Depending on how much you’ve saved, you may have to pay federal taxes on some of your retirement income. For example, about half of Social Security beneficiaries pay federal income taxes on a portion of their benefits, according to Pew Research data.
At the state level, there’s a lot of nuance: Some states have no income tax at all, while others exempt certain kinds of retirement income.
Only eight states tax Social Security benefits, and most of those offer exemptions based on income. A handful of states also tax distributions from 401(k) plans and IRAs while exempting pension income.
See how annuities can provide guaranteed income in retirement
Which states tax Social Security?
Only Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Vermont and Utah tax Social Security benefits.
West Virginia phased out its tax, and starting with 2026 returns (filed in 2027), benefits will be completely exempt.
Start preparing your taxes with these options
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
The Deluxe plan comes with priority support and live chat, while the paid Pro Support tier adds access to a tax pro, phone support, live screenshare and assistance with federal and state returns
Guarantees 100% accuracy and maximum refund
Which states tax 401(k) accounts and IRAs?
Nine states don’t have any income tax, whether on paychecks, 401(k)s, IRAs or pensions.
- Alaska
- Florida
- Nevada
- New Hampshire (only taxes dividend and interest income)
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Four states with income tax exempt retirement income.
Tax laws are always changing, so stay up-to-date with your state tax commission.
Get help for your tax debt
Which states tax pensions?
All but 15 states tax pensions, although some provide a credit or exemption for a portion of pension income. The states that don’t tax pensions are:
- Alabama (does tax 401(k) and IRA distributions)
- Alaska
- Florida
- Hawaii (does tax 401(k) and IRA distributions)
- Illinois
- Iowa
- Mississippi
- Nevada
- New Hampshire
- Pennsylvania
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Don’t wait to save for retirement
When it comes to your retirement funds, the lowest-hanging fruit is taking advantage of your employer’s 401(k), especially if your company offers to match your contributions.
The money you put in is taken from pre-tax income, which lowers your taxable income for the year and can put you into a lower tax bracket.
If your employer doesn’t offer a 401(k) — or if you want to supplement it — a Roth IRA is a great way to maximize your retirement savings. You contribute after-tax dollars, so your withdrawals later in life are tax-free. Fidelity and Wealthfront are among our top picks for Roth IRAs.
Having both a 401(k) and a Roth IRA allows you to diversify your portfolio and take advantage of different tax benefits and withdrawal options.
Fidelity Investments
-
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go® account, but minimum $10 balance according to the investment strategy chosen
-
Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over and this includes access to unlimited 1-on-1 coaching calls from a Fidelity advisor)
-
Bonus
-
Investment vehicles
Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®
-
Investment options
Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares
-
Educational resources
Extensive tools and industry-leading, in-depth research from 20-plus independent providers
Wealthfront
-
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. $500 minimum deposit for investment accounts
-
Fees
Fees may vary depending on the investment vehicle selected. Zero account, transfer, trading or commission fees (fund ratios may apply). Wealthfront annual management advisory fee is 0.25% of your account balance
-
Bonus
-
Investment vehicles
-
Investment options
Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources and dividend stocks
-
Educational resources
Offers free financial planning for college planning, retirement and homebuying
Retirement tax FAQs
What is the most tax-friendly state for retirees?
The most tax-friendly state for retirees is Alaska, where there’s no income tax and no state sales tax, no estate tax and no inheritance tax.
What retirement accounts are tax-exempt?
Retirement accounts that are tax-exempt, or accounts where your withdrawals are tax-free because you pay taxes upfront, are Roth IRAs and Roth 401(k)s.
Does West Virginia tax Social Security?
West Virginia has phased out its tax on Social Security benefits. For 2025 returns, 65% of benefits were tax-exempt. For 2026 returns (filed in 2027), benefits are completely exempt.
Subscribe to the CNBC Select Newsletter!
Money matters — so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox. Sign up here.
Why trust CNBC Select?
Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
