Key Trends in State Tax Retirement for 2025-26
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When planning for retirement, most people focus on investment performance, Social Security timing, and withdrawal strategies — but one factor can quietly make or break your retirement budget: state taxes.
Where you live after you retire can dramatically affect how far your savings stretch. Between state income taxes, federal pension taxes, and cost-of-living differences, two retirees with the same income can end up with very different lifestyles depending on where they choose to settle.
As 2026 approaches, several states are adjusting their tax policies — some becoming more retirement-friendly, others less so. At Goldstone Financial Group, we help clients understand not just how to grow their money, but where to live to make the most of it.
If you’re considering relocating in retirement, here’s what you need to know about state tax trends for retirees in 2025–26, and how to evaluate your options wisely.
Why State Taxes Matter More Than Ever
For retirees, taxes don’t stop at the state border. While the federal government taxes Social Security and IRA distributions as well as retirement distributions based on your total income, states vary widely in what they tax — and what they don’t.
- Some states don’t tax retirement income at all.
- Others exclude pensions or Social Security but tax IRA or 401(k) withdrawals.
- A few taxes nearly all sources of retirement income.
As more retirees seek affordable living and warmer weather, states are competing to attract retirees by adjusting their tax codes. For example, states like Iowa, Nebraska, and West Virginia have recently phased out or reduced taxes on pensions and retirement income, while others are reassessing exemptions amid budget pressures.
Knowing where your income will be taxed — and how much — can mean the difference between financial freedom and unnecessary strain.
The Most Retirement-Friendly States (Tax-Wise)
Let’s start with the good news: several states continue to offer major tax advantages for retirees. These states either have no income tax at all or exempt most retirement income sources, benefiting your retirement savings.
States With No State Income Tax
As of 2025, the following nine states do not levy a state income tax:
- Florida
- Texas
- Tennessee
- Nevada
- South Dakota
- Wyoming
- Alaska
- Washington
- New Hampshire*
These states are perennial favorites among retirees seeking simplicity and sunshine — but it’s worth remembering that no income tax doesn’t mean no taxes. Property and sales taxes can still be significant, especially in Florida and Texas.
States That Don’t Tax Social Security Benefits
If you rely heavily on Social Security, consider a state that does not tax those benefits. As of 2025, 41 states do not tax Social Security income, including:
- Arizona
- California
- Florida
- Illinois
- New York
- North Carolina
- Pennsylvania
- Virginia
Goldstone Tip: Illinois stands out as one of the few states that does not tax pensions, 401(k) distributions, or IRAs, making it especially attractive for retirees with substantial savings.
States Reducing or Eliminating Pension Taxes (2025–26 Trends)
Recent legislative trends show a clear pattern: many states are working to become more retiree-friendly by easing taxes on pensions, retirement account withdrawals, and retirement accounts.
For example:
- Nebraska: Phasing out taxation of Social Security and most retirement income by 2025.
- Mississippi: Continues to exempt all retirement income at the state level, including IRAs and pensions.
- West Virginia: Fully exempted Social Security benefits from state tax in 2024.
On the other hand, a few states like Minnesota and Vermont are reviewing their exemptions due to budget concerns — meaning retirees may face higher taxes in the coming years.
The Hidden Costs: Property and Sales Taxes
Even in states with no income tax, other taxes, including state estate tax, can quickly erode your savings.
- Property Taxes: Florida and Texas are popular for their lack of income tax, but both rank among the highest in property taxes.
- Sales Taxes: Tennessee and Nevada have high sales taxes, often exceeding 8–9%, which can increase daily living expenses.
That’s why a truly tax-efficient retirement plan considers all taxes — not just income taxes.
The Lifestyle Layer: Balancing Taxes with Quality of Life
Of course, taxes aren’t the only factor that matters when deciding where to retire. A low-tax state with a flat rate isn’t necessarily the best state for your lifestyle or long-term well-being.
Before relocating, consider:
- Healthcare access: Quality and affordability of medical care in your new state.
