provides an exclusion for retirement income for those 55 or older, disabled individuals, or surviving spouses, starting January 1, 2023.

New Hampshire's Tax Considerations

While New Hampshire has no income tax, it does tax interest and dividends. Retirees should consider this if they rely on these income sources.