The Best States to Retire in for Taxes — and Why the List Changes With Your Income

Every "best states to retire" ranking has the same defect. It picks one hypothetical retiree, computes fifty numbers, sorts them, and publishes the result as though the order were a property of the states.

It is not. It is a property of that retiree.

Change the income and the ranking rearranges itself. Change the shape of the income — more Social Security, less; a pension instead of a 401(k) — and it rearranges again. States that look generous at one level are ordinary at another, and one of the most-praised states in retirement rankings charges nearly $2,800 on the middle profile tested here.

So this article does not give you a list. It gives you three, and shows you why they disagree.

A note before you start. This is general education, not tax advice. Every figure comes from this site's fifty-state income-tax dataset and its retirement tax engine, computed for a single filer aged 70. State income tax is only part of the cost of living somewhere — property tax, sales tax, insurance and healthcare all vary and none are modelled here. Rates are for tax year 2026 and several states are mid-phase-down, so confirm a figure that is doing real work in your decision. Nineteen states carry a data flag indicating their retirement provisions are due for 2026 re-confirmation; the underlying records carry statute citations, but a figure worth acting on is worth checking against the state's own department of revenue.

1. Three retirees, three different answers

Modest — $55,000 total. $24,000 of Social Security, $31,000 of 401(k) distributions.

Typical — $95,000 total. $34,000 of Social Security, $61,000 of distributions.

Affluent — $180,000 total. $40,000 of Social Security, $100,000 of distributions, $40,000 of other income.

Same fifty states, same age, same filing status. Only the amount changes.

Read the first column as the finding. Nearly half the country charges a modest retiree nothing, and by the affluent profile that has collapsed to nine states — essentially the ones with no income tax at all.

The reason is structural. Most states that "exempt retirement income" do not exempt it without limit. They exempt an amount, or they exempt it below an income ceiling, or they exempt it above an age with a cap attached. Those provisions are generous at $55,000 and largely irrelevant at $180,000.

Which means a ranking built on a modest retiree tells an affluent one almost nothing — and rankings rarely say which retiree they used.

2. The modest profile: $55,000

Twenty-three states charge nothing.

The dearest ten:

And the cheapest states that charge anything at all:

New York $117 · South Carolina $119 · Ohio $136 · Louisiana $184 · Arizona $381 · New Mexico $383

New York at $117 is the entry most likely to surprise you. It is a high-tax state by reputation and by its treatment of wages, and it charges a modest retiree almost nothing — because its retirement provisions are generous at this level.

Utah at the top is the other surprise. It appears in "retirement-friendly" lists regularly, and on this profile it is the most expensive state in the country.

3. The typical profile: $95,000

Nineteen states charge nothing — four fewer than at $55,000.

Cheapest that charge anything:

Maryland $603 · Kentucky $929 · Wisconsin $936 · Ohio $961 · South Carolina $1,066 · Louisiana $1,084

Maryland at $603 is the standout, and it undercuts Ohio, Wisconsin and Kentucky — none of which have Maryland's reputation for taxing income.

And the leader has changed. Utah was dearest on the modest profile and is fifth here; Minnesota was tenth and is now first. Neither state changed. The retiree did.

4. The affluent profile: $180,000

Nine states charge nothing — and this is where the picture simplifies dramatically.

Cheapest that charge anything:

Mississippi $868 · Iowa $908 · Pennsylvania $1,228 · North Dakota $1,449 · Illinois $1,835 · Michigan $2,826

Three things to take from this table.

The exclusions have stopped mattering. By $180,000, most retirement provisions have been exhausted or phased out, and what remains is essentially the state's ordinary rate structure. The affluent list looks much more like a general income tax ranking than the modest one does.

California appears for the first time. It is absent from both earlier lists — its provisions handle a modest retiree well — and lands fifth here.

And the flat-tax states become the bargain. Pennsylvania, Illinois, North Dakota and Michigan are cheap at this level precisely because a flat rate does not escalate. Mississippi and Iowa are cheap because both exempt retirement income broadly, which holds at every level rather than phasing out.

5. The states that charge nothing at every level

Nine states have no individual income tax at all, which makes them immune to everything in this article: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

One caution attaches to Washington. It has no income tax, but it charges an excise on large individual long-term capital gains. A retiree living on distributions never encounters it; one selling a business or a long-held portfolio might.

