States That Won’t Tax Your Retirement Distributions

12 States That Won' t Tax Your Retirement Distributions

Retiring in one of these places may help you stretch your nest egg

iStock / Getty Images One of the biggest items on your is taxes. If you're thinking of moving somewhere else, consider one of the 12 states that don't tax distributions from pensions or defined contribution plans such as .

A lack of tax

Nine of those states that don't tax retirement plan income simply because distributions from retirement plans are considered income, and these nine states have no state income taxes at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. The remaining three — Illinois, Mississippi and Pennsylvania — don't tax distributions from 401(k) plans, IRAs or pensions. Alabama and Hawaii don't tax pensions, but do tax distributions from 401(k) plans and IRAs.

State Taxes and Retirement Distributions

AARP Taxing retirement plan distributions isn't an all-or-nothing proposition. For example, 34 states don't tax . Nine of those, are the states listed above that don’t have income taxes. The others: Arizona, Alabama, Arkansas, Connecticut, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Pennsylvania, Utah, West Virginia and Wisconsin. California, Vermont, Virginia and Washington, D.C. fully tax military retirement pay. All other states have partial allowances for military pay. And Virginia only allows Congressional Medal of Honor recipients to exclude their military retirement income.
Note: You may not have paid tax on your retirement income, but that doesn’t mean that your state doesn’t tax retirement income under certain conditions: 27 states tax some, but not all, retirement or pension income. Typically, these states limit the amount of tax by income levels. 27 states limit the amount of tax by income levels Alabama Kansas New Jersey Arizona Kentucky New Mexico Arkansas Louisiana New York Colorado Maine Oklahoma Connecticut Maryland Rhode Island Delaware Massachusetts South Carolina Georgia Michigan Virginia Indiana Missouri West Virginia Iowa Montana Wisconsin

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Taxes aren t everything

Some states with have higher property or sales taxes. For example, while Illinois does not tax retirement income, it has one of the highest sales and property taxes in the U.S. Other low-tax states may have fewer programs that you might find helpful, such as senior centers and public transportation. Ultimately, depends on what you can afford — and what makes you happy. If you have a beloved child or grandchild in a high-tax state, you may figure the extra taxes are worth being nearby.

Also of Interest

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