The best states to retire for tax benefits are the ones that offer a range of lower taxes -- or none at all -- whether it's on income, property, sales tax, or inheritance. Although there's no avoiding federal tax, you can significantly lower your expenses by retiring to one of the many states that are more retiree-friendly.
It may not be the only factor or even the most important one when choosing where to retire. However, it could make a big difference in how much money you can spend on your retirement, improving your quality of life greatly. (See our Retirement Planning Guide.)
If you plan to leave a financial legacy behind, picking the right state can also result in a bigger after-tax inheritance for your heirs, making this an important part of retirement planning.
Most tax-friendly states for retirement (alphabetically listed)
1. Alabama
One of several Sunbelt states on the list, Alabama retirees benefit from no state income tax on Social Security and pension income and the lowest median property taxes paid in 2023. If you plan to leave a large estate, the Yellowhammer State might also be attractive with no estate or inheritance tax.
However, non-retirement sources of income are fair game for state income tax, which is between 2% and 5% based on income, and the average sales tax rate of 9.29% is one of the highest in the U.S.
2. Alaska
One of the states with no income tax, Alaska doesn't have estate or inheritance taxes either. Though it doesn't have state sales tax, local taxes can easily result in higher total sales taxes than other states, especially since groceries are also taxed.
Alaska's median property tax of $4,004 in 2023 (the most recent fully compiled data) is on the higher end of this group. However, the state's Permanent Fund Dividend, paid to residents and funded primarily from oil and gas production on state land, was $1,702 in 2024.
Alaska has a very low average combined state and local sales tax rate of 1.82%, helping make it tax-friendly for retirees.
3. Florida
The Sunshine State is a very popular place for retirees -- and for good reason. It has no individual income tax on any income, median property taxes are on the lower end (plus longtime residents can qualify for a large exemption), and its average sales tax rate of 6.95% is lower than many states with low or no income tax. It's also favorable for heirs, with no estate or inheritance tax.
4. Iowa
The Hawkeye State is starting to move up the list of tax-friendly states for retirees. In 2023, residents 55 and older no longer pay income tax on other sources of retirement income, and it is moving to a flat tax structure in 2025. Also, on the positive side of the ledger, Iowa has no estate tax, and its inheritance tax is being phased out entirely by 2025.
The potential downside: Iowa's property tax rate is on the higher end, though lower property values offset the median property tax bill. If you intend to own a higher-value property, you may want to factor in a higher tax bill than the median.
5. Nevada
With some of the lowest property taxes in the country, no state income tax, and no inheritance or estate taxes, Nevada is a state that plenty of people love to retire to.
On the downside, it does have some of the highest state sales tax rates, although groceries and prescriptions are exempt. On balance, there's a lot for retirees to like from a tax perspective about Nevada.
6. New Hampshire
The Granite State lets people keep more of their hard-earned money, with no state tax on regular income and no tax on Social Security or pensions.
However, New Hampshire does tax interest and dividend income that exceeds $2,400 per person, though even that tax is being phased out, dropping from 4% in 2023 to 3% in 2024 before being repealed in 2025. There is also no state sales tax nor estate or inheritance tax.
The downside: New Hampshire has some of the highest median property taxes and property tax rates in the U.S. There's no such thing as a free ride, after all.
7. South Dakota
The Mount Rushmore State is one of a handful of states with no income tax, a benefit for everyone but especially for retirees. It also has no inheritance or estate tax and a relatively low combined average state and local sales tax rate of 6.4%.
Relatively low property values mean a lower median property tax bill, but its effective property tax rate of 1.09% is on the higher end, and thus a consideration if you're likely to own a high-value property.
8. Tennessee
One of the most tax-friendly states, even from this list, the Volunteer State has no state income tax, no estate or inheritance tax, and one of the lowest median property tax bills and property tax rates in the country.
You may end up paying more on sales tax though. Tennessee charges a 7% state sales tax, while local sales tax can be another 2.75%. The average Tennessean pays 9.56% in sales tax, the second-highest rate behind only Louisiana. This is notable depending on your spending and consumption levels.
9. Texas
The Lone Star State is another that's becoming more tax-friendly for retirees. It has no income tax, along with no estate or inheritance tax.
A current downside that might improve is the higher local property tax: An amendment to the Texas Constitution went before voters in November 2023 that should significantly reduce property taxes for homeowners, though potentially at the expense of businesses and renters, since commercial properties won't qualify. This could mean rents for retirees could rise in coming years, an important consideration when you factor in where you plan to live.
It's also worth noting that despite being one of the best states for individual income tax and an improving environment for homeowners, Texas's combined state and local tax rate of 8.2% is on the higher end.
10. Wyoming
While it's 10th on our alphabetical list, Wyoming is one of the -- if not the -- most tax-appealing states for retirees to consider. Not only does it lack state income tax on any source of income, but it also has no estate or inheritance tax. The Equality State also has one of the lowest effective property tax rates in the U.S. and a very appealing 4% state sales tax. The average 5.44% combined sales tax rate makes Wyoming one of the most tax-friendly states for retirement.
Expert tips for retirement planning
1. Think about the bigger picture first
Taxes are a big deal when you're on a fixed income or stretching a nest egg out across many years, but it's not the only factor to consider when mapping out your future in retirement. Proximity to (and travel costs to reach) friends and family also matter, along with choosing a place where the climate, lifestyle, available activities, and social connections will result in the quality of life you want.
2. Find out how much will it cost to get (and stay) there
Sometimes in our rush to save money, we can spend more than we saved to make it happen. Be sure to calculate relocation expenses, increased travel costs, differences in energy, insurance, and other living expenses versus where you currently live.
3. Make sure the tax benefits add up for you
This is part of the prior tip, but it's a reminder to do the math, and then do it again. Make sure your calculations are based on conservative, real-world numbers along with the rest of your retirement plans.
4. Give it a test drive
Just as nobody buys a car without taking it for a spin around the block, it's worth doing the same with a major relocation to a new state. Instead of fully committing, consider finding a short-term rental in the area you want to settle, then spending a few weeks or more there to see if it meets your expectations.
Related investing topics
Should you consider these states for retirement?
Each in our list of tax-friendly states to retire in offers something for just about every retiree. Factors to consider include your sources of income, how much you expect to spend on a property, and how much you expect to spend on things ranging from groceries to gasoline to designer gloves.
For example, if boating is a big part of your retirement plans, you may want to consider fuel and excise taxes, which can vary significantly from state to state. Do you intend to leave a large estate behind to your heirs? How large it is and who will inherit it could also be important factors to consider if you want to minimize or avoid estate and inheritance taxes.
Remember that it's a balancing act: No state is likely to have a perfect tax regime for you. Factor in each of the different taxes to make the most of your retirement income and wealth while also settling in a place where your family will be happy.
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