States That Don't Tax 401k Withdrawals 2026: 13 States

When you withdraw money from a traditional 401k or IRA in retirement, it's taxable at the federal level — but not necessarily at the state level. In 2026, 13 states have laws that effectively eliminate state income tax on 401k and IRA withdrawals for most retirees. Choosing to retire in one of these states versus a state like California, Minnesota, or New York can save tens of thousands of dollars over a multi-decade retirement.

This guide identifies every state with a full or near-full exemption, explains the rules and any age or income conditions, and shows the tax difference with worked examples at realistic retirement income levels. It also explains why Michigan joins this list effectively in 2026 following the completion of its Public Act 4 phase-in.

The 13 States: Full Summary Table

Here is every state that effectively exempts 401k and IRA withdrawals from state income tax in 2026:

*Michigan is not technically a full exemption state but the 2026 deduction of $65,987 (single) / $131,794 (MFJ) exceeds the retirement income of most Michigan retirees, making it effectively equivalent.

No-Income-Tax States (9): The Complete List

The simplest way to avoid state tax on 401k and IRA withdrawals is to retire in a state with no income tax at all. Nine states currently have no broad-based personal income tax:

1. Alaska — No income tax, no sales tax. High cost of living but the Permanent Fund Dividend offsets some costs.
2. Florida — No income tax. Property taxes moderate (~0.79% avg effective). Sales tax ~6.98%. Popular retirement destination.
3. Nevada — No income tax. Sales tax ~8.23% combined. Low property taxes (~0.55%).
4. New Hampshire — No tax on wages or retirement income. A separate tax on investment income (interest and dividends) has been phasing out and ends in 2025.
5. South Dakota — No income tax. Low property taxes. Low sales tax (~6.4%).
6. Tennessee — No income tax on earned or retirement income (Hall Tax fully repealed January 2021). Sales tax ~9.55% combined — highest in the nation.
7. Texas — No income tax. High property taxes (~1.63% avg effective). Sales tax ~8.2%.
8. Washington — No broad income tax, but note: a 7% capital gains tax applies to net long-term capital gains above $250,000 annually (enacted 2023). Retirement distributions from 401k/IRA are not affected.
9. Wyoming — No income tax. Low property taxes (~0.55%). Low sales tax (~5.34%).

Income-Tax States That Exempt Retirement Distributions: Illinois, Iowa, Mississippi, Pennsylvania

Four states have income taxes but fully exempt retirement account distributions:

Illinois (5% flat rate)

Illinois does not tax distributions from qualified retirement plans including 401k, 403(b), traditional IRA, Roth IRA, SEP-IRA, and SIMPLE IRA. The exemption applies to all ages with no income limit. Illinois has the most comprehensive retirement income exemption of any income-tax state — even pension income from state and private plans is fully exempt.

Iowa (graduated rates, top rate 6%)

Iowa exempts retirement income including pension, 401k, and IRA distributions for individuals aged 55 or older, or who are disabled. The age requirement means younger early retirees (under 55) in Iowa do not benefit from this exemption. Iowa has been gradually reducing its income tax rates and the top bracket for 2026 is 6%.

Mississippi (5% flat rate from 2026)

Mississippi fully exempts all retirement income — pension, 401k, IRA, annuity, and Social Security — from state income tax with no age or income restrictions. Mississippi also reduced its income tax rate to 5% flat effective 2026.

Pennsylvania (3.07% flat rate)

Pennsylvania exempts pension and retirement income from state tax for individuals who have reached normal retirement age for their plan, or are at least 59½, or are disabled. Importantly, early withdrawals before 59½ may be taxable in Pennsylvania. The 3.07% rate is one of the lowest in the nation for states that do impose income tax.

Michigan in 2026: The Near-Full Exemption

Michigan is not technically an exemption state, but the 2026 retirement income deduction under Public Act 4 of 2023 is large enough to exempt the retirement income of most Michigan retirees:

• Single filers: $65,987 deduction
• Married filing jointly: $131,794 deduction
• Public safety retirees: unlimited deduction

For a married couple with $120,000 in combined 401k/IRA income, the $131,794 MFJ deduction results in $0 Michigan state tax. Only the amount above the deduction threshold is taxed at 4.05%.

Important caveat: Section 457 deferred compensation plans do not qualify for the Michigan deduction. Government employees with 457 plan balances should factor this in when planning retirement withdrawals.

Conditions and Caveats: Iowa's Age Rule, Pennsylvania's Early Withdrawal Rule

Two of the four income-tax exemption states have conditions worth understanding:

Iowa — Age 55 Requirement

Iowa's retirement income exemption requires the taxpayer to be at least 55 years old, OR permanently disabled. If you retire early to Iowa at age 52, your 401k and IRA withdrawals will be subject to Iowa's income tax (up to 6%) until you turn 55. Early retirees planning to use Iowa as their retirement state should account for 2–3 years of state tax before the exemption kicks in.

Pennsylvania — Normal Retirement Age or 59½

Pennsylvania's exemption requires the taxpayer to have reached the normal retirement age defined in their plan, OR to be at least 59½, OR to be disabled. Early 401k withdrawals at age 55 (which are allowed without the 10% federal penalty in certain situations) may still be taxable in Pennsylvania. Additionally, any withdrawal that would be a 'premature distribution' for federal purposes could be taxable at Pennsylvania's 3.07% rate.

States to Watch: Near-Miss Exemptions (Georgia, New York, Maine)

Several states offer substantial but not complete exemptions for 401k and IRA income:

Georgia

Georgia exempts up to $35,000 of retirement income per person for ages 62–64, and up to $65,000 per person for those 65+. For a married couple both 65+, this means $130,000 of combined retirement income (including 401k/IRA) is exempt from Georgia's 4.99% flat tax.

New York

New York exempts up to $20,000 of pension and retirement income per person for those aged 59½ or older. This is a meaningful but not comprehensive exemption given New York's tax rates (4%–10.9%).

Maine

Maine allows a pension income deduction that in 2025 was $48,216 per person, reduced by any Social Security benefits received. Maine's 2026 figure will be published by Maine Revenue Services in autumn 2026.

Federal Tax Still Applies in All 50 States

Regardless of which state you retire in, the IRS still taxes traditional 401k and IRA withdrawals at federal income tax rates. Living in Florida or Texas does not exempt you from federal taxation.

For 2026, the federal income tax brackets for a single filer are:

The standard deduction for 2026 is $15,000 (single) or $30,000 (MFJ), with an additional $1,600 per person if age 65+ (single) or $1,300 per person (MFJ). For a single retiree age 65 with $80,000 in 401k income, the federal taxable income after standard deduction would be approximately $63,400, resulting in federal tax of roughly $9,200–$10,000.

Worked Example: $80k 401k Withdrawal in 5 States

A single retiree age 65, with $80,000 in traditional 401k withdrawals and $24,000 in Social Security (85% federally taxable = $20,400). Here's the state tax comparison:

The cumulative savings over 20 years in Florida vs California for this retiree: approximately $85,000–$90,000 in state tax avoided (not inflation-adjusted).

Use our Retirement Income Tax by State Calculator to run your own numbers across all 50 states.