States That Exempt Social Security Income: A Complete List

In retirement, plenty of Americans seek out a lifestyle that brings them the greatest relaxation and happiness possible. This comes through all kinds of important decisions, such as moving into a new home that better serves your individual needs, or taking up a hobby to occupy some of your now-expansive free time.

Another approach that many newly-retired Americans (and those planning their exit in the coming years) target is a larger move. Rather than trading real estate to take advantage of a more cost effective or even smaller but more luxurious residence nearby, a move to a different state can really supercharge a retirement. There are nine states in the union that apply state taxes to Social Security benefits, leaving 41 plus Washington D.C. as potential safe landing zones for movers looking to improve their financial standing via tax minimization. But that's not the whole picture. Illinois, Iowa, Mississippi, and Pennsylvania don't tax retirement income, including Social Security checks, and nine states don't tax income at all at the state level. On the other hand, the other nine states that do apply state levies against your retirement income specifically are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. On top of the tax implications, there's far more to this decision. For instance, a move to scenic Oregon might be a good financial move for you, but if you're heading there from busy Atlanta the change might be too drastic.

Chicago looms large here. Illinois is home to numerous little hamlets of adventure and relaxation, but Chicago is likely the brightest star on many people's minds when thinking about the Land of Lincoln. Chicago is a vibrant and welcoming city, with plenty of dense metropolitan communities and suburban oases to select from if you're planning a move.

Illinois has been named among the most entertaining states in the U.S. to live, and it's easy to see why. Chicago, in particular, plays host to major sports teams across the spectrum of leagues. The Bulls are an iconic franchise with plenty to get excited about, while the Bears, Blackhawks, and two Major League Baseball franchises also play their home games in Chi-Town. Chicago also features a thriving theater scene, and beyond the city limits, you'll find all kinds of wonderful activities to fill your days, too. The state hasnumerous state and national park sites, great for those with an outdoor itch that needs to be scratched. Illinois is a state that imposes taxes on income, but your retirement income sources are protected, including Social Security checks.

Iowa is the ninth-most-affordable state in the country, and ranked fifth in terms of cost of living. Iowa gets a bad rap. It's not frequently thought about by people considering a move, or by travelers seeking an interesting destination to explore on a vacation. But Iowa quietly builds a phenomenal resume for itself. It's number three in opportunity and the sixth "best state overall" in a U.S. News and World Report ranking. Iowa won't tax your sources of retirement income, either, including 401(k) distributions, Social Security checks, and more.

Iowa falls within the very center of America, and doesn't benefit from sea or ocean vistas, as a result. But that doesn't mean it's a flat, waterless prairie, far from it in fact. Iowa's outdoor recreation is stockpiled with lakes. Lake towns are everywhere in the state, making for a wonderful tapestry of places to visit as you seek a calming post-working lifestyle. Iowa is also mighty close to a number of metropolitan hubs, perfect as a rural platform for a peaceful life interspersed with big city adventures from time to time or a full schedule of international travel (with Milwaukee, Chicago, Minneapolis, and both of Missouri's big cities within relatively easy driving distance).

Mississippi features as the second-best state in the country in terms of affordability and cost of living. It's a state overflowing with rural charm and a solid option for someone seeking a move in retirement. The state is ranked sixth in the nation for its average temperature, as well (63.4°F), making it a comfortable place to spend your time throughout the majority of the year. Mississippi is a state that won't tax your Social Security checks or other sources of retirement income. However, Mississippi residents will owe state taxes on other sources of income. Early distributions from your retirement accounts (actions like borrowing from your 401(k) or retiring early and potentially taking the penalty hit for a year, as an example) are treated as regular income here, so strategizing your distribution schedule will be particularly important if you live in Mississippi already or plan to relocate to "The Magnolia State."

On top of the favorable tax status you'll gain as a Mississippi resident, the state features a tremendously low cost of living across the expense range. Median home sale prices are just $130,000 here, and everything you'll add to your budget is generally far cheaper in Mississippi than the average, from utility costs to grocery prices and transportation expenses.

Pennsylvania features a cost of living that's highly competitive among states in its northeastern region. It's the third-cheapest state to own a car. This makes it a great place to move if you're already living in this part of the country and are seeking a change of scenery that improves your financial standing in the process. Tremendous outdoor living amenities like state and national parks are abundant in Pennsylvania, and it's also home to a variety of competitive and popular professional sports teams. Pennsylvania is another state that considers early distributions to be regular income, and imposes state taxes on this flow of cash. However, retirement income is exempt from state income tax obligations here, adding another feather to the state's bow when it comes to retirement benefits.

