Which states have no tax on pensions or Social Security

Thirty-nine states do not tax Social Security income at all. Fourteen states tax pensions, Social Security, or both, but most of those offer exemptions or deductions that can reduce or eliminate your tax bill. The states with the most favorable treatment are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — they tax neither pensions nor Social Security and have no state income tax at all.

If you live in a state that does tax pensions or Social Security, you may still owe nothing depending on your income level and the type of pension. Some states exempt military pensions entirely. Others exempt government pensions but tax private pensions. A few exempt pensions below a certain dollar amount. The rules are specific to each state and change year to year, so you need to check your state's current rules rather than relying on what applied last year.

Key Takeaways

  • Eight states have no income tax at all, so neither pensions nor Social Security are taxed there.
  • Thirty-nine states do not tax Social Security, but fourteen states do tax it — though some offer income thresholds that may protect you.
  • States that tax pensions often exempt military pensions, government pensions, or pensions under a certain amount, so you may owe nothing even in a taxing state.
  • Your tax bill depends on your total income, not just your pension or Social Security amount, because most states use income thresholds to determine taxation.

States with no income tax at all

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax. If you live in one of these states, your pensions and Social Security are not taxed by the state, regardless of how much you receive. You may still owe federal income tax on these sources, but the state will not take a portion.

New Hampshire and Tennessee deserve separate mention: both have no income tax on wages, but Tennessee taxes some types of investment income. Neither taxes pensions or Social Security. If you are considering a move to a no-income-tax state specifically to reduce your tax burden, these eight are the only ones where you will have complete state-level protection for all retirement income.

States that do not tax Social Security

Thirty-nine states do not tax Social Security benefits under any circumstances. This includes states that do tax pensions — for example, Colorado taxes pensions but not Social Security. If you receive Social Security and live in one of these states, that income is off-limits to state taxation.

The fourteen states that do tax Social Security are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. However, most of these states have income thresholds. In Connecticut, for example, Social Security is taxed only if your combined income exceeds $75,000 (single) or $100,000 (married filing jointly). In Kansas, the threshold is $75,000 for all filers. If your income falls below the threshold, you owe no state tax on Social Security even though the state technically taxes it.

States that tax pensions and common exemptions

Fourteen states tax at least some pension income: Colorado, Connecticut, Delaware, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, West Virginia, and Oregon. But "taxes pensions" does not mean you will pay tax on your pension. Most of these states exempt military pensions entirely. Many exempt government pensions (federal, state, or local). Some exempt pensions below a certain dollar amount.

Colorado, for instance, taxes pensions but exempts military pensions and allows a deduction of up to $24,000 per person for other pensions. Montana exempts military pensions and allows a $3,520 deduction for other pensions. Kansas exempts military pensions and allows a $75,000 income threshold before any pension is taxed. The specifics change by state and are updated annually, so you need to check your state's current rules or contact your state tax authority to know whether your particular pension is taxed.

How income thresholds protect you

Many states that tax pensions or Social Security use an income threshold — a dollar amount above which taxation begins. If your total income stays below that threshold, you owe no state tax on retirement income even though the state technically taxes it.

Income thresholds are usually based on your combined income: pensions, Social Security, wages, interest, dividends, and other sources added together. In some states, the threshold is different for single filers and married couples filing jointly. For example, Vermont taxes Social Security but only if your income exceeds $20,000 (single) or $32,000 (married). If you are married and your combined income is $31,000, you owe no Vermont tax on Social Security even though you live in a state that taxes it.

These thresholds are set by state law and adjusted periodically, but not always annually. Before you file, check your state's tax website or call the state tax department to confirm the current threshold for your filing status.

Military and government pension exemptions

Military pensions receive special treatment in most states that tax pensions. Of the fourteen states that tax pensions, at least twelve exempt military pensions entirely. If you are a military retiree, your pension is usually not taxed by the state even if the state taxes other pensions.

Government pensions — from federal, state, or local employment — are also commonly exempted. Some states exempt all government pensions. Others exempt only state or local pensions, or only federal pensions. The rules vary. If you worked for a government agency and receive a pension, check your state's rules to see whether your specific pension is exempt.

What to do if your state taxes pensions or Social Security

If you live in a state that taxes pensions or Social Security, start by determining whether you fall below the income threshold. Add up all your income sources for the year: pensions, Social Security, wages, interest, dividends, rental income, and anything else. Compare that total to your state's threshold for your filing status. If you are below the threshold, you owe no state tax on retirement income.

If you are above the threshold, check whether your specific pension is exempt. Military pensions are almost always exempt. Government pensions may be exempt depending on your state. Some states exempt pensions below a certain dollar amount or allow a deduction that reduces the taxable portion. Your state tax authority's website will list these exemptions, or you can call their helpline to ask about your situation.

When you file your state tax return, you will report your income and claim any exemptions or deductions you are may have access to to. The state tax form will ask you to identify the source of your income — pension, Social Security, wages — so the tax software or preparer can apply the right rules.

Frequently Asked Questions

If I move to a no-tax state, do I have to live there the whole year?

Most states tax you as a resident for the entire year you move in, even if you arrive on December 31. Some states have rules about establishing residency. If you are planning a move specifically for tax reasons, check your current state's rules about when you stop being a resident and your new state's rules about when you become one. You may owe taxes to both states for the year you move.

Does federal income tax apply to pensions and Social Security?

Yes. The federal government taxes Social Security if your combined income exceeds certain thresholds, and it taxes most pensions as ordinary income. State tax rules do not affect your federal tax bill. Even if you live in a state with no income tax, you will still file a federal return and may owe federal tax on retirement income.

Can I claim a deduction for taxes paid to another state?

Yes, if you paid state income tax to another state, you may be able to claim a credit or deduction on your current state's return. The rules vary by state. Some states allow a credit for taxes paid to other states; others do not. Check your state's tax website or ask a tax preparer whether you can reduce your current state's tax bill based on taxes you paid elsewhere.

What if I receive a pension from one state and live in another?

Some states tax pensions based on where you worked, not where you live. Others tax based on where you live. A few have reciprocal agreements with other states. The rules are complex and state-specific. If your pension comes from a different state than where you live, contact both states' tax authorities to understand which one will tax your pension.

Are there any other retirement income sources that get special tax treatment?

Some states exempt or partially exempt distributions from individual retirement accounts (IRAs) or 401(k)s. A few exempt interest and dividends below a certain amount. These rules vary widely by state and change frequently. If you have income from sources other than pensions and Social Security, ask your state tax authority or a tax preparer whether any of it receives special treatment in your state.