10 Tax-friendly States for Retirees

South Dakota is often listed among the most tax-friendly states for retirees. The state has no state income tax, which means pension income, Social Security retirement benefits, and retirement account distributions are not taxed at the state level.

While residents still need to consider property taxes, South Dakota’s below-average housing costs (the state’s overall cost of living is about 12 percent lower than the U.S. average) help reduce retirees’ expenses and partially offset the property tax burden.

New Hampshire takes a different path to tax advantages.

The state does not tax regular income or Social Security income. It relies more heavily on property taxes and local taxes, which can be high.

Retirees with lower-value homes may benefit overall, but New Hampshire’s property taxes are among the nation’s highest, meaning the lack of income and sales tax may not fully offset costs for those with more expensive homes.

There is also no statewide sales tax.

Florida remains a classic retirement destination. It has no state income tax, which means most retirement income is tax-exempt at the state level.

Property tax relief programs—including homestead exemptions and deferred property tax payments—help retirees manage housing-related tax liability.

South Carolina offers targeted tax breaks for older residents.

The state allows generous deductions on retirement income, including pension income and other retirement benefits. Social Security benefits are not taxed, and Property tax rates are low compared to most states.

South Carolina’s average effective property tax is around 0.5 percent, among the lowest in the country.

New Mexico has become more retiree-friendly in recent years. Expanded income thresholds now spare most New Mexico retirees from state tax on Social Security (no tax for single filers earning up to $100,000 and joint filers up to $150,000).

Seniors 65 and older can also deduct up to $8,000 of pension or retirement-account income from state taxable income (subject to eligibility limits).

Combined with a lower cost of living, these changes reduce retirement taxes for many households.

Texas attracts retirees with its lack of state income tax. That means Social Security income, military retirement pay, and retirement account withdrawals are not taxed by the state.

The tradeoff comes in higher property taxes, though homestead exemptions can reduce the impact.

Tennessee has phased out taxes on investment income. The state does not tax Social Security benefits or most retirement income either.

Sales tax rates are higher, including local sales taxes, but retirees who spend less often feel less impact from sales tax.

Wyoming combines low taxes with strong tax advantages for retirees.

There is no state income tax, and property tax rates are among the lowest in the country. Sales tax rates are moderate, helping keep overall retirement tax liability manageable.

Nevada is another state without a state income tax. Most retirement income is not taxed either, including pensions and Social Security benefits.

Higher sales taxes exist in some areas, but retirees benefit from predictable tax implications year to year.

This state is not tax-free, but it offers targeted relief.

Rhode Island exempts Social Security benefits from state tax for most retirees below high-income levels. Only single filers above ~$107,000 and joint filers above ~$133,750 pay state tax on Social Security.

It allows each retiree to exclude up to $20,000 of pension or annuity retirement income from state taxable income.

While property taxes can be high, these exemptions improve affordability for retirees with moderate incomes.

Income tax is only part of the equation.

Property tax rates, estate or inheritance taxes, and sales tax rates all matter. Some states tax capital gains as regular income, while others provide estate tax exemptions or avoid estate and inheritance taxes altogether.

That said, no state is perfect for everyone. Housing costs, healthcare access, quality of life, and local services matter just as much as taxes. The best states to retire are the ones that balance tax savings with daily comfort and long-term security.

We created this article in conjunction with AI technology, then made sure it was fact-checked and edited by a HowStuffWorks editor.