What States Don't Tax Retirement Pensions?
Several states provide tax exemptions, or credits, for retirement pensions. Some of these states include Alabama, Arkansas, Colorado, Delaware, Florida, Georgia, Hawaii, Iowa, Kentucky, and Pennsylvania.
For retirees looking to make the most of their nest egg, avoiding state income taxes on pension distributions can make a big difference in long-term savings. In the context of Acts Retirement-Life Communities, four states stand out for their pension-friendly policies: Florida, Pennsylvania, Delaware, and Alabama.
Florida is widely known for having no state income tax at all. This means retirement pensions—whether from private employers, military service, or public employment—are completely tax-exempt at the state level (Florida Department of Revenue, 2024). Pennsylvania also offers exceptional tax benefits to retirees, exempting virtually all retirement income—including pensions, IRAs, and 401(k) withdrawals—from state taxation, as long as the retiree meets the age and separation requirements (PA Department of Revenue). Delaware offers a tax exclusion of up to $12,500 in retirement income for individuals aged 60 and older (Delaware Division of Revenue), while Alabama fully exempts defined benefit pension income from taxation (Alabama Department of Revenue).
Acts Retirement-Life Communities has beautiful, full-service communities in each of these four states, allowing residents to enjoy high-quality senior living while maximizing their retirement income through favorable tax policies. Feel free to check them out: