Key takeaways

  • Nine states do not tax wages, retirement income, Social Security, or pension payments at the state level. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming all qualify, per the Tax Foundation’s 2026 State Individual Income Tax Rates and Brackets report, though Washington carries important caveats for high earners.
  • Washington is a partial exception that requires attention in 2026. Washington does not tax retirement income, but its capital gains tax applies at 7 percent on gains above $278,000 and 9.9 percent on gains above $1 million. A new 9.9 percent income tax on household income above $1 million takes effect January 1, 2028, following legislation signed by Governor Ferguson on March 30, 2026.
  • No income tax does not mean “no taxes”. States without an income tax fund their governments through other mechanisms. Tennessee and Washington carry two of the highest combined state and local sales tax rates in the country at 9.61 percent and 9.51 percent, per Tax Foundation 2026 data.
  • Texas and New Hampshire carry the trade-off most visibly. Both states impose no income tax but rely heavily on property taxes, which rank among the highest effective rates in the country.
  • Federal income tax still applies everywhere. Residing in a no-income-tax state eliminates state-level tax on retirement income but does not affect federal tax obligations, which the IRS applies uniformly to all U.S. residents.

Choosing where to retire involves more variables than most people expect. Climate, cost of living, proximity to family, and access to healthcare all factor in. For retirees drawing from pensions, Social Security, individual retirement accounts, or investment portfolios, however, the state income tax picture can add up to thousands of dollars per year between one location and another. The most straightforward advantage a state can offer in this regard is the complete absence of a state income tax.

As of 2026, nine states impose no individual income tax on wages or retirement income, per the Tax Foundation’s 2026 State Individual Income Tax Rates and Brackets report. Washington, while it does not currently tax retirement income, carries significant caveats for high earners that make it a distinct case. Understanding which states qualify, how they fund their governments in the absence of income tax revenue, and what trade-offs arise for retirees forms the foundation of any informed conversation about tax-efficient retirement geography.

The states with no income tax in 2026

The following information is drawn from the Tax Foundation’s 2026 State Individual Income Tax Rates and Brackets report and its 2026 State and Local Sales Tax Rates data.

1. Alaska

No state income tax and no statewide sales tax. Alaska funds much of its government through oil and gas revenue, which also allows it to keep property taxes relatively low. The combined sales tax rate is 1.82 percent, the lowest in the country.

2. Florida

No state income tax, protected by a provision in the state constitution that prohibits personal income taxation. The state relies primarily on sales tax revenue. Florida’s combined average state and local sales tax rate is 7.00 percent as of 2026, per Tax Foundation data. Groceries and prescription drugs are exempt from sales tax. Property taxes sit at an average effective rate of approximately 0.74 percent on owner-occupied homes.

3. Nevada

No state income tax. Nevada generates revenue primarily through gaming, tourism, and sales taxes. The combined average state and local sales tax rate is approximately 8.23 percent.

4. New Hampshire

No state income tax as of January 1, 2025, when the state eliminated its longstanding interest and dividends tax. New Hampshire levies no sales tax. The trade-off is property taxes, which carry an effective rate of approximately 1.41 to 1.44 percent on owner-occupied homes, among the highest in the country.

5. South Dakota

No state income tax. The state uses sales taxes as its primary revenue source. The combined average rate is approximately 6.11 percent for 2026.

6. Tennessee

No state income tax. Tennessee previously taxed interest and dividends but eliminated that tax by 2021. The state carries one of the highest combined average sales tax rates in the country at 9.61 percent for 2026, a meaningful cost for retirees on fixed budgets.

7. Texas

No state income tax. Texas relies heavily on property taxes to fund local governments and public education. Property taxes in Texas rank among the highest effective rates in the country. The combined average sales tax rate is approximately 8.19 percent.

8. Wyoming

No state income tax. Wyoming benefits from significant mineral extraction revenue, which allows it to keep both property and sales taxes relatively low. The combined average sales tax rate is approximately 5.56 percent, among the lowest of the nine states.

