The 10 Most Tax-Friendly States for Retirement 2026

Ranked on a tax-only composite: no state income tax (40 pts), no Social Security tax (20 pts), low property tax (15 pts), low cost of living (15 pts), low sales tax (10 pts). For a balanced cost + tax + healthcare retirement ranking, see the retirement composite.

Top 10

Tax-friendly retirement states

Rank	State	Tax score	Income tax	Taxes SS?	Property tax	Sales tax
1	Wyoming	100	0%	No	0.56%	4.00%
2	Tennessee	90	0%	No	0.56%	7.00%
3	North Dakota	88	0% (eff. 2025)	No	0.94%	5.00%
4	Nevada	87	0%	No	0.48%	6.85%
5	South Dakota	85	0%	No	1.14%	4.20%
6	Florida	80	0%	No	0.80%	6.00%
7	Texas	80	0%	No	1.60%	6.25%
8	Louisiana	79	1.85-4.25%	No	0.52%	4.45%
9	Alabama	75	2-5%	No	0.39%	4.00%
10	Arizona	75	2.5%	No	0.51%	5.60%

Sources: Tax Foundation State and Local Tax Burden, state revenue departments, BEA RPP cost-of-living overlay. Social Security treatment cross-checked with state tax instructions and the SSA.

The trade-off

No tax often means higher property or sales tax.

No-income-tax states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming) raise revenue from other sources. Texas has 1.60% effective property tax. New Hampshire has 1.86% property tax. Tennessee has 7% state sales tax. Florida has 6% sales tax and 0.80% property tax. The net effect on a retiree depends on the property value and spending level.

For a retiree with $70,000 income, no significant home and average spending: the no-income-tax states all look good and the property tax differences are small. For a retiree with a $500,000 home, Texas property tax of $8,000/year dwarfs the income tax saving from the cheap-tax states with low rates and a homestead exemption.

The strongest combinations are no-income-tax states with low property tax: Wyoming (0.56%), Tennessee (0.56%), South Dakota (1.14%), Alaska (1.04%), Florida (0.80%). Compare to Texas (1.60%) and New Hampshire (1.86%) which are no-income-tax but high-property-tax.

Retirement Composite

Cost + tax + healthcare.

Cost + Taxes

Full tax overlay.

All 50 States

Cost index baseline.

Compare Two States

Run your own numbers.

Frequently Asked

Retirement tax states, answered

What makes a state retirement-friendly from a tax perspective?

Four things stack together: (1) no state income tax (or very low) on pension and 401(k) withdrawals; (2) no state tax on Social Security benefits; (3) low property tax effective rate on the retirement home; (4) low sales tax on day-to-day spending. The states at the top of this list combine three or four of these. The federal income tax still applies on tax-deferred withdrawals regardless of state.

Which states don't tax Social Security?

Most states do not tax Social Security: 41 states and DC fully exempt SS from state income tax. The 9 states that currently tax SS (or did until recently) include Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont and West Virginia. Several have legislated phase-outs; Nebraska fully exempted SS as of 2026 (LB 754). Check current state rules before relying on this list.

What about pensions and 401(k) withdrawals?

Treatment varies. Some states fully exempt retirement income up to certain limits (Mississippi fully exempts qualified retirement income; Illinois exempts pensions, 401(k), IRA withdrawals; Pennsylvania exempts after age 59½). Others tax retirement income at the standard state rate (California, New York). Specific exclusions are typically documented in each state's instructions; the IncomeTaxByState.com sister site covers per-state pension treatment in depth.

Is no-income-tax always best for retirees?

Usually but not always. Texas and Florida have no income tax but Texas has the highest effective property tax in this list (1.60%) and Florida charges 0.80% on rising home values. South Dakota and Wyoming combine no income tax with very low property tax, which is the strongest combination for retirees on fixed incomes. Tennessee has no income tax, low property tax (0.56%) and is well-positioned but has 7% state sales tax.

What about healthcare access for retirees?

Critical. The /retirement page (sister to this one) weights healthcare access (hospitals per capita + Medicare-supplement insurance availability) alongside cost and tax. For a tax-focused ranking, see this page; for a balanced retirement-decision composite, see /retirement.

Should I move to a no-tax state just to save on retirement income?

Run the math, including: state move-in costs, home price difference, healthcare network availability under Medicare Advantage in the destination state, family proximity and quality of life. The tax saving on a $60,000 retirement income from a 5% state might be $3,000/year; that needs to outweigh the friction. Consult a CFP and tax professional before relocating; this page is for shortlist purposes only.