What are the best states to retire in 2026 for taxes?

The most tax-friendly states for retirees in 2026 include Florida, Texas, Nevada, Washington, and Wyoming — which have no state income tax. Additionally, states like Pennsylvania, Mississippi, and Illinois exempt most or all retirement income (Social Security, pension, 401k/IRA distributions) from state income tax. Alaska has no state income tax and no state sales tax. The least tax-friendly states for retirees include California, Minnesota, Vermont, and Connecticut.

Which states have no income tax on retirement income?

As of 2026, nine states have no state income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Additionally, several states with income taxes exempt most retirement income: Pennsylvania exempts all Social Security, pensions, and retirement account distributions. Illinois exempts retirement income for residents 65+. Mississippi exempts nearly all retirement income. Alabama and Hawaii exempt Social Security from state tax.

What should I consider when choosing where to retire?

The main factors are: state income taxes on retirement income, cost of living (housing, healthcare, groceries), climate, proximity to family, quality of healthcare and hospitals, crime rates, and community. Taxes are often overemphasized — a state with no income tax but high property taxes and cost of living may cost more than a state with modest income taxes and low overall expenses. Run the full numbers before deciding.

Is retiring abroad cheaper than retiring in the US?

Many popular expat retirement destinations — Portugal, Mexico, Costa Rica, Panama, Thailand, and Colombia — offer a significantly lower cost of living than most US cities. A couple that needs $80,000/year to live comfortably in the US might live well in Portugal on $50,000–$60,000 or in Mexico on $35,000–$45,000. Key considerations include healthcare access, political stability, visa requirements, and whether you can receive Social Security abroad (you can in most countries).

Can I collect Social Security if I retire abroad?

Yes. The Social Security Administration will send payments to most countries. As of 2026, the SSA cannot send payments to Cuba, North Korea, or certain other sanctioned countries. Some countries have totalization agreements with the US that affect benefits. You remain eligible for Medicare only if you return to the US for healthcare — Medicare does not cover care abroad, which is a significant cost consideration for early retirees living overseas.

Best Places to Retire in 2026: US States, Cities & Abroad

Where you choose to retire can save — or cost — you tens of thousands of dollars per year. State income taxes on Social Security and retirement distributions, cost of living, housing prices, and healthcare quality vary dramatically across the US and even more so internationally.

Most Tax-Friendly States for Retirees 2026

State	Income Tax	Social Security Taxed?	Retirement Distributions Taxed?
Florida	None	No	No
Texas	None	No	No
Nevada	None	No	No
Wyoming	None	No	No
Alaska	None	No	No
Pennsylvania	3.07% flat	No	No — most retirement income exempt
Mississippi	Graduated	No	No — retirement income exempt
Illinois	4.95% flat	No	No — retirement income exempt
South Dakota	None	No	No
Tennessee	None	No	No

Least tax-friendly states for retirees: California (up to 13.3%), Minnesota (up to 9.85%), Vermont, Connecticut, and Rhode Island all fully or partially tax Social Security and retirement income.

Best States to Retire 2026 — Overall

The best retirement state depends on your priorities. Here are top picks by category:

Priority	Top States
No/low taxes	Florida, Texas, Nevada, Wyoming
Affordable cost of living	Mississippi, Oklahoma, Arkansas, Alabama
Warm climate	Arizona, Florida, New Mexico, South Carolina
Healthcare quality	Minnesota, Massachusetts, Utah, Colorado
Active lifestyle / outdoors	Colorado, Montana, Oregon, Vermont
Near family (Northeast)	Pennsylvania (no retirement income tax)
Snowbird friendly (winter option)	Arizona, Florida, South Carolina

Best Cities to Retire in the US 2026

City	State	Median Home Price	Key Advantage
Asheville	NC	~$410,000	Culture, mountains, mild climate
Sarasota	FL	~$450,000	Gulf Coast beaches, arts scene
Scottsdale	AZ	~$550,000	Dry heat, golf, healthcare
Chattanooga	TN	~$300,000	Affordable, outdoor activities
Boise	ID	~$430,000	Outdoor lifestyle, lower cost vs Pacific NW
San Antonio	TX	~$280,000	No income tax, affordable, military community
Greenville	SC	~$320,000	Warm, growing arts scene, affordable
Wilmington	NC	~$370,000	Coastal, mild climate, lower cost than FL
Flagstaff	AZ	~$460,000	High altitude, cooler than Phoenix

Retiring Abroad: Popular Destinations for US Retirees

Country	Estimated Monthly Budget (couple)	Key Advantage	Concern
Mexico (Lake Chapala, San Miguel)	$2,000–$3,500	Proximity to US, large expat community	Safety varies by region
Portugal (Algarve, Lisbon)	$2,500–$4,000	EU access, safety, NHR tax regime	NHR regime changed in 2024
Costa Rica	$2,000–$3,500	Pensionado visa, stable democracy	Healthcare quality varies
Panama	$1,800–$3,000	Pensionado discounts, dollar economy	Limited culture outside Panama City
Colombia (Medellín)	$1,500–$2,500	Affordable, spring-like climate	Perception vs. reality on safety
Thailand (Chiang Mai)	$1,500–$2,500	Very low cost, quality expat healthcare	Distance from US, visa rules
Spain	$2,500–$4,000	Culture, food, EU access	Wealth tax on non-residents

The Full Cost Comparison: Taxes Are Not Everything

A state with no income tax can still be expensive in total:

State	Income Tax on Retirement	Property Tax Rate	Avg Home Price	Total Annual Tax + Housing Cost Index
Florida	0%	0.83%	$410,000	High total (housing costs)
Texas	0%	1.68%	$300,000	High property taxes offset income tax savings
Pennsylvania	0% (retirement)	1.36%	$240,000	Competitive overall
Tennessee	0%	0.48%	$300,000	Very competitive overall
Mississippi	Low	0.52%	$165,000	Most affordable overall

What to Check Before You Move

Tax treatment of your specific income — Social Security, pension, 401(k), and capital gains are all treated differently by different states
Medicare supplement network — confirm your Medigap or Medicare Advantage plan covers the area
Healthcare quality — check hospital ratings and specialist availability in the local area
Property taxes and homestead exemptions — many states offer senior homestead exemptions that significantly reduce property tax bills
Estate/inheritance taxes — a dozen states still have estate taxes with exemptions far below the federal threshold

All Best Places to Retire Guides

Best Places to Retire Articles

Best states and cities

Housing in retirement

See parent hub: Retirement

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

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