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12 States That Won’t Tax Your Retirement Income

Feb. 13, 2019 Kiplinger

You’ve worked hard all your life, and now you’re retired (or will soon retire). Unfortunately, there’s a pretty good chance that Uncle Sam is going to take a cut of your 401(k), traditional IRA or pension income. But what about your state? Will it take a bite out of your retirement income, too?

Most states tax at least a portion of retirement income (not counting Social Security benefits). Your state might offer some tax breaks, but those breaks usually have limitations based on your age and/or income. Twelve states, however, completely exempt the most common types of retirement income—401(k)s, IRAs and pensions—from taxation. That’s a huge plus for retirees living in those states. Take a look at the list.


Retirement Income: Sunshine, palm trees, sandy beaches … what more could you want in a retirement destination? How about no taxes on your 401(k), IRA or pension income? That’s what you get in Florida, because the Sunshine State doesn’t have an income tax.

Social Security Benefits: Florida doesn’t tax Social Security benefits, either.

Income Tax Range: Not applicable (no income tax).

Inheritance and Estate Taxes: There are no inheritance or estate taxes in Florida.


Retirement Income:Midwesterners looking for a tax-smart place to retire should check out Illinois. It’s the only state in the region that completely exempts 401(k), IRA and pension income from tax. Pension and 401(k) income must be from a qualified employee benefit plan to be tax-free, though.

Social Security Benefits: The Prairie State doesn’t tax Social Security benefits, either.

Income Tax Range: The Illinois income tax rate is a relatively low, flat 4.95%.

Inheritance and Estate Taxes: Illinois has an estate tax for estates worth more than $4 million


Retirement Income: If you’re at least 59½ years old, the Magnolia State won’t tax your retirement income. However, the state will take its share of 401(k), IRA or pension income received by those who retire early. 

Social Security Benefits:Mississippi won’t tax your Social Security benefits.

Income Tax Range: For the 2018 tax year, Mississippi’s lowest tax rate is 3% (on taxable income of $1,000 or more), and its top rate is 5% (on taxable income of more than $10,000). (Note: The 3% rate is gradually being phased out. Starting in 2022 , the lowest rate will be 4%, which will be applied to taxable income from $5,001 to $10,000.)

Inheritance and Estate Taxes: Don’t worry about inheritance or estate taxes if you live in Mississippi. The state doesn’t impose those taxes.


Retirement Income: Why gamble with your finances in your golden years? Move to Nevada, where the state won’t tax your 401(k), IRA or pension income—or any of your other income, for that matter, because it doesn’t have an income tax.

Social Security Benefits: Your Social Security check is tax-free in Nevada, too. So, you’ll have more cash for the poker and blackjack tables … if that’s your sort of thing.

Income Tax Range: Not applicable (no income tax).

Inheritance and Estate Taxes: Nope—those taxes don’t exist in Nevada.

Click Read More for the rest of the states.

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