Best states to retire for taxes

Discover which U.S. states offer the most tax-friendly environments for retirees, from zero income taxes to low property and sales taxes.

Home > Retirement > Best states to retire for taxes

Key Takeaways

Tax advantages: Some states offer significant tax advantages on retirement income, property, and everyday purchases, making them ideal for retirees looking to lower their tax burden.
Don’t rush to move: Before relocating, consider factors like capital gains tax, healthcare costs, and proximity to family to ensure a comfortable retirement lifestyle.
Top states: States like Florida, Wyoming, and Nevada consistently rank as top choices for their lack of income taxes and low property tax rates.

What to consider when choosing what state to retire in

Some states might offer a more attractive retirement lifestyle due to tax and other financial benefits, leading to many retirees relocating during retirement. States with lower income, property, and sales tax rates can help retirees stretch their retirement savings and maintain their quality of life when they are no longer working.

However, before packing your bags, it is also important to take other factors into consideration for your retirement. You should also take note of other tax rates, such as capital gains, estate, and inheritance taxes, as well as quality of life, to weigh out the pros and cons when choosing the best place for you to retire.

Before looking at the states with the best retirement taxes, here are some other important factors to consider.

Property taxes

While homeownership may be a decent way to lock in housing costs for the long run, states with high property taxes may discourage retirees from owning or purchasing a home. Property taxes and other rules can vary drastically between states; therefore, if you are looking into buying property in another state, you should understand the differences between states.

Some states may also offer exemptions, or circuit breakers, to help limit the tax burden for retirees. Also called homestead exemptions, they may have income limits you’ll need to meet to qualify.

Property tax deferrals are something else to keep in mind when looking into the most tax-friendly states for retirees. These deferrals allow retirees and seniors to postpone some or all of their property taxes. If the property is eventually sold, the deferred property tax payments would come out of the revenue, so you might not even pay it directly.

While states like Hawaii, Alabama, Arizona, and South Carolina offer some of the lowest property taxes by state, property taxes may also vary between counties.¹ Therefore, you should also check county rates before deciding where to buy property.

Sales taxes

While sales tax may not seem like a lot up front, it can still add up over time and affect your cost of living. Lower sales taxes can help keep your day-to-day expenses down — which can be especially beneficial when inflation is high.

States like Oregon, Montana, Alaska, and New Hampshire forego statewide sales taxes.² However, some states, like Alaska, can still impose local sales taxes. Therefore, you should also consider local tax laws when looking into tax-friendly states for retirees.

Retirement income tax

Aside from property and sales taxes, some states, like Florida, Nevada, and Wyoming, do not impose income taxes at all. Some of the most tax-friendly states for retirees are those with low to no income taxes, as they can benefit from receiving income from Social Security, pensions, or traditional retirement account distributions without state income taxes.

State tax regulations on retirement accounts and pension income can largely impact a retiree’s finances. Living in a state that has tax exemptions for retirement income can help stretch retirement funds further.

Capital gains taxes

When selling capital assets, like shares in a company or real estate property, the net earnings — or capital gains — on these sales are generally subject to taxes. This is generally true for most states.

However, eight states — Arizona, Arkansas, Hawaii, Montana, New Mexico, North Dakota, South Carolina, and Wisconsin — tax capital gains at lower rates than ordinary income.³ When looking into the best states to retire for tax purposes, it is important to consider capital gains taxes if you expect to have high net earnings during retirement.

Quality of life

If you are looking for the most tax friendly states for retirees, it may be wise to consider other aspects that can affect your quality of life.

Cost of living — including housing, taxes, healthcare, insurance, and the cost of daily goods and services — can also greatly impact your finances during retirement. Aside from taxes, you should also ensure you will be able to live comfortably in terms of affording groceries, transportation costs, and recreational activities.

You may also want to check healthcare costs in your state, or the state you are interested in, to ensure they are affordable. Some states may have higher out-of-pocket healthcare costs, depending on which Medicare plan you have.

When considering a move during retirement, it is essential to take the local climate into account — beyond just the financial perks. While Alaska's favorable tax benefits may be attractive on paper, it may not align with your lifestyle if you thrive in beachside settings or prefer a consistently warm, sunny climate. The best state to retire for taxes can be different for everyone, depending on personal desires.

Furthermore, you might also want to consider the proximity to your family. While relocating may offer financial or lifestyle advantages, increasing the distance from your family and other loved ones means travel may likely become a recurring expense. Therefore, you might also consider if your financial situation allows you to budget for recurring travel costs.

Best tax-friendly states for retirees in 2025

The best states to retire tax-wise are those with low or no taxes on retirement income, low property taxes, and no state income tax. Here are some of the most tax-friendly states for retirees as of 2025: