One of the most important factors to consider when choosing where to retire is tax efficiency. While sunshine and scenery are great, retirees are increasingly looking at states with low or no retirement taxes to make their savings last longer. In this comprehensive guide, we break down the best states for retirement taxes in 2025, helping you find the ideal tax-friendly retirement haven.
🧾 Why State Taxes Matter in Retirement
When you’re living on a fixed income—pensions, Social Security, IRAs, 401(k)s, and annuities—every dollar counts. State-level taxes can significantly impact your retirement budget. Here’s what to consider:
| Tax Category | Impact on Retirees |
|---|---|
| Income Tax | Affects Social Security, pension, and withdrawals from retirement accounts |
| Property Tax | Recurring cost that affects homeowners |
| Sales Tax | Impacts daily living expenses |
| Estate/Inherit. Tax | Affects your legacy planning |
🌟 Top 10 Best States for Retirement Taxes in 2025
Let’s explore the top states that are most favorable to retirees based on income tax, property tax, sales tax, and tax exemptions.
1. Wyoming
- Income Tax: None
- Social Security Tax: Not taxed
- Retirement Income Tax: Not taxed
- Property Tax: Low
- Sales Tax: 4%
- Estate/Inheritance Tax: None
Why it’s great: Wyoming tops the list for its complete lack of income tax and low property tax. It’s also ranked high in safety and healthcare access.
2. Florida
- Income Tax: None
- Social Security Tax: Not taxed
- Retirement Income Tax: Not taxed
- Property Tax: Moderate
- Sales Tax: 6%
- Estate/Inheritance Tax: None
Why it’s great: Florida’s no state income tax and beautiful weather make it a perennial retirement favorite.
3. Tennessee
- Income Tax: None (as of 2021)
- Social Security Tax: Not taxed
- Retirement Income Tax: Not taxed
- Property Tax: Low
- Sales Tax: 7% (but groceries taxed lower)
- Estate/Inheritance Tax: None
Why it’s great: With no state income tax and low property costs, Tennessee is rising in popularity, especially cities like Chattanooga and Knoxville.
4. Nevada
- Income Tax: None
- Social Security Tax: Not taxed
- Retirement Income Tax: Not taxed
- Property Tax: Low to moderate
- Sales Tax: ~6.85%
- Estate/Inheritance Tax: None
Why it’s great: Retirees flock to Nevada for no income tax and mild winters in places like Henderson and Reno.
5. South Dakota
- Income Tax: None
- Social Security Tax: Not taxed
- Retirement Income Tax: Not taxed
- Property Tax: Moderate
- Sales Tax: 4.5%
- Estate/Inheritance Tax: None
Why it’s great: South Dakota offers a favorable tax climate, low crime rates, and excellent healthcare services for seniors.
6. Alaska
- Income Tax: None
- Social Security Tax: Not taxed
- Retirement Income Tax: Not taxed
- Property Tax: Varies (higher in cities)
- Sales Tax: None (varies by locality)
- Estate/Inheritance Tax: None
Why it’s great: Alaska not only avoids most taxes but also offers an annual oil dividend to residents. Not ideal for cold-haters though.
7. New Hampshire
- Income Tax: No tax on wages or retirement income
- Social Security Tax: Not taxed
- Retirement Income Tax: Not taxed
- Property Tax: High
- Sales Tax: None
- Estate/Inheritance Tax: None
Why it’s great: No sales or income tax, but property taxes are relatively high. A good fit for renters or those downsizing.
8. Mississippi
- Income Tax: Social Security and retirement income exempt
- Social Security Tax: Not taxed
- Retirement Income Tax: Not taxed
- Property Tax: Very low
- Sales Tax: 7%
- Estate/Inheritance Tax: None
Why it’s great: One of the few states that exempts all retirement income, Mississippi is extremely tax-friendly for low-income retirees.
9. Georgia
- Income Tax: 5.75% (but offers major exemptions)
- Social Security Tax: Not taxed
- Retirement Income Tax: Up to $65,000 per person exempt (over 65)
- Property Tax: Moderate
- Sales Tax: 4% (plus local)
- Estate/Inheritance Tax: None
Why it’s great: Generous retirement income exclusions make Georgia surprisingly tax-efficient for seniors.
10. Delaware
- Income Tax: 2.2–6.6%
- Social Security Tax: Not taxed
- Retirement Income Tax: Up to $12,500 excluded for 60+
- Property Tax: Among the lowest in the U.S.
- Sales Tax: None
- Estate/Inheritance Tax: None
Why it’s great: With no sales tax and low property taxes, Delaware is ideal for budget-conscious retirees.
📊 State Tax Comparison Table (2025 Snapshot)
| State | Income Tax | SS Tax | Ret. Income Tax | Property Tax | Sales Tax | Estate Tax |
|---|---|---|---|---|---|---|
| Wyoming | No | No | No | Low | 4% | No |
| Florida | No | No | No | Moderate | 6% | No |
| Tennessee | No | No | No | Low | 7% | No |
| Nevada | No | No | No | Moderate | 6.85% | No |
| South Dakota | No | No | No | Moderate | 4.5% | No |
| Alaska | No | No | No | Varies | None | No |
| New Hampshire | No | No | No | High | None | No |
| Mississippi | Yes | No | Exempt | Low | 7% | No |
| Georgia | Yes | No | Partial Exempt | Moderate | 4%+ | No |
| Delaware | Yes | No | Partial Exempt | Very Low | None | No |
🧠 What Makes a State Tax-Friendly for Retirees?
Here are key features to look for in a retiree-friendly tax state:
- No state income tax or major exemptions for retirement income.
- Social Security benefits are not taxed.
- Low property taxes, especially with senior exemptions or freezes.
- Minimal or no sales tax, especially on food and medicine.
- No estate or inheritance taxes, preserving wealth for heirs.
🔍 States Retirees May Want to Avoid (Tax-Wise)
These states are not necessarily “bad” for retirement, but they tend to be less tax-friendly:
- California – High income taxes, taxes all retirement income (except Social Security).
- Vermont – Taxes Social Security and most retirement income.
- Connecticut – High property taxes and partial taxation on Social Security.
- Minnesota – Taxes Social Security and other retirement income.
- New York – High taxes and cost of living, though pensions may be partially exempt.
✅ How to Choose the Best Retirement State for You
Tax benefits are important, but don’t forget to consider:
- Cost of living
- Healthcare access and quality
- Climate
- Proximity to family
- Recreation and lifestyle
Use the following decision framework:
| Factor | Weight |
|---|---|
| Tax friendliness | 30% |
| Cost of living | 25% |
| Healthcare access | 20% |
| Climate preference | 15% |
| Social/community | 10% |
💡 Expert Tip
“The best retirement state balances tax advantages with your personal lifestyle needs. A low-tax state means little if you’re unhappy or far from loved ones.”
— Certified Financial Planner, Jane Moore
🏁 Final Thoughts
Choosing the right place to retire is about more than sunshine and golf courses. It’s about maximizing your nest egg and minimizing unnecessary taxes. States like Wyoming, Florida, and Tennessee top the list in 2025 due to no income tax, no tax on retirement income, and overall tax efficiency.
Whether you’re retiring next year or planning a few years ahead, understanding which states are best for retirement taxes will help you make an informed, financially savvy decision.