Tax Season Tip: 5 Best States for a Tax-Friendly Retirement in 2025
Written by
J. Arky
Edited by
Amber Barkley
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Retirement may be a time to finally relax, but that can only happen if you have built a big enough nest egg. It also helps if your overall tax burden is less based on where you live out your retirement years.
If you are already retired or plan to in 2025, probably the last thing you want to hear is that you’ll need to put in some effort to make your money, and taxable income, fit your new lifestyle — because even though you are not clocking in at a nine-to-five job, you will still need to make sure your taxes are paid.
This can be easier when you live in the right state. That being said, no matter which state you file your federal taxes in, it still takes some effort and strategy to make all your finances work.
“States with low- or no-income tax, favorable property tax policies and exemptions for retirement income consistently rank as attractive destinations,” said Robyn E. Jameson, a wealth manager and partner at Merit Financial Advisors.
There are nine states that don’t levy a state income tax including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, that doesn’t always matter for every type of retirement income when it comes to issues such as taxing Social Security benefits. However, here are GOBankingRates’ five picks for the best tax-friendly states for retirement in 2025.
Florida
Florida is consistently a top choice for retirees due to its lack of state income tax, according to Jameson. A zero percent income tax rate goes a long way toward creating a more affordable tax year for those on a fixed budget.
“This means Social Security benefits, pensions and withdrawals from retirement accounts are entirely tax-free at the state level,” she explained. “Additionally, Florida offers relatively low property taxes and a homestead exemption that can reduce the taxable value of primary residences.”
For 2025, Jameson predicted that Florida will maintain these policies, “continuing its reputation as a retiree-friendly haven with no looming changes in tax laws.”
Wyoming
“Wyoming stands out for its overall low tax burden,” Jameson said. “It imposes no state income tax, making it an excellent choice for retirees drawing income from pensions or investments.”
The state has no inheritance tax, nor does it have an estate tax. On top of those tax exemptions for state and local taxes, Wyoming’s property taxes are some of the lowest in the United States.
“In 2025, Wyoming is likely to remain a tax haven due to its resource-rich economy and conservative fiscal policies,” Jameson added.
Tennessee
“Tennessee completed its phase-out of the Hall income tax on interest and dividends in 2021, making it another state with no state income tax,” Jameson said.
Previously, the Hall income tax was paid on stock dividends and interest earned on bonds and notes. Jameson also pointed out how Social Security and retirement account distributions are untaxed in Tennessee, in addition to the state’s sales tax revenue, which supports state services.
“Retirees can expect Tennessee to maintain this favorable tax environment in 2025, with no significant tax increases anticipated,” she said.
Nevada
Nevada also makes Jameson’s list for top tax-friendly states for retirement, again because of the absence of a state income tax.
“Retirees enjoy tax-free Social Security benefits and withdrawals from retirement accounts,” she explained. “While property taxes are moderate, the lack of estate and inheritance taxes adds to Nevada’s appeal.”
In 2025, Jameson said, “Retirees can anticipate a steady tax climate, bolstered by the state’s gaming and tourism-driven economy.”
Pennsylvania
“I would be remiss not to highlight my home state of Pennsylvania,” added Jameson.
Although Pennsylvania does have a flat state income tax — 3.07% — she pointed out that it “does not assess income tax on retirement income, which includes Social Security, IRA withdrawals and pension income.”
Caitlyn Moorhead contributed to the reporting for this article.
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