State Taxes on Federal Retirement Income: The 2026 Map

1. Why the state question is separate from the federal one

Everything else in this pillar has been about federal income tax — the IRS rules that apply to every federal retiree identically, whether they live in Maine or Arizona. State taxes on federal retirement income are an entirely separate layer, and they are not uniform. Two federal retirees with identical pensions, identical Social Security, and identical TSP withdrawals can have state tax bills that differ by thousands of dollars a year, based solely on where they live.

The federal treatment is fixed. Your FERS or CSRS pension is largely taxable, most of your Social Security is taxable, and your Traditional TSP withdrawals are fully taxable — at the federal level, no matter your address. State treatment is where the variation lives. A state can choose to tax all of that income, some of it, or none of it. It can exempt Social Security but tax the pension. It can exempt the pension but tax the TSP. It can have no income tax at all.

For a federal retiree deciding where to spend retirement — or just trying to understand the tax bill in their current state — the state layer is worth real attention. Over a 20-year retirement, the difference between a high-tax and a no-tax state can exceed the value of a small TSP balance.

2. The nine states with no income tax

The simplest case: nine states levy no personal income tax at all. In these states, every form of retirement income — your FERS pension, Social Security, Traditional and Roth TSP withdrawals, IRA distributions, even wages from a part-time job — is free of state income tax.

The nine no-income-tax states in 2026:

Two footnotes matter. Washington has no income tax on pensions, TSP, or wages, but it does impose a 7% tax on long-term capital gains above a high threshold — relevant only to retirees selling large appreciated taxable-account holdings, not to ordinary pension or TSP income. New Hampshire historically taxed interest and dividends, but that tax has been repealed, leaving retirement income fully untaxed.

For a federal retiree, a no-income-tax state means the pension, the FERS Supplement, Social Security, and every TSP dollar arrive without a state tax layer. That’s the cleanest possible state tax outcome.

3. The states that exempt retirement income

A no-income-tax state isn’t the only way to reach a zero state tax bill on federal retirement income. Several states do have an income tax — they tax wages and other income — but specifically exempt pension and retirement-account income.

For federal retirees, the most generous of these are:

In each of these four states, a federal retiree drawing a FERS pension, Social Security, and TSP withdrawals can face no state income tax on that retirement income — even though the state taxes working-age wage earners. Illinois, for a retiree with pension-and-TSP-heavy income, effectively functions as a no-tax state.

Combined with the nine no-income-tax states, that brings the 2026 total to roughly 13 states where a federal retiree’s core retirement income faces no state income tax. Michigan is effectively joining this group: it completed a multi-year phase-out of its retirement income tax, and for the 2026 tax year most retirement income — pension, TSP, IRA — is exempt up to a high ceiling that covers most middle-income retirees in full.

Beyond these, a larger group of states offers partial exemptions — an age-based or income-based deduction that shelters some retirement income but not all. Georgia, for example, doesn’t tax Social Security and offers a retirement-income exclusion ranging from roughly $35,000 to $65,000 per person depending on age. New York fully exempts federal, state, and military pensions and shelters the first $20,000 of other retirement income. These partial-exemption states won’t get a federal retiree all the way to zero, but they can substantially reduce the state bill.

A state having an income tax doesn’t mean it taxes your retirement. Illinois and Pennsylvania both tax wages — but exempt the FERS pension, Social Security, and every TSP withdrawal. For a federal retiree, the question isn’t “does this state have an income tax,” it’s “does this state tax retirement income.”

4. The eight states that still tax Social Security

Social Security gets its own state-level treatment, and the news here is mostly good and getting better. As of the 2026 tax year, only eight states still tax Social Security benefits at all — and every one of those eight uses income-based exemptions that shield lower- and middle-income retirees.

The eight states taxing Social Security in 2026:

The trend is unmistakably toward elimination. West Virginia completed its phase-out and stopped taxing Social Security beginning with the 2026 tax year. Kansas, Missouri, and Nebraska all dropped their Social Security taxes earlier in the decade. The eight-state list above has been shrinking for years and is widely expected to keep shrinking.

