A retiree pulling $80,000 a year from a traditional IRA pays roughly $3,500 more in state income tax living in California than the same retiree living in Florida, who pays nothing at all. For anyone weighing where to spend their retirement years, or where to base a second home for extended travel seasons, that gap compounds into real money fast.
For the well traveled crowd who split time between destinations, own a second property, or are considering a permanent relocation to fund more adventures abroad, state tax exposure is one of the most overlooked factors in the decision.
The Nine States That Take Nothing
Nine states levy no broad based income tax on wages or retirement accounts at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Pension income, IRA withdrawals, and Social Security benefits all pass through untouched in these states.
Income tax is only one slice of the picture though. High sales and property taxes can quietly erase the benefit of paying nothing on income.
| State | Income Tax | Taxes Social Security? | Taxes Pension? | Avg. Sales Tax | Avg. Property Tax |
|---|---|---|---|---|---|
| Wyoming | None | No | No | ~5.56% | ~0.58% |
| South Dakota | None | No | No | ~6.11% | ~0.99% |
| Florida | None | No | No | ~7.00% | ~0.83% |
| Alaska | None | No | No | ~1.82% (local only) | ~0.94% |
| Nevada | None | No | No | ~8.24% | ~0.49% |
| Tennessee | None | No | No | ~9.61% | ~0.49% |
| Texas | None | No | No | ~8.20% | ~1.40% |
| New Hampshire | None | No | No | None | ~1.50% |
Wyoming, South Dakota, and Florida come out on top once every category is weighed together.
The States Where Retirement Gets Expensive Fast
New York, California, and Hawaii consistently rank as the most punishing states for retirees, and the reasons differ in each case.
New York pairs a 10.9 percent top income tax rate with estate taxes and property tax rates hovering near 1.60 percent. California’s top marginal rate hits 13.3 percent, the highest anywhere in the country. It does exempt Social Security, but traditional IRA withdrawals and wages face full taxation.
Hawaii is the trickiest of the three. It has the lowest effective property tax rate in the nation, yet still runs one of the highest overall tax burdens because of a broad excise tax applied at every stage of a transaction. For travelers who have dreamed of a slower paced life on the islands, that excise tax shows up in nearly every purchase, from groceries to everyday services, and it adds up on a fixed income.
What Actually Determines the Bill
Six categories shape a retiree’s total state tax exposure: income tax, interest and dividends tax, sales tax, property tax, estate tax, and taxes specifically on Social Security or pension income. Not every state charges all six, and the combination matters more than any single headline rate.
Washington deserves a closer look here. It has no standard income tax, but it taxes long term capital gains at 7 percent above an inflation adjusted $278,000 threshold, with a 9.9 percent surtax above $1 million. A new 9.9 percent tax on income over $1 million is also scheduled to take effect in 2028. Anyone with a substantial investment portfolio should factor that in before assuming Washington is a clean tax haven.
Social Security Taxes Are Rarer Than Most Assume
Only eight states still tax Social Security benefits: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. Most of these apply generous income based exemptions, so many retirees living on modest benefits owe little or nothing even in a taxing state.
Pension income fares even better nationally. More than a dozen states exempt it entirely, including all nine no income tax states plus Alabama, Illinois, Mississippi, and Pennsylvania.
Sales and Property Taxes Can Undo the Math
Five states charge no statewide sales tax at all: Oregon, Montana, New Hampshire, Delaware, and Alaska. On the other end, Louisiana’s combined state and local rate reaches 10.12 percent, the steepest in the country.
Property taxes swing just as widely. Hawaii sits at the low end near 0.29 percent, while New Jersey and Illinois both average close to 1.88 percent, a sixfold difference that meaningfully affects the cost of owning a home base in retirement.
The Travel Angle Worth Considering
For a well traveled reader base already comfortable living between destinations, this data points toward a strategy rather than just a ranking. A primary residence established in a low tax, low cost state, paired with extended stays or a second property somewhere with more character and higher costs, often delivers the best of both worlds. It preserves more retirement income for the flights, the regional wine, and the experiences that matter, while avoiding the slow leak of an expensive home base.
Housing costs, healthcare access, and climate risk typically carry more weight in a relocation decision than tax rates alone, and moving purely to save on taxes rarely delivers the full savings retirees expect once those factors are counted. Tax friendliness works best as one input in a much larger lifestyle equation, not the deciding factor on its own.
Source: This article is based on data and analysis from Kathleen Coxwell, drawing on figures from the Tax Foundation’s 2026 State Income Tax Rates, State and Local Sales Tax Rates, and Property Taxes by State and County reports.
Amanda O’Brien is the creator and editor of The Boutique Adventurer. She has visited 80 countries and is a member of the British Guild of Travel Writers as well as the IFTWTA. She is passionate about wine had has just completed Level 3 of the WSET. Born in Australia, she lives in London.