Places like Philadelphia are home to a mythic status among history buffs, as the city once served as the federal government's home, and it's where the Declaration of Independence was signed. The Liberty Bell, and a large slate of battlefields (including the iconic Gettysburg from Civil War times) can be found here. Outdoor adventure, big city attitudes in Philly, Pittsburgh, and elsewhere, and tax advantages come together to make Pennsylvania a solid option for retirees on the move.

The frontier near the top of the Great White North is an interesting option for retirees. Alaska features no state income taxes, so your retirement income will be protected against an additional obligation. And if you decide to return to work in some capacity, that income won't be subjected to state tax burdens either. It's the first on this list that imposes no additional tax burden on any income source you may bring into the mix. Alaska isn't a place for the faint of heart, though. It's the coldest state in the country by average temperature (26.6°F) and the state is so far north that it experiences day-night shifting, so you'll have to endure significantly lengthy bouts of darkness each day during the winter, but get the benefit of long days in the summer months. Alaska is a hunter's, fisher's, or hiker's dream destination, though. The state is blessed with immense natural forests that remain unimpeded in many areas.

There are a number of national parks and other outdoor recreation sites, as well, giving explorers a mix of backcountry wilderness and patrolled hiking routes within federal land to select from when planning a jaunt out in the wild. Alaska features a few built up cities, but it remains a sparsely populated state. It's one of just a handful with less than a million residents, and ranks 48^th overall.

Florida has been named the most fun state in the country. It's a peninsula with warm water on all sides and not much seasonal diversity. The state also ranks first in average temperature (70.7°F). A few weeks in the depths of winter may see some chill — especially if you decide to call one of the northern coastal cities home — but the vast majority of the year is marked by sunny skies and warm weather. Major sports teams call Florida home, with numerous professional outfits located around the state. MLB Spring Training facilities also congregate along Florida's gulf coast, giving residents and visitors a spring that's chock full of cheap and accessible baseball games featuring virtually every team east of the Mississippi (Florida is home to MLB's "Grapefruit League" while teams in the west largely play in the "Cactus League" in Arizona).

Florida is one of just nine states that don't tax income in any way: Not your regular income nor your retirement funding sources. This means Social Security checks and retirement account distributions won't be subjected to yet another draw on their financial support system. Florida is a perfect storm of great features. No state filing requirement whatsoever streamlines your tax preparation efforts each April when tax season returns, and great weather, plenty of water, and lots of solid entertainment options come together to provide a high octane retirement opportunity.

A true mecca of entertainment, Las Vegas and the rest of the state of Nevada should feature prominently on any frugal mover's list of potential landing spots. The outdoor scene is criminally underrated, and Nevadans actually see one of the highest averages anywhere in the country when it comes to sunny days (second in the nation behind Arizona). Nevada is ranked as the third most fun state in the country, too. Add to these gaudy figures the fact that Nevada is among the small list of states that don't add an income tax requirement to residents, and the states becomes even more welcoming to those considering a change of scenery.

Nevada has added a number of new features lately, on top of these already valuable attributes. The Raiders now play their home games in Las Vegas (opening their stadium in the city in 2020), and the Oakland A's anticipate ushering in their 2028 home opener in Sin City, as well (spending the next few seasons ahead of the larger move in Sacramento).

A New England state with tremendous character, New Hampshire is a place of immense natural beauty and can be found within the sphere of major hub cities like Boston and New York. This makes New Hampshire a state that's worth considering as a destination for a retirement move if staying close to places like this is important. It's also one of the nine states without additional, state-level income tax additions. There's also a lack of sales tax in the state, making it a dual-threat when it comes to shifting financial circumstances a little further into your favor.

New Hampshire was a frontline player in the American Revolution, and was the first state to draw up its own constitution. There's lots of history in the state's landscape, as a result, and this only adds to the majesty of the outdoor gem. Those from New Hampshire are frequently engulfed in the Boston sports universe considering the proximity, and the large market teams of Massachusetts to the south are often exceedingly fun to root for — even when they're losing — considering the history that each one brings to its individual contest (like the Patriots' dynastic success with Tom Brady at the helm or the baseball tradition that is Fenway Park).

Cost of living is a major feature of the South Dakota lifestyle. Hanging up your fast paced lifestyle may be something that is high on the priority list, and a move to South Dakota can accomplish this alongside a few other important benefits. It's worth noting that the cold will be a major factor here. South Dakota averages an annual temperature of 45.2°F, making it 38^th in the union. It's also sparsely populated, with fewer than 1 million people calling the state home. South Dakota doesn't feature any state income tax impositions, and an affordability rating standing at fifth in the nation (and fourth in terms of cost of living) combine to make the state a great option for someone seeking a low cost move.