And a broader caution attaches to all nine. They raise revenue some other way — usually property tax, sales tax, or both. A state that takes $0 of your income tax and $7,000 of your property tax has not saved you $7,000. This article measures one line of the total, deliberately and with that limitation stated, because it is the line that is hardest to look up and most often misrepresented.

Beyond those nine, a second group exempts retirement income broadly enough to reach $0 on the typical profile — Mississippi and Iowa are the clearest cases, and both remain among the cheapest at $180,000, which is the more meaningful test.

6. Where the rankings go wrong

Four specific ways published lists mislead, all visible in the numbers above.

They pick one income and do not say which. A ranking built on $50,000 puts New York at $117 and Utah at $2,448. A ranking built on $180,000 puts Utah eighth and New York nowhere near the top. Both are true; neither is "the answer".

They rank on the presence of a tax rather than the amount. "Does this state tax retirement income" produces a binary that hides a $0-to-$11,815 range. Maryland charges $603 on the typical profile and Utah charges $4,228 — both are in the "taxes retirement income" column.

They use a pension when most people have a 401(k). This is Alabama's case exactly. Alabama exempts defined-benefit pension income and does not exempt 401(k) or IRA distributions, so it reads as retirement-friendly in a ranking built on a pension and charges $2,785 on a profile built from distributions. The kind of retirement income you have changes the answer more than the amount does, in several states.

They ignore Social Security's share. A retiree with a larger benefit and smaller distributions pays less in the 26 states that treat benefits better than distributions, and the same in the other 24. Two people with identical total income can face materially different bills.

7. The military pension exception

A military pension is exempt in 33 states.

That is a larger and more reliable break than any general retirement provision in this article, and it is not subject to the phase-outs that make the other exclusions unreliable at higher incomes.

Which changes the ranking substantially for anyone it applies to. A military retiree's state list is not the same list as a civilian's, and using a general ranking will produce the wrong answer — states that are expensive on a distribution-based profile can be free on a military pension.

Several states that tax other retirement income exempt military pensions specifically, which is a deliberate policy choice made independently of their general treatment. If this applies to you, the general question is close to irrelevant and the specific one is the only one worth asking.

8. What the spread is actually worth

On the affluent profile the range is $0 to $11,815 a year.

That is not a one-time cost. It is annual, it continues for as long as you live in the state, and it applies to income you must take — required distributions in particular are not optional.

Over a twenty-five-year retirement, at the top of the range, that is roughly $295,000 before considering that distributions grow as the required percentage rises. It is plausibly the largest single recurring cost in a retirement that nobody examines, because it never arrives as a bill labelled "state choice".

Two honest qualifications.

The affluent profile is where the spread is largest. On the modest profile the range is $0 to $2,448 — real, but a far smaller share of a smaller income, and much less likely to justify a move on its own.

And income tax is one line. A state at $0 on this measure may cost more in property tax on the house you would buy there, and property tax is assessed on a value rather than an income, which makes it harder to reduce. The right comparison is total cost, and this article is one input to it.

9. How to use this without moving

Most people reading a ranking like this are not going to relocate. The useful applications are smaller and more available.

Know which group you are in. If you are in one of the states charging $0 on your profile, this whole subject is settled and you can stop thinking about it. That is 23 states at the modest level and 19 at the typical one — a large share of readers.

If you are near a provision's ceiling, the ceiling is a planning target. States that exempt retirement income below an income limit create a threshold where an extra dollar of distribution is unusually expensive. Knowing where yours sits changes how you size a withdrawal or a conversion.

Check what your state does to each stream separately. Alabama's split — pension exempt, distribution not — is not unusual. A state can be generous to one kind of income and indifferent to another, which affects which account you draw from first.

And if you are already planning a move for other reasons, this belongs in the arithmetic. Nobody moves for tax alone, and nobody should ignore an $11,815 annual difference when the decision is being made anyway.

10. What the three profiles have in common

Strip out the rankings and the same four states keep appearing near the top of every list: Oregon, Minnesota, Vermont and Utah. Two of them — Oregon and Vermont — are in the dearest ten on all three profiles, and Utah is dearest on one and fifth on another.

That consistency is more useful than any single ordering. A state that is expensive at $55,000, at $95,000 and at $180,000 is expensive because of how it is built, not because of where one threshold happens to fall. It has a graduated structure, a high rate reached relatively early, and retirement provisions that are narrow or capped.

