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.
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Key Takeaways
Florida, Wyoming, South Dakota, Nevada, Alaska, Tennessee, New Hampshire, Texas, and Washington don't tax any form of income, including Social Security, pensions, and retirement account withdrawals.
Property taxes, sales taxes, estate taxes, and cost of living all affect your total financial picture. A state with no income tax but high property or sales taxes may not be as favorable as it first appears.
Your income sources, homeownership plans, spending patterns, and proximity to family all factor into the right decision. A state that works well for one retiree may not be ideal for another.
Why taxes matter more in retirement
During your working years, taxes are a line item deducted from your paycheck. In retirement, they become something you manage more directly, and the stakes are higher because you're drawing your income from savings and relying on Social Security benefits instead of working.
Consider a retiree withdrawing $80,000 per year from a traditional 401(k) or IRA. In a state with a 5% income tax, that's $4,000 per year going to state taxes alone, on top of whatever federal taxes apply. Over a 25-year retirement, that adds up to $100,000 in state income taxes that a retiree in a no-income-tax state would keep.
But income tax is just one piece. A retiree who owns a $350,000 home will pay anywhere from $1,750 per year (in a state with a 0.50% effective property tax rate) to $6,500 per year (at 1.86%). And sales taxes of 7% to 9% on everyday purchases add another layer that compounds over time, especially on a fixed budget.
That's why choosing where to retire is partly a tax planning decision. The differences between states aren't marginal, and they can amount to tens of thousands of dollars over the course of a retirement. On a fixed retirement income, that makes a difference.
10 tax-friendly states for retirees in 2026
The states below consistently rank among the most favorable for retirees from a tax perspective. Each one offers some combination of no income tax, low property taxes, or no estate tax.
State | Income tax on retirement income | Property tax (effective rate) | Sales tax (state rate) | Estate / inheritance tax |
None | 0.78% | 6.00% | None | |
None | 0.57% | 4.00% | None | |
None | 1.02% | 4.20% | None | |
None | 0.50% | 6.85% | None | |
None | .94% | None, though some local municipalities do have sales tax | None | |
None | 0.52% | 7.00% + local taxes | None | |
None | 1.5% | None | None | |
SS exempt; other retirement income partially excluded | 0.54% | None | None | |
None on retirement income | 0.72% | 7.00% | ||
Georgia | Up to $65,000 excluded (age 65+) | 0.74% | 4.00% | None |
As a note: Property tax rates are effective rates on owner-occupied housing, and may vary within states. Sales tax rates shown are state-level only; local rates may apply.
A few things worth noting about the list
- New Hampshire repealed its Interest and Dividends tax as of January 1, 2025, making it a fully no-income-tax state for the first time. The trade-off is one of the highest effective property tax rates in the country (1.50%). For retirees who rent rather than own, this can be an advantage. For homeowners, the property tax burden partially offsets the income tax savings.
- Tennessee has no income tax and low property taxes, but its combined state and local sales tax rate averages can be as high as 10%, which one of the highest rates in the country. Retirees who spend heavily on taxable goods may find the sales tax eats into their savings more than expected.
- Delaware is the only state on this list with an income tax, but it makes the list for good reason. The state has no sales tax, low property taxes, and partial exclusions on retirement income. For retirees with moderate income, the effective state tax burden can be very low.
- Alaska offers no income tax and an annual Permanent Fund Dividend (which is a payment from oil revenues to state residents). The trade-offs are higher property taxes, a high cost of living, geographic remoteness, and limited healthcare infrastructure outside of Anchorage.
What to consider when choosing where to retire
Tax rates are one of the most tangible financial factors in a retirement relocation decision, but they're not the only ones. Before comparing states, it helps to think about the full range of costs and considerations that will affect your finances and quality of life.
Property taxes vary widely by state and even by county. Some states offer homestead exemptions, senior freezes, or deferrals that can meaningfully reduce the burden for retirees who own their homes. Others have high effective rates that can add thousands per year to your housing costs.
Sales taxes affect your day-to-day cost of living. Five states — Oregon, Montana, New Hampshire, Delaware, and Alaska — have no statewide sales tax. In states with sales taxes, exemptions on groceries and prescription medications can make a noticeable difference for retirees on a fixed budget.
Retirement income taxes matter most for retirees drawing from 401(k)s, IRAs, pensions, or Social Security. Nine states impose no income tax at all, and several others exempt some or all retirement income even though they have an income tax.
Capital gains taxes affect retirees who sell investments, real estate, or business assets. States with no income tax generally don't tax capital gains either, but a few states with income taxes offer preferential rates on capital gains. Washington, for instance, levies a 7% capital gains tax on high earners.
Estate and inheritance taxes can affect how much of your wealth passes to heirs. Most states don't impose either, but a handful do, and their exemption thresholds are often much lower than the $15 million federal exemption.
Quality of life, including climate, healthcare access, cost of living, and proximity to family, can be just as important as tax savings. A state with ideal tax treatment may not be the right fit if it doesn't align with how you want to live.
Bottom line
The most tax-friendly state for your retirement depends on where your income comes from, whether you plan to own or rent, how much you spend on taxable goods, and what kind of lifestyle you want. A state with no income tax sounds appealing on paper, but high property or sales taxes can narrow the gap in practice.
If you're planning a move or just evaluating your options, looking at the full tax picture gives you a more accurate sense of where your retirement savings will go furthest. That said, don’t forget to account for overall quality of life. You may save a few thousand by relocating, but you may find it’s not worth the tradeoff of moving away from family, friends, or a climate you love.
If you're looking to grow your retirement savings with competitive, steady returns in the meantime, Raisin gives you access to high-yield savings accounts and CDs across multiple federally insured banks and credit unions, all from a single login.
Frequently asked questions
Which states don't tax retirement income?
Nine states have no income tax at all, which means they don't tax any form of retirement income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Several other states, including Mississippi, Pennsylvania, and Illinois, have income taxes but exempt most or all retirement income, including Social Security, pensions, and retirement account withdrawals.
Is Social Security taxed at the state level?
Most states don’t tax Social Security benefits. As of 2026, only a handful of states tax Social Security at all, and most of those offer exemptions or income thresholds that shield lower- and middle-income retirees. At the federal level, Social Security may be partially taxable depending on your combined income.
Should I move to a no-income-tax state just for the tax savings?
It’s not always advisable to move to a no-income tax state exclusively for tax savings. Income tax is just one piece of the picture.
States without income taxes often compensate through higher property taxes (like Texas and New Hampshire) or higher sales taxes (like Tennessee). Your total tax burden also depends on how much you spend, whether you own a home, and what other income sources you have.
Don’t forget to factor in cost of living, healthcare access, climate, and proximity to family before making a move based on taxes alone.
Do any states have estate or inheritance taxes?
Yes, though most states do not. As of 2026, roughly a dozen states and the District of Columbia impose an estate tax, and six states impose an inheritance tax (Maryland imposes both). The exemption thresholds in these states are often much lower than the federal $15 million exemption. None of the 10 states listed in this article impose state-level estate or inheritance taxes. For more on how estate taxes work, see our estate planning guide.
The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
- https://taxfoundation.org/data/all/state/property-taxes-by-state-county/
- https://taxfoundation.org/data/all/state/sales-tax-rates/
- https://taxfoundation.org/data/all/state/state-capital-gains-tax-rates-2024/
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