Which States Don’t Tax Retirement Income? What You Need to Know Before You Pack the U-Haul

If you’ve spent any time watching our videos or sitting down with our team here in Houston, you know we talk a lot about one thing: it’s not what you make, it’s what you keep. Lately, I’ve been getting a lot of questions from folks who are about to “pull the ripcord” on their careers. They see those headlines about states with no income tax, Florida, Nevada, or right here in our backyard in Texas, and they think, “If I move there, I’m going to save a fortune in retirement.”

Well, maybe. But having been in this business for over 15 years now, we have to tell you: “Tax-free” on paper doesn’t always mean “cheaper” in your checkbook. Today, I want to walk you through the real landscape of retirement taxes in 2026 and the “ripple effects” you need to consider before you decide to relocate.

The “Big 9” and the Retirement Exemptions

First, let’s look at the map. You have nine states that generally don’t have a broad-based personal income tax. That means your 401(k) distributions, IRA withdrawals, and part-time wages aren’t touched at the state level:

• Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. * New Hampshire joined this list recently as they finished phasing out their tax on interest and dividends.

Then you have states like Pennsylvania, Illinois, Mississippi, and Iowa. These states do have income tax, but they’ve decided to play nice with retirees by exempting most or all forms of retirement income.

The Social Security Surprise

Here’s some good news: the list of states taxing your Social Security is shrinking. By 2026, West Virginia has finally stopped taxing those benefits. We’re down to just about 8 states that still take a bite out of your Social Security, and even then, it’s usually only if you’re a higher earner.

But here is where I want you to take a step back and look at the bigger picture.

The “Silent Killer” of Retirement Plans: Property Taxes

This is where people get tripped up. States need money to pay for roads, schools, and emergency services. If they aren’t collecting taxes on your income, they’re going to need to get it from somewhere else.

Take Texas or New Hampshire, for example. No income tax sounds great until you get your first property tax bill. In these states, property taxes are often significantly higher than the national average. If you’re moving into a $600,000 “forever home” in the Hill Country, that “tax savings” you thought you were getting from your IRA might be going straight to the county appraiser instead.

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Don’t Forget the “Death Taxes”

While estate taxes are not going to change your lifestyle in retirement, it could have a big impact on your legacy. Most of you are already aware that the federal estate tax exemption is quite high, and thanks to the OBBBA will now be indexed annually with inflation. But what many people forget is that some states, like Oregon, Massachusetts, or Maryland, have their own estate or inheritance taxes with much lower thresholds.

So be sure to look at your plan from all angles. You could move to a state to save 5% on your annual income, only to have that state take 10% or 15% of your total legacy away from your kids and grandkids later on. That’s why we always say you need to look at holistic planning, not just next year’s tax return.

Troy’s Pro Tip: The “Shadow Tax Return”

Before you put the “For Sale” sign in the yard, do this one thing: Run a Shadow Tax Return. Take your projected retirement income, Social Security, your pension (if you have one), and your RMDs, and plug them into a tax calculator for the state you’re in and the state you’re eyeing.

And don’t just look at income tax. Add in the estimated property tax on the home you want to buy and the local sales tax rates. Sometimes, a state with a low, flat income tax (like Arizona) actually ends up being cheaper for your specific situation than a “zero-tax” state.

The Bottom Line

Relocating is a personal decision. Maybe you want to be closer to the grandkids, or maybe you just never want to shovel snow again. I get it. But don’t let a “tax-free” headline drive a decision that might actually cost you more in the long run.

If you’re looking for more detail on this, we’ve put together a comprehensive Tax Planning Report that covers the ripple effects of taxes in retirement. It’s the same stuff we walk our clients through every day.

What about you? Are you planning on staying put, or is there a specific state you’ve got your eye on? Let me know in the comments below. I’m curious to see where everyone is heading!

As always, if you need help looking at your specific “math,” feel free to reach out to us here at Oak Harvest. We’re here to help you navigate the complexity so you can enjoy your best retirement.

 

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