The reverse consistency is equally informative. Mississippi and Iowa are at or near $0 on the modest and typical profiles and among the cheapest six on the affluent one. That is a structural exemption rather than a threshold, and it will not evaporate if your income rises or if you take an unusually large distribution one year.

Which suggests a better question than "where do I rank". Ask whether your state's generosity is structural or conditional. A structural exemption survives a $200,000 distribution year; a conditional one — capped, or limited below an income ceiling — disappears in exactly the year you most need it, because a large one-off withdrawal is precisely what pushes you past the condition.

Three signs a state's provision is conditional: it names a dollar amount rather than a category, it phases out above an income level, or it applies only above an age. All three are common, and all three mean the $0 you see today is not a $0 you can plan around indefinitely.

11. The comparison this article deliberately does not make

Total tax burden. It is the number everyone actually wants and it is the number that cannot be computed generically.

Property tax depends on the house you buy, not on the state alone — and a retiree downsizing into a $300,000 house in a high-rate county may pay less than one buying a $700,000 house in a low-rate one. Some states offer substantial homestead or senior exemptions that change the answer again, and those are county-level in many places.

Sales tax depends on what you spend, and retirement spending patterns differ enough from working-age patterns that a general index misleads. States that exempt groceries and prescriptions treat a retiree differently from how a headline rate suggests.

Healthcare cost varies more than any tax line, and for many retirees it is the largest single number in the comparison.

So the honest framing is this: income tax is one line, it is the line most misreported in published rankings, and it is the line this site can compute from a cited fifty-state dataset. It is a starting point for a relocation decision and never a conclusion. A state that saves you $11,815 in income tax and costs you $9,000 more in property tax and insurance has saved you $2,815, which is a different decision entirely.

If a move is genuinely on the table, price the actual house, the actual insurance and the actual healthcare before the income tax figure does any work. If it is not on the table, the useful part of this article is section 9 — knowing which group you are in, and whether your state's generosity has a ceiling you are approaching.

Frequently asked questions

Which states charge nothing on retirement income? It depends on the amount. Twenty-three states charge $0 on $55,000, nineteen on $95,000, and nine on $180,000. The nine that hold at every level are the states with no individual income tax at all.

Which state is the most expensive? That also depends. Utah is dearest on the modest profile at $2,448, Minnesota on the typical one at $4,937, and Oregon on the affluent one at $11,815. Oregon is near the top of all three.

Why does the ranking change with income? Because most retirement exemptions are capped, or limited to income below a ceiling, or phased out. They are generous at $55,000 and largely spent by $180,000, at which point what remains is the state's ordinary rate structure.

Is a no-income-tax state always cheaper? On this measure, yes by definition. On total cost, not necessarily — those states raise revenue through property and sales taxes instead, and neither is modelled here.

Why is Alabama expensive here when rankings call it retirement-friendly? Because it exempts defined-benefit pension income and does not exempt 401(k) or IRA distributions. On a profile built from distributions it charges $2,785 at the typical level. Rankings built on a pension reach a very different conclusion.

What about a military pension? Exempt in 33 states, and not subject to the phase-outs that limit general retirement exclusions. If this applies to you, a general ranking will give you the wrong answer.

Does the type of retirement income matter? Substantially. States treat Social Security, public pensions, private pensions, military pensions and 401(k) distributions differently, and two retirees with identical total income can face materially different bills.

Is Maryland really cheaper than Ohio? On the typical profile, yes — $603 against $961. Maryland's retirement provisions are more generous than its reputation on wages suggests. It is a good illustration of why a state's headline rate answers the wrong question.

How much is the difference worth over a retirement? On the affluent profile, roughly $11,800 a year at the top of the range. Over twenty-five years that is around $295,000, before accounting for required distributions growing as the required percentage rises.

Should I move for this? Rarely on its own, and never on the modest profile alone. If you are already considering a move, the figure belongs in the decision — and if you are affluent and in one of the top-ten states, it is large enough to be worth a serious look.

What to do next

Find your own number rather than your state's rank. The profiles above are illustrations, and the difference between them is the whole point of the article.

• Retirement state tax calculator — your income, your streams, your state, cited per state
• RMD calculator — what your balance will force out, which is the income you cannot reduce
• The Relocation Tax Playbook — what a move actually involves, beyond the rate comparison
• The Retirement Withdrawal Order Playbook — which account to draw from, given what your state does to each