9 Washington

Washington does not tax wages, Social Security, pension income, or retirement account distributions. While it has a capital gains tax, it does not currently tax retirement income. That said, Washington’s tax picture is evolving rapidly in 2026 and deserves careful attention.

Washington’s capital gains tax, enacted in 2022 and upheld by the Washington Supreme Court in 2023, applies a 7 percent rate on long-term gains above $278,000, the 2025 standard deduction adjusted annually for inflation per the Washington Department of Revenue. Gains above $1 million are taxed at 9.9 percent, following the enactment of Senate Bill 5813, signed in May 2025 and retroactive to January 1, 2025. Washington also imposes an estate tax with a $3 million exemption and rates up to 35 percent.

Most significantly for 2026, Governor Ferguson signed ESSB 6346 into law on March 30, 2026. This legislation imposes a 9.9 percent income tax on household income above $1 million, effective January 1, 2028. The tax applies to wages, business income, dividends, and other income, not only capital gains. Retirement account distributions such as those from a 401(k) or IRA, are not subject to the tax, per available guidance. The law is currently facing a constitutional challenge filed in April 2026. Retirees with household income above $1 million should track this legislation carefully.

Go Further: A capital gains tax is a tax on the profit realized from selling an asset such as stocks, bonds, or a business interest, measured as the difference between the sale price and the original purchase price. An estate tax is a tax levied on the total value of a deceased person’s assets before those assets pass to heirs. Washington imposes both. Most retirees will not be affected by either, but those with significant investment portfolios or estates above $3 million should factor both into any relocation analysis.

Property tax trade-offs

The absence of state income tax does not create a uniformly lower tax burden. States must fund their governments, and when income tax revenue is removed, that funding comes from somewhere else. Property taxes are the most common substitute.

According to Tax Foundation data, property taxes comprise 27.4 percent of combined state and local tax collections nationally. In states without income taxes, that share is often higher. Texas and New Hampshire are the clearest examples: both rely heavily on property taxes as the primary mechanism for funding local services and public education.

A retiree who eliminates state income tax liability by relocating to Texas may find that property taxes on a median-value home run several thousand dollars higher per year than in a comparable state. 

Wyoming and Alaska sit at the other end of the spectrum, with relatively low property tax burdens supplemented by mineral and oil revenue. Florida maintains moderate property taxes at approximately 0.74 percent on owner-occupied homes. New Hampshire’s effective rate of approximately 1.41 to 1.44 percent is the most significant financial counterweight to its otherwise favorable profile.

Go Further: A property tax is an annual tax levied by local governments on the assessed value of real estate. Property tax rates vary not only by state but by county and municipality within a state. Retirees evaluating a specific destination should research county-level rates, as they can differ substantially from a state’s published average.

Sales tax considerations

Sales taxes affect retirees differently from income taxes. Income tax liability depends on how much retirement income is drawn. Sales tax exposure depends on spending behavior. Retirees who spend heavily on goods and services subject to sales tax face meaningful costs in high-rate states, while those whose spending falls in exempt categories like groceries and prescription drugs may feel the impact less.

Tennessee and Washington carry the highest combined average state and local sales tax rates at 9.61 percent and 9.51 percent, respectively, per the Tax Foundation’s 2026 data. Texas follows at approximately 8.19 percent. Alaska has no statewide sales tax and only minimal local rates averaging 1.82 percent. New Hampshire levies no sales tax at all. Wyoming and South Dakota fall in the moderate range at approximately 5.56 percent and 6.11 percent.

Sales tax bases vary significantly by state. Florida exempts groceries and prescription drugs. Tennessee taxes groceries at a reduced state rate of 4 percent rather than the standard 7 percent, though local rates apply on top. The applicable exemptions in any specific state should be confirmed directly with that state’s department of revenue before concluding total tax exposure.

How a financial advisor can help

The decision about where to retire involves income tax, property tax, sales tax, estate planning, healthcare costs, and a retiree’s specific income mix, all at once. That combination rarely lends itself to a simple calculation. A qualified financial advisor or tax professional with experience in retirement income planning can model the full tax picture for a given state based on a retiree’s actual income sources, asset profile, and spending patterns.

