Let’s face it: whether you’re still working or enjoying retirement, paying income taxes is not exactly the most exciting thing to do. Even though it is our civic duty to contribute to the government’s revenue, most people would rather pay as little in taxes as possible.
For both current and future retirees, there is some excellent news: there are a number of states that do not tax any retirement income.
Although you shouldn’t hurry to move just to lower your tax burden, it is something to think about when making your overall plans for the future.
States That Do Not Tax Retirement Income
This year, there are nine states in the United States that do not charge income taxes on the wages of retirees. This is because these jurisdictions do not charge income taxes on anyone.
These states depend on other sources of revenue, including sales tax and property tax, to finance their budgets. The following nine states do not charge income tax:
- Florida
- Texas
- Washington
- Alaska
- Nevada
- South Dakota
- Wyoming
- Tennessee
- New Hampshire
Think about how these states could fit into the larger picture of your life, particularly if you want to improve your retirement plan.
It can be interesting to look at the appeal of states that do not have a state income tax, especially for retirees and others who are looking for financial benefits. Here is a more detailed examination of a few of these states, each of which provides its own distinct advantages.
States That Do Not Have a State Income Tax
Residents who want to maximize their financial freedom are drawn to these jurisdictions because they do not impose a state income tax:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
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New Hampshire: A Noteworthy Mention
Yes, New Hampshire is accurately included in this list. In the past, the state taxed dividend and interest income, which was a major issue for retirees who depended on these accounts.
However, beginning in 2025, this tax will no longer exist, making New Hampshire a true tax-free sanctuary for all of its people. It is vital to keep in mind that although state income tax is not an issue, residents may still be subject to federal, city, or county taxes.
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States That Have Exceptions for Retirees
Although some jurisdictions do impose a regular income tax, they provide exceptions for retirees, offering financial relief in several ways:
Illinois: The regulations in this state are simple. In the state of Illinois, payouts from 401(k)s, other retirement plans, pension income, and Social Security payments are not subject to state income tax.
Understanding these nuances can lead to a more informed decision about where to call home during retirement, delivering financial benefits that coincide with your lifestyle preferences.