However, South Dakota is somewhat removed from many of the facilities and features that many people from other parts of the country might be used to. There aren't any major sports teams in the state, and major transit hubs can be found relatively close by in places like Minneapolis, but they aren't readily available in the state. Even so, this might be the perfect change of scenery you've been looking for if a slower pace of life and a major cost of living reset are high priorities.

It just may be the music capital of the world. Some of the most recognizable voices (and instruments) in all of music history called Tennessee home at one point or another. It's a wonderful place for people who love live music, and the literary tradition of the community here is nothing to scoff at either. In terms of fantastic outdoor adventures, you'll need to look no farther than Great Smoky Mountains National Park – although other fabulous forests, hiking opportunities, and other outdoor landscapes can be found in abundance in Tennessee, too.

Tennessee is another state that doesn't impose a state income tax obligation on its residents. This makes it a great solution for a move that seeks to slow things down a bit while also providing a financial boost. Tennessee features good relative warmth — 14^th in the country in terms of annual average temperatures (57.6°F) and is ranked 17^th for cost of living among U.S. states. For those seeking a city atmosphere but can live without the constant busyness of the country's largest metropolises, Nashville or Memphis offers a highly rewarding change of pace with plenty of great tax and other financial benefits.

Texas is warm (4^th in the country for average temperature), features plenty of inviting coastline, and is large and diverse enough to provide a variety of interesting lifestyle experiences that are more than capable of acting as a major draw for retirees seeking a new place to live. As the second most populous state in the country (roughly 30.5 million people in 2023), its major city and suburban landscapes can be notably crowded, with both foot and road traffic sometimes making a mess of plans.

Texas is one of the nine states that doesn't feature any state income tax requirements. This protects your retirement assets from additional obligations during the drawdown phase of your portfolio's lifecycle. The state's business tax requirements are also a major draw for entrepreneurs. Taxes are assessed based on margins rather than static numbers like revenue figures. This provides a friendly atmosphere for small businesses, making it a great place to call home if you plan to continue operating some kind of business enterprise as a part of your retirement income picture. Houston features a well connected hub of air travel, as well – and other airports around the state are also valuable assets for fast transits — providing a great place to launch vacations both of the domestic and international nature. Sports are also a significant part of the Texas lifestyle, with professional teams littered throughout the statewide community.

Washington features no state income taxes, so your retirement income sources and any other avenues of financing your relaxation years won't be subjected to any additional obligations beyond the federal level. Washington is a state that features a huge sports following, so fans of professional sports across the spectrum can find themselves easily adopting a new hometown squad to root for in a range of leagues. The cost of living can be a bit higher here than other parts of the country, though, especially if you're considering a move to one of the state's metro areas — Seattle in particular. 

Washington is a haven for outdoor enthusiasts, too. With destinations like the Olympic Peninsula and Mount Ranier just a stone's throw from the thriving urban oasis of Seattle, it's a great choice for those who want to mix a range of food and drink greatest hits with a bustling music and sports scene, outdoor adventures, and much more. It finds itself as the eighth most fun U.S. state, but does come with some strings attached. Up at the north end of the Pacific coastline, the state features some gray winters, and the average year round temperature sits at 48.3°F, good for the bottom half (34^th) across all states. It's well known as a rainy destination, too, so all those positive attributes come alongside a few potentially experience-defining setbacks.

Wyoming is the final entry on this list, and it stands as an interesting selection for a number of reasons. Wyoming is one of the coldest states in the country by average temperature, and it's the very last American state by population (roughly 600,000 people all told), making the northern "Equality State" a very good option for someone who doesn't mind a landlocked, cold escape from the hustle and bustle of life elsewhere. Wyoming won't tax your income at the state level, no matter the source. Wyoming is also an advantageous state for business owners to set up shop, making it a decent option for someone who will remain leveraged in a business venture to provide a portion of their retirement income. In addition to your personal income, Wyoming doesn't impose a corporate income rate on businesses incorporated here, either.

Hardy adventurers are most likely to find an advantageous lifestyle in Wyoming. The state is home to two of the country's most recognizable national parks (Yellowstone and Grand Teton) alongside numerous other national monuments and recreation sites. It's a hiker's paradise with more than its fair share of natural beauty. Tax advantages and an abundance of places to explore make this a great option for a special kind of retiree looking to make the most of their Social Security checks.