For retirees considering Washington in particular, the rapidly changing legislative environment makes professional guidance especially valuable. The interaction between the capital gains tax, the incoming income tax on high earners, and the estate tax requires analysis that goes beyond published rate tables.

FAQs

Does living in a no-income-tax state eliminate all state taxes on Social Security and pension income? 

At the state level, yes, for the nine states covered here. None imposes a tax on wages, Social Security benefits, pension payments, or retirement account distributions. Federal income tax obligations remain unchanged regardless of state residence. The IRS applies its rules on Social Security taxation and retirement income uniformly across all states based on combined income thresholds that have nothing to do with where a retiree lives.

Is Washington state income-tax-free for retirees in 2026? 

For most retirees, yes, in practical terms. Washington does not tax wages, Social Security, pension income, or retirement account withdrawals. Two exceptions apply. First, the capital gains tax applies at 7 percent on long-term gains above $278,000 and 9.9 percent on gains above $1 million, per the Washington Department of Revenue. Second, ESSB 6346, signed March 30, 2026, imposes a 9.9 percent income tax on household income above $1 million, effective January 1, 2028. Retirees with significant investment activity or income above that threshold should consult a tax professional.

How should property and sales taxes factor into a retirement relocation decision? 

With the same rigor as the income tax calculation. A state that eliminates income tax on $60,000 in annual retirement income may deliver meaningful savings, but if property taxes on a purchased home run $4,000 to $6,000 per year higher than in a comparable state, the net advantage narrows considerably. A complete picture requires calculating income tax, property tax, and sales tax exposure in the destination state and comparing that total against the same calculation for alternatives.

Glossary

  • Capital gains tax: A tax levied on the profit realized from the sale of an asset, calculated as the difference between the purchase price and the sale price. Washington state applies a 7 percent rate on long-term gains above $278,000 and 9.9 percent on gains above $1 million, per the Washington Department of Revenue. Check out this calculator to learn more about how capital gains taxes work.
  • Combined sales tax rate: The sum of a state’s statewide sales tax rate and the average local sales tax rates weighted by population. Tax Foundation data expresses this as a single percentage for each state.
  • Estate tax: A tax levied on the total value of a deceased person’s estate before distribution to heirs. Washington state imposes an estate tax with a $3 million exemption and rates up to 35 percent. Eleven other states and the District of Columbia also impose estate taxes as of 2026, separate from the federal estate tax.
  • Individual income tax: A tax levied by a state or the federal government on wages, salaries, investment income, and other earnings. The nine states covered in this article do not impose this tax on wages or retirement income at the state level, though Washington’s ESSB 6346 will impose a 9.9 percent tax on household income above $1 million beginning January 1, 2028.
  • Interest and dividends tax: A limited form of state income tax applied only to investment income, such as interest from savings accounts and dividends from stocks, rather than wages or salaries. New Hampshire eliminated this tax effective January 1, 2025, making it fully income-tax-free.
  • Property tax: An annual tax levied by local governments on the assessed value of real property. Property taxes are the primary funding mechanism for local services such as public education, roads, and emergency services in most states.
  • Sales tax: A consumption tax levied on the retail sale of goods and, in some states, certain services. Rates vary by state and locality, and some states exempt categories such as groceries and prescription drugs.
  • State income tax: A tax imposed by a state government on an individual’s income, separate from and in addition to the federal income tax. Forty-one states levy a broad individual income tax on wages and salaries as of 2026, per the Tax Foundation.

Sources

Disclaimer: Steady Retire and MediaFeed are providers of educational content and information. This article is intended for informational and illustrative purposes only and does not constitute financial, legal, tax, or investment advice. The information provided does not create a professional-client relationship and should not be used as a substitute for consultation with a qualified financial advisor, tax professional, or attorney. While we strive to provide accurate and up-to-date information, rules and regulations regarding retirement are subject to change. Always consult with a certified professional regarding your specific financial situation.