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The Washington Independent

Which States Do Not Tax Pensions?

Which States Do Not Tax Pensions?

You are looking to make your pensions go further during retirement; one of the perfect ways of stretching your dollars is to minimize your expenses. Many approaches can help you cut costs. One of the effective ways of cutting your costs is to relocate to a state that does not include tax pensions.

Susan Murillo
Oct 12, 2021

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You are looking to make your pensions go further during retirement; one of the perfect ways of stretching your dollars is to minimize your expenses. Many approaches can help you cut costs. One of the effective ways of cutting your costs is to relocate to a state that does not include tax pensions. 

According to AARP, nine states have fewer income taxes, which implies no taxes on your pensions. But there are three states that personal tax income but notably doesn’t include the distributions from retirement plans like pensions and IRAs. Also, two states do not provide tax pensions but tax distributions from your IRA or 401(k) accounts. Read on and know the state that doesn’t pay tax pensions.


There is an extended list of income that are not taxed in the state of Alabama. These Include state of Alabama workers' retirement pensions benefit, state of Alabama teachers’ retirement system benefits, US government retirement fund benefits, Military retirement, and finally, payment from a Defined Benefit Retirement Plan. Besides, other retirement benefit plans not taxed in Alabama include federal social security benefits and federal railroad retirement benefits. It will help to know that Alabama state does not tax life insurance proceeds received due to the death of a loved one.


Put aside the incredible scenery aside. This state is considered a mixed bag for retirees. Also, it does not include tax retirees’ pensions. However, it taxes distributions from IRAs and 401(k) plans.


Florida has gone to significant lengths to create very a very conducive tax environment for retirees. There is less personal income tax in this state. For instance, there will be no taxes on social security, IRA, Pensions, or 401(k) distributions. Add the additional bonus, Florida has also eliminated inheritance and estate taxes.


Aside from the brisk winters, Illinois maybe another better state for retirement. This state doesn’t make tax distributions from qualified workers' benefit plans, including IRAs, 401(k) accounts, and self-employed retirement plans. Illinois state also exempts retirement bonds from taxes, the redemption of US, and government disability or government retirement, including military retirement benefits.

Additionally, Railroad retirement income is eliminated from taxes in Prairie State.

New Hampshire

Identical to Nevada, there is no state income tax in New Hampshire, enabling residents to make the most out of their pensions, IRAs, or 401(K) and social security benefits. Also, the products sold in this state are more affordable since there is a lack of sales tax, inheritance tax, and estate tax.

South Dakota

While the climate in this state may not be favorable for retirees, the income tax system is ideal. There is a lack of state income in this state for retirees. That implies no taxes on your pension, social security, IRAs, and 401(k).


Washington is another ideal state that doesn’t tax personal income. This implies you can save pensions, social security, and the entire forms of retirement income.

It would be right to move to a state that does not include tax pensions in your retirement benefits. This will help you save a lot of money during retirement. But please look into all of the variables in your preferred retirement region.

Susan Murillo | Susan has been interested in real estate since she was a child in Halifax, Nova Scotia. Susan had always wanted to pursue a direction that would encourage her to support others, and she discovered her true calling in real estate, where she could serve her clients and direct them through one of their most significant investments. Shannon has been involved in the selling and distribution of one billion dollars in real estate in Western Canada over the last ten years.


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