- Cost of living: Housing, utilities, and transportation costs may offset tax savings.
- Family proximity: The emotional and logistical benefits of staying near loved ones.
- Weather and recreation: Daily comfort and opportunities for an active lifestyle.
Goldstone Tip: Taxes should inform your decision — not dictate it. A balanced relocation strategy considers finances, lifestyle, and long-term goals together.
Emerging 2025–26 Trends: What’s Changing Next
Here are a few state-level tax developments retirees should watch as we head into 2026, especially in the context of estate planning:
- Sunset Provisions and Phaseouts: Several states are in the process of eliminating taxes on certain retirement income, but some benefits have expiration dates or thresholds.
- Increased Property Tax Relief: States like Georgia and South Carolina are introducing senior property tax exemptions to retain retirees amidst varying property tax rates.
- Rising Migration Pressure: As more retirees move to tax-free states, housing and insurance costs in those areas are rising — offsetting some tax benefits.
- Roth IRA Conversions on the Rise: With federal tax brackets expected to change post-2025, retirees are increasingly doing Roth conversions before moving to no-tax states to lock in favorable rates.
These shifting trends underscore why tax planning for retirement isn’t one-and-done — it’s ongoing.
A Practical Checklist Before You Relocate
If you’re thinking about moving in retirement, here’s a checklist to help you plan wisely:
1. Review Your Current State’s Tax Rules
Understand how your current state treats pensions, IRAs, and Social Security. You may already live in a more favorable state than you realize.
2. Compare Potential Destinations
Use resources like Kiplinger’s “State-by-State Guide to Taxes on Retirees” to compare states. Focus on total tax burden, not just income tax.
3. Evaluate Cost of Living and Housing
A state with no income tax but sky-high housing prices may not save you money overall.
4. Plan the Timing of Your Move
Consider relocating in December or early in the year to simplify your state tax filings and establish residency cleanly for the following tax year.
5. Review Healthcare Options
If you’re under 65, explore how your new state handles ACA coverage or employer retiree plans.
6. Work With a Financial Advisor
Before moving, coordinate with a financial planner and tax specialist to model your after-tax income and long-term outcomes.
How Goldstone Helps You Plan a Tax-Efficient Retirement
At Goldstone Financial Group, we know that every retirement plan is as unique as the person behind it. Whether you’re considering a move across the country or simply across state lines, our advisors can help you navigate the complexities of high property taxes and other financial considerations:
- Analyze the tax impact of potential relocation states.
- Build a tax-efficient withdrawal plan from your 401(k), IRA, and pension.
- Optimize Social Security and Medicare timing.
- Evaluate cost-of-living differences and financial tradeoffs.
- Coordinate relocation timing with your broader retirement roadmap.
We don’t just help you save for retirement — we help you live it wisely, wherever you choose to call home.
Relocation Is a Financial Strategy, Not Just a Move
Choosing where to retire is about more than scenery; it’s a financial decision that affects your lifetime income, healthcare costs, and peace of mind.
Before you make the move, take time to review your entire retirement plan through a tax lens. A smart relocation strategy today can save you thousands tomorrow — and keep your financial roadmap aligned with your long-term goals.
Ready to Explore a Tax-Savvy Retirement?
If you’re considering relocating in retirement, don’t go it alone. Schedule a consultation with Goldstone Financial Group’s tax returns and retirement planning team to review your options and design a plan that works for your goals, income, and lifestyle. Visit goldstonefinancialgroup.com to book your Tax-Efficient Retirement Review today.
Disclosure:
Goldstone Financial Group, LLC (“GFG”) is a registered investment advisor with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or qualification. This material is provided for informational purposes only. Opinions expressed herein are solely those of GFG. None of the information presented in this material is intended to offer personalized investment advice and does not constitute an offer to sell or solicit any offer to buy a security or any insurance product and is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. The information contained herein has been obtained from sources believed to be reliable but accuracy and completeness cannot be guaranteed by GFG.