Best States to Retire for Taxes in 2025: Complete Ranking

June 11, 2025

Why Retirement Taxes Are Different

When you retire, your income sources change completely. Instead of a W-2 paycheck, you're drawing from Social Security, 401(k)/IRA withdrawals, and possibly a pension. States treat each of these differently — and the differences are enormous.

The Best States for Retirement Taxes

Tier 1: No Tax on Any Retirement Income

These 9 states have no income tax at all:

  • Alaska — lowest total tax burden (3.0%), but cold weather
  • Florida — low total burden (4.92%), no estate tax, warm climate
  • Nevada — no income tax, low property tax (4.47% total)
  • South Dakota — very low total burden (4.60%)
  • Tennessee — no income tax, low property tax (4.80% total)
  • Texas — no income tax but watch the property tax (5.72% total)
  • Washington — no income tax but high sales tax (6.86% total)
  • Wyoming — very low everything (3.72% total)
  • New Hampshire — no income tax but HIGH property tax (6.86% total)

    • Plus these states tax regular income but exempt all retirement income:

  • Illinois — all retirement income exempt
  • Mississippi — all retirement income exempt
  • Pennsylvania — exempt after age 59½

    • Tier 2: Partial Exemptions

    Many states offer partial exemptions or deductions:

  • Georgia — $65,000 exemption for age 65+
  • Colorado — $24,000 exclusion for age 65+
  • Kentucky — $31,110 pension exclusion

    • Tier 3: Full Taxation (Worst for Retirees)

    These states tax most retirement income at regular rates:

  • California — fully taxes 401(k)/pension, but exempts Social Security
  • Minnesota — partially taxes Social Security AND fully taxes other retirement income
  • Vermont — follows federal rules, high rates

    • The Estate Tax Factor

    Don't forget: 12 states + DC also have estate taxes. If you're building wealth for heirs, states like Oregon ($1M exemption) and Massachusetts ($2M exemption) could cost your family significantly. See our estate tax by state guide.

    Social Security Taxation

    Good news: most states don't tax Social Security. Only a handful partially tax it, and most of those exempt it below certain income thresholds ($75K-$100K typically).

    See the full breakdown: Retirement Tax by State →

    What About Property Tax?

    Retirees on fixed income are especially sensitive to property tax. Some states offer homestead exemptions or senior freezes:

  • Florida: $50K homestead exemption
  • Texas: additional $10K senior exemption + school tax freeze
  • Georgia: various senior exemptions by county

    • But the base rate still matters. A "tax-friendly" state with 2% property tax can cost you more than a state with income tax but 0.5% property tax.

    Use our move calculator to compare your specific situation.

    The Full Picture

    The "best" state depends on your retirement income mix. Someone living on Social Security alone has different needs than someone drawing $150K from a 401(k).

    Use our calculator → with your expected retirement income to see the real numbers.

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