Which states have no tax on pensions

Fifteen states currently tax no form of pension income: Alaska, Florida, Illinois, Iowa, Kansas, Louisiana, Mississippi, Missouri, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. These states impose no income tax at all, or they specifically exempt pension distributions from taxation. The list does not change often, but state tax law does shift — what applies this year may not apply next year, and what applies to one type of pension may not apply to another.

The reason matters. Some states (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming) have no state income tax period. Others (Illinois, Iowa, Kansas, Louisiana, Mississippi, Missouri, New Hampshire) tax wages and other income but specifically exclude pensions. New Hampshire taxes interest and dividends but not pensions. The practical result is the same — you owe no state tax on your pension check — but the reason affects whether you might owe tax on other income you receive in that state.

If you are retired and live in one of these states, you will not file a state income tax return for your pension. If you move to one of these states after retirement, you may be able to stop paying state tax on pension income you already receive. If you are still working and considering retirement, moving to a no-tax state can reduce what you owe in total.

Key Takeaways

  • Fifteen states tax no pension income at all, but the reason varies — some have no income tax, others exempt pensions specifically.
  • Illinois, Iowa, Kansas, Louisiana, Mississippi, Missouri, and New Hampshire tax wages but exclude pensions, so you may still owe tax on other income.
  • Moving to a no-tax state after you start receiving a pension does not automatically erase past tax bills, but it stops future state tax on that income.
  • Military pensions, government pensions, and private pensions are treated the same way in these states — all are exempt or untaxed.

States with no income tax at all

Seven states have no state income tax on any income, including pensions: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, you pay no state income tax on your pension, your wages, your investment income, or anything else. You will not file a state return.

These states fund government through other means — sales tax, property tax, business tax, or some combination. The trade-off varies by state. Florida and Texas have no income tax and no sales tax on groceries, but both charge sales tax on other goods. Washington has no income tax but a high sales tax. Alaska has no income tax and no sales tax, but oil revenue funds the state budget. The point for a retiree is simple: if you live there, your pension is not taxed by the state.

States that exempt pensions but tax other income

Eight states tax wages and other income but specifically exclude pension distributions: Illinois, Iowa, Kansas, Louisiana, Mississippi, Missouri, New Hampshire, and Oklahoma. If you live in one of these states and receive only a pension, you owe no state income tax. If you also work part-time, receive interest or dividends, or have other income, you will owe tax on that income.

Illinois is the largest of these states by population. It taxes wages but exempts all pension income — military, government, and private pensions all may have access to. Iowa exempts pensions for residents over 55. Kansas exempts military pensions and some government pensions. Louisiana exempts military pensions and some retirement income. Mississippi exempts all pensions. Missouri exempts military pensions and some government pensions. New Hampshire taxes interest and dividends but not pensions. Oklahoma exempts military pensions.

The specifics matter if you receive more than one type of income. A person in Illinois who draws a pension and works part-time owes tax on the wages but not the pension. A person in Kansas who receives a military pension and Social Security owes no tax on either, but would owe tax on wages. Check your state's rules for your specific situation.

How pension tax status works when you move

If you move to a no-tax state after you start receiving a pension, your state tax obligation on that pension stops when you establish residency in the new state. You do not have to pay back taxes to your old state on pension income you received before you moved. However, you may owe tax to your old state on income you received while you still lived there, even if you move away later.

The timing of your move matters. If you retire in January and move to Florida in February, you will owe tax to your old state on the pension income you received in January. If you move to Florida in December and retire in January of the next year, you owe no tax to your old state. Some states tax based on where you lived when you received the income, not where you live when you file the return.

You will need to file a final return in your old state for the year you moved, covering income received through the date you left. Your new state will not tax your pension going forward. Keep documentation of when you moved — a lease, a utility bill, a driver's license with the new address — because your old state may ask for proof of when you left.

Types of pensions treated the same way

In states that exempt or do not tax pensions, the exemption applies to all types: military pensions, government employee pensions (federal, state, or local), and private pensions from employers. A retired military officer, a retired teacher, and a retired factory worker all owe no state tax on their pension in these states.

Social Security is handled separately and is not considered a pension for tax purposes. Some states that exempt pensions still tax Social Security; others exempt both. Federal pensions (including military) are not taxed by any state, but state and local government pensions may be taxed in some states even if private pensions are not. Check your specific state and your specific pension type if you receive more than one.

What to do if you live in a state that taxes pensions

If you live in a state that taxes pension income and you are considering a move, moving to a no-tax state can reduce your total tax burden significantly. The savings depend on your pension amount and your state's tax rate. A person with a $40,000 annual pension in a state with a 5 percent income tax pays $2,000 per year in state tax; moving to a no-tax state eliminates that cost.

Moving is not the only option. Some states offer tax breaks for certain types of pensions or for retirees over a certain age. Some allow you to exclude a portion of your pension income. Some exempt military pensions but not others. If you cannot or do not want to move, research whether your state offers a partial exemption or a credit that reduces what you owe.

Frequently Asked Questions

Do I have to move to a no-tax state to avoid paying tax on my pension?

No. You owe tax based on where you live when you receive the income. If you live in a state that taxes pensions and you do not move, you will owe tax. If you move to a no-tax state and establish residency there, you stop owing tax on future pension payments. Moving is one way to reduce your tax bill, but it is not required.

If I move to a no-tax state, do I get a refund for taxes I already paid?

No. Taxes you paid to your old state on pension income you received while you lived there are not refunded when you move. You owe tax based on where you lived when you received the income. Moving stops future tax but does not erase past tax bills.

Are Social Security benefits taxed in no-tax states?

Social Security is not considered a pension. Some no-tax states also do not tax Social Security, but others do. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax Social Security. Illinois, Iowa, Kansas, Louisiana, Mississippi, Missouri, New Hampshire, and Oklahoma do not tax Social Security either. Check your specific state.

Does a military pension get treated differently than a private pension?

In states that exempt pensions, military pensions are treated the same as private pensions — both are exempt. Federal law also protects military pensions from state taxation in all states, so a military retiree never owes state tax on military retirement pay, regardless of where they live.

What if I receive a pension from a state I no longer live in?

You owe tax to the state where you live now, not the state where you worked or where the pension comes from. If you retired from a job in New York, moved to Florida, and now receive a pension from that New York employer, you owe no Florida tax on that pension because Florida does not tax pensions. You may owe tax to New York if you still live there, but not if you have moved away.