Maximize Your Retirement: These Are the States That Don’t Tax Retirement Income

By Lucas

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Maximize Your Retirement These Are the States That Don’t Tax Retirement Income

Let’s be honest: whether you’re still working or enjoying retirement, paying income taxes isn’t exactly exciting. While contributing to the government’s revenue is a civic duty, most people prefer to reduce their tax liabilities.

Here’s some great news for current and future retirees: several states do not tax any retirement income at all. You should not rush to relocate solely to lower your tax bill, but it is worth considering this benefit as part of your overall life plans.

States That Don’t Tax Retirement Earnings

As of this year, nine states in the United States do not levy income taxes on retirees’ earnings—simply because no one pays income taxes. These states fund their budgets through other sources of revenue, such as sales and property taxes. Here are the nine states that have no income tax:

  • Florida
  • Texas
  • Washington
  • Alaska
  • Nevada
  • South Dakota
  • Wyoming
  • Tennessee
  • New Hampshire

Consider how these states might fit into your life’s big picture, especially if you’re looking to optimize your retirement strategy.

Exploring the allure of states with no state income tax can be fascinating, particularly for retirees and those seeking financial advantages. Here’s a closer look at some of these states, each offering its own unique benefits.

Maximize Your Retirement: These Are the States That Don’t Tax Retirement Income
Source (Google.com)

States Without State Income Tax

These states are known for not imposing a state income tax, making them attractive for residents looking to maximize their financial freedom:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

New Hampshire: A Noteworthy Mention

Yes, New Hampshire is properly listed here. Previously, the state taxed dividend and interest income, which was a major concern for retirees who rely on these funds.

However, beginning in 2025, this tax will be eliminated, transforming New Hampshire into a truly tax-free haven for all residents. It’s worth noting that, while state income tax isn’t an issue, residents may still face federal, city, or county taxes

States With Exceptions for Retirees

While some states do levy a regular income tax, they offer exceptions for retirees, providing financial relief in varying forms:

  • Illinois: The rules here are straightforward. In Illinois, distributions from 401(k)s, other retirement accounts, pension income, and Social Security payments are exempt from state income tax.

Understanding these nuances can lead to a more informed decision about where to call home during retirement, offering financial benefits that align with your lifestyle needs.

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