State Tax Strategies for Retirees in 2025: Where to Live (or Move) for Lower Taxes
When you’re living off your savings instead of working for a paycheck, the state you reside in can make a big difference to how far your dollars go. In 2025, state tax laws affecting retirement income, property, sales, and estate taxes vary widely—and choosing a tax‑friendly state can mean thousands in annual savings.
At One Advisory Partners, we help clients evaluate not just portfolios, but places—so your retirement location aligns with your financial goals. Below are key considerations and state strategies to watch in 2025.
Key State Tax Factors Retirees Should Consider
When evaluating where to retire, don’t just look at whether a state taxes “income.” You need to dig deeper into multiple tax types:
Treatment of retirement income: Do they tax Social Security, IRAs, 401(k) distributions, pensions, etc.?
Property taxes: High property taxes can offset state income tax savings.
Sales and consumption taxes: States with no income tax might compensate with higher sales tax or excise taxes.
Estate, inheritance, and gift taxes: Some states impose these taxes, while others do not.
Local taxes and fees: Cities or counties may add significant levies.
A state’s “tax friendliness” is often a balance: a state might spare retirement income but tax property or goods heavily. Use a holistic view.
States That Don’t Tax Pension or Retirement Income in 2025
One of the first filters retirees often apply is: Which states don’t tax my pension or retirement distributions?
According to Kiplinger, 15 states do not tax pension income in 2025. Kiplinger
Some of these states include:
Florida: No state income tax at all, which means no tax on pensions, IRAs, Social Security, or distributions.
Wyoming: No individual income tax, and no taxation of retirement income.
Nevada, Alaska, South Dakota, Texas: Also among the states with no state income tax, which generally means retirement income is untaxed.
These states are strong starting points—but they may come with trade-offs in other areas (e.g., property tax, sales tax).
States That Provide Partial Exemptions or Deductions
If you prefer a state with some income tax but beneficial retirement rules, a few states offer exemptions or favorable treatment:
Iowa: As of 2025, Iowa no longer taxes pension, 401(k), or IRA income for residents 55+.
Alabama: Has an exclusion (for retirees 65+) on the first portion of distributions from retirement accounts.
Mississippi: Does not tax retirement income, including pensions, IRAs, and Social Security.
These partial or conditional rules can benefit retirees who are flexible about where they live.
How to Compare State Tax Burdens: A Real‑World Approach
When comparing states, consider running side‑by‑side projections with:
Total income tax burden (including federal + state)
After‑tax retirement income
Expenses like property, sales, and local taxes
Real estate appreciation/property tax growth
Estate/inheritance implications
Health costs, services, and local cost of living
A state with zero income tax might have high property taxes or expensive housing, which can erode gains.
How One Advisory Partners Helps You Pick the Right State
We bring together tax, financial, estate, and lifestyle analysis to help clients decide whether a move makes sense. Our support includes:
Modeling tax impact across states over decades
Evaluating property and local tax implications
Aligning your move with estate planning and legacy goals
Stress‑testing your retirement income plan against state tax changes
Helping with timing of relocation (e.g., which year to change residency)
Because we operate on a fiduciary, flat‑fee basis, our recommendations are designed to serve your goals—not commissions.
Final Thoughts
Choosing where to live in retirement is a decision where place matters—often as much as your investment returns. In 2025, with so much state variance, that’s increasingly true.
If you’re planning a move or evaluating your state of residence, let’s talk. Together we can run the numbers, compare your options, and help you pick a place where your money—and your quality of life—goes further.
