States That Don't Tax Pension Income at All

Eight states currently do not tax any form of pension income: Alaska, Florida, Illinois, Mississippi, Nevada, South Dakota, Tennessee, and Wyoming. These states have no income tax at all, which means pensions are not taxed regardless of the source — whether from a public employee plan, military service, private employer, or an IRA.

Pennsylvania and Illinois stand apart slightly: Illinois taxes no pensions at all, while Pennsylvania exempts all pension and retirement income from state tax but does tax other forms of income. If you receive a pension from a Pennsylvania employer or the federal government, you pay no state tax on it, even though Pennsylvania residents pay tax on wages and investment income.

Moving to one of these states after you start receiving a pension does not retroactively erase taxes you already paid in your former state. However, your future pension payments will not be subject to state income tax once you establish residency in a no-tax state.

Key Takeaways

  • Eight states — Alaska, Florida, Illinois, Mississippi, Nevada, South Dakota, Tennessee, and Wyoming — tax no pension income of any kind.
  • Pennsylvania exempts all pension and retirement income from state tax, even though it taxes wages and other income.
  • Moving to a no-tax state after you retire stops future pension taxes but does not refund taxes already paid to your former state.
  • Some states tax military pensions differently than civilian pensions, so check your specific state's rules if you receive military retirement pay.

States That Tax Some Pensions but Not Others

Many states tax pensions selectively. The most common pattern is to exempt public employee pensions — those from state and local government jobs — while taxing private employer pensions and IRAs. Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont follow this approach.

Other states exempt military pensions specifically. Arizona, Arkansas, Hawaii, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, Texas, Virginia, and West Virginia all exclude military retirement pay from state income tax, though they may tax civilian pensions.

A smaller group exempts only federal pensions — those from the Civil Service Retirement System or Federal Employees Retirement System. Georgia and North Carolina take this approach. If you worked for the federal government and receive a CSRS or FERS pension, these states will not tax it, but they will tax pensions from other sources.

The rules within each state can be narrow. Some states set income limits: if your total income exceeds a threshold, the pension exemption phases out or disappears. Others require you to have worked in that state to receive the exemption. Always check your specific state's Department of Revenue website for the exact conditions.

How to Find Your State's Pension Tax Rules

Your state's Department of Revenue publishes a tax guide for retirees, usually available free on their website. Search "[Your State] Department of Revenue pension tax" to find it. The guide will list which pensions are taxed, which are exempt, and any income limits or residency requirements.

If you moved to a new state after retiring, you may need to file a return in both your old state and your new state for the year you moved. Your old state may claim you were a resident for the full year and tax your full-year pension income; your new state may do the same. Some states offer a credit for taxes paid to another state, but you have to claim it. Keep copies of both states' tax returns and any correspondence about residency.

If you receive a pension from a state where you no longer live, that state's tax withholding rules still apply unless you file a form to change your withholding status. For example, if you retired from a New York public employee plan and moved to Florida, New York may still withhold state tax from your pension checks until you notify the pension administrator of your new residency and request a change.

Military and Federal Pensions: Special Rules

Military retirement pay receives the broadest exemption across states. Twenty states and the District of Columbia exempt all military pensions from state income tax. If you receive military retirement pay, start by checking whether your current state is one of them — if it is, you owe no state tax on that income.

Federal employee pensions (CSRS and FERS) are taxed by most states, with the exceptions noted above. However, the federal government does not withhold state income tax from federal pensions automatically. You must request it yourself if your state taxes federal pensions. Contact your pension administrator — usually the Office of Personnel Management — to set up withholding or to change it.

Railroad Retirement benefits are treated differently still. Some states tax them as pensions; others exempt them. The Railroad Retirement Board can tell you whether your state taxes your specific benefits, or you can check your state's Department of Revenue website.

What Happens If You Move Between States

If you move from a state that taxes pensions to a state that does not, you do not automatically stop owing taxes to your old state. You must establish residency in your new state and notify your pension administrator of the address change. Your old state may continue to withhold tax until you file a return showing you moved.

Establishing residency usually means registering to vote, getting a driver's license, and registering your vehicle in the new state. Keep documentation of these changes. If your old state audits you and claims you were still a resident when you moved, you will need proof that you established residency elsewhere.

Some retirees maintain a home in a high-tax state and move to a no-tax state but keep their voter registration or driver's license in the old state. The IRS and state tax authorities look at the totality of your connections — where you spend most of the year, where your family lives, where you vote, where your financial accounts are based. If you claim residency in a no-tax state but maintain substantial ties to a high-tax state, you may face a challenge from the high-tax state's revenue department.

Income Limits and Phase-Outs

Some states that exempt pensions set income thresholds. If your total income — including pensions, Social Security, investment income, and any wages — exceeds the limit, the exemption shrinks or disappears entirely. Colorado, for example, exempts military pensions only if your total income is below a certain level, which changes yearly.

These limits vary widely and change annually with inflation adjustments. A state might exempt the first $24,000 of pension income but tax anything above that, or it might phase out the exemption gradually as income rises. You cannot know whether you are affected without checking your state's current rules.

If you are close to an income threshold, you may be able to reduce your taxable income by contributing to a traditional IRA, claiming deductions, or timing the sale of investments. A tax professional in your state can model your specific situation and tell you whether you are above or below the limit.

Frequently Asked Questions

If I move to Florida after I retire, will I owe back taxes to my old state?

No. You owe taxes only for the years you were a resident of that state. Once you establish residency in Florida and notify your pension administrator, your old state cannot tax future pension payments. However, if your old state disputes when you moved, you may need to prove your residency change with documentation like a driver's license, voter registration, or lease.

Does Social Security count toward the income limit for pension exemptions?

It depends on the state. Some states include all income in the limit; others exclude Social Security. Check your state's Department of Revenue website or call their retiree tax line to find out whether Social Security is counted in your situation.

Can I claim a tax credit in my new state for taxes I paid to my old state?

Many states offer a credit for taxes paid to another state, but you must claim it on your return. The credit usually covers only income tax, not other taxes. File your return in both states and look for a line for "tax paid to other states" or "credit for taxes paid to another state." Keep copies of both returns.

What if my pension administrator keeps withholding taxes after I move to a no-tax state?

Contact your pension administrator directly and provide proof of your new residency — a driver's license or lease showing your new address. Request a change in your withholding status. If they continue to withhold after you have notified them, you can claim a refund when you file your tax return in your new state, but it is easier to stop the withholding before it happens.

Are 401(k) withdrawals treated the same as pensions for state tax purposes?

No. States that exempt pensions often tax 401(k) and IRA withdrawals as regular income. The exemption usually applies only to pensions from an employer plan or government retirement system, not to money you withdraw from retirement savings accounts. Check your state's rules on retirement account distributions.