States With Pension Tax Breaks: Retirement Planning Guide

There are many considerations that go into which state to retire in, and the taxes on your pension should be one of them. Taxes can be burdensome for those who plan to live on all or a substantial amount of their pension, and there are 11 states that won't tax a public or qualified private pension.

States That Don't Tax Public and Qualified Private Pensions

• Alabama
• Alaska
• Hawaii
• Illinois
• Kansas
• Louisiana
• Massachusetts
• Michigan
• Mississippi
• New York
• Pennsylvania

The states that are not on this list tax at least a partial amount or the total amount of public and private pensions. Some states will only tax private pensions, while exempting public pensions earned in that state. For example, if you retire to a state that taxes public pensions, and your public pension was earned in the state you're leaving, you'll have to pay pension taxes. It's for this reason that some choose to earn a pension in states they plan to retire in.

States That Won't Give You a Break

It's also important to know the states that tax the entire pension amount. These are:

• California
• Indiana
• Nebraska
• Rhode Island
• Vermont

The other states that don't fully exempt pensions from taxation offer a partial exemption. However, if you live in one of these five states, you'll be taxed on it all. This includes private and public pensions.