Taxes
States That Don't Tax IRA Withdrawals: The Full List
By Dana Mercer · May 28, 2026
Thirteen states exempt IRA and 401(k) withdrawals from income tax entirely. If you're sitting on a seven-figure retirement account, where you live when you start drawing it down could be worth hundreds of thousands of dollars over a 20-year retirement.
Thirteen states impose zero income tax on IRA and 401(k) withdrawals. For a retiree pulling $80,000 a year from a traditional IRA, living in the wrong state could cost $5,000 to $9,000 annually in taxes that simply don't exist across the state line.
The 13 States That Don't Tax IRA or 401(k) Distributions
Nine states have no broad-based income tax at all, which means retirement withdrawals are automatically untaxed:
- Alaska
- Florida
- Nevada
- New Hampshire (taxes only interest and dividends, not earned income or retirement distributions)
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
- Illinois — flat 4.95% income tax, but retirement income including IRA and 401(k) distributions is fully exempt
- Iowa — eliminated tax on all retirement income as of 2023; pensions, IRAs, and Social Security are all exempt for residents 55 and older
- Mississippi — retirement distributions are fully exempt for residents who have reached retirement age
- Pennsylvania — distributions from IRAs and 401(k)s are exempt once the account holder reaches age 59½
What the Other 37 States Do
The remaining 37 states tax IRA and 401(k) withdrawals to some degree, but the range is wide.
Some states offer substantial exemptions. Michigan, for example, allows a partial retirement income deduction that phases in based on birth year, with full exemption available for older retirees. Colorado exempts up to $24,000 in pension and retirement income for residents 65 and older. Georgia exempts up to $65,000 per person in retirement income for residents 65 and older.
At the other end, states like California, Minnesota, and Vermont tax retirement income at their full marginal rates. California's top marginal rate hits 13.3%, and the state offers no special exemption for IRA or 401(k) distributions. A retiree drawing $100,000 annually in California could owe more than $8,000 in state income tax on that income alone.
New York technically taxes IRA distributions, but exempts the first $20,000 per year for residents 59½ and older. It's a partial benefit, not a full exemption.
For a deeper breakdown of how high-tax states compound the retirement tax burden, see The True Cost of Living in High-Tax States.
Social Security and Pensions: The Other Two Variables
IRA and 401(k) treatment is only one piece of the retirement tax picture. Social Security and pension income have their own rules, and they don't always follow the same pattern.
As of 2026, 41 states plus Washington D.C. do not tax Social Security benefits. The states that still tax Social Security at least partially include Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. See the full breakdown in our post on States That Don't Tax Social Security.
Pension treatment varies even more widely. Illinois exempts all government pensions but taxes private retirement income differently in some scenarios. Pennsylvania's exemption covers private pensions and IRAs but has specific eligibility rules. Mississippi's exemption is broad but has age and retirement-status requirements.
The bottom line: a state that looks IRA-friendly may still tax your pension or your Social Security. You need to check all three categories before making a relocation decision.
How Much This Actually Matters
Approximately 497,000 Americans had 401(k) balances over $1 million as of late 2025, according to Fidelity data. For that group, the state tax question is not abstract. A retiree drawing down a $1.5 million IRA over 20 years at roughly $75,000 per year would pay zero in state income tax in Florida, Texas, or Pennsylvania, and potentially $60,000 to $100,000+ in cumulative state taxes in a state like California or Minnesota over the same period.
Property taxes, cost of living, and estate taxes all factor into the full picture. Our Best States for Retirees to Avoid Taxes post scores all 50 states across every retirement tax category.
Use the Live or Die Here retirement tax calculator to run your specific income mix against every state's actual tax code.
Key Takeaways
- 13 states impose zero income tax on IRA and 401(k) distributions: the 9 no-income-tax states plus Illinois, Iowa, Mississippi, and Pennsylvania
- California's top marginal rate is 13.3% with no retirement income exemption, making it one of the most expensive states for traditional IRA withdrawals
- Iowa and Illinois are the strongest surprises on the list, offering full retirement income exemptions despite having active state income taxes on other income
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