For a federal retiree, two things follow. First, 42 states plus the District of Columbia do not tax Social Security at all — the large majority. Second, even in the eight states that do, the income-based exemptions mean many federal retirees pay little or nothing on their benefits. But a federal retiree with a substantial pension and TSP income is more likely to exceed those exemption thresholds than a typical retiree — so in one of the eight states, the federal retiree should check the specific threshold rather than assume the exemption covers them.

5. Special rules for federal pensions

Some states draw a distinction that matters specifically to federal employees: they treat the government pension differently from other retirement income.

The clearest cases are Alabama and Hawaii. Both states exempt the federal (and military) defined-benefit pension from state income tax — but both still tax distributions from the TSP and IRAs. A federal retiree in Alabama or Hawaii sees their FERS or CSRS pension arrive untaxed by the state, while their Traditional TSP withdrawals are taxed as ordinary state income.

This split treatment is a quirk worth understanding, because it interacts with the Traditional-versus-Roth question. In a state that exempts the pension but taxes TSP withdrawals, the TSP withdrawal carries a state tax cost that the pension doesn’t. A retiree in that situation who has Roth TSP balances — which are generally not taxed by states, just as they’re not taxed federally — has a way to draw retirement income without the state TSP tax. For how to build that balance, see Roth vs Traditional TSP in 2026.

New York is another federal-friendly case: it fully exempts federal, New York State, and military pensions from state income tax, while taxing some private retirement income above a $20,000 exclusion. A federal retiree in New York gets the pension fully sheltered at the state level — a meaningful carve-out in an otherwise high-tax state.

6. The relocation math — and what it leaves out

How much does the state actually matter? Consider a representative federal retiree: a $42,000 FERS pension, $30,000 in Social Security, and $24,000 in annual Traditional TSP withdrawals — $96,000 of gross retirement income.

Run that retiree through different state environments:

The spread is real. The same retiree, with the same income, can pay nothing or close to $5,000 a year depending purely on the state. Over a 20-year retirement, that’s a difference approaching $97,000 — a sum on the order of a meaningful TSP balance, decided entirely by geography.

The chart makes the geography premium visible. The same federal retirement income costs $0 in state tax across a two-decade retirement in a no-tax or retirement-exempt state — or $66,000 to $97,000 in a state that taxes retirement income. Income tax is the single largest of the four state cost factors for most retirees, which is why it leads the analysis — but the next section covers why it shouldn’t be the only factor.

But the income tax is not the whole picture, and a relocation decision made on income tax alone can backfire. Three other costs matter:

Property tax. Some no-income-tax states carry high property taxes that claw back much of the income tax savings. Texas, for instance, has no income tax but among the higher property tax rates in the country. A retiree who owns a home needs to weigh the property tax bill against the income tax savings — the two can substantially offset.

Sales tax. Combined state and local sales taxes vary widely. A state with no income tax but a high sales tax shifts the burden onto everything the retiree buys. For a retiree spending most of their income, a high sales tax functions much like an income tax.

Estate and inheritance tax. A minority of states levy estate or inheritance taxes, sometimes with thresholds well below the federal level. For a federal retiree with a substantial TSP balance and heirs, this can matter more than the annual income tax.

The honest framing: income tax is one of four state cost factors, not the whole decision. A state that looks like a tax haven on income alone may be average or worse once property tax, sales tax, and estate tax are added in. The no-income-tax states are not automatically the cheapest places to retire.

7. How to think about a retirement-state decision

State tax should inform a retirement-location decision — it should rarely drive it alone. A reasonable way to think about it:

Start with the four tax factors together. Income tax, property tax, sales tax, and estate tax. Look at the combined picture for any state you’re considering, not just the income tax headline. A retiree-tax overview that covers all four for a given state is the right starting reference, and the state’s own revenue department is the authority.

Weigh tax against everything else. Proximity to family, climate, healthcare access and quality, cost of housing, and the cost of the move itself all matter — often more than the tax difference. A $3,000-a-year tax saving is real, but it doesn’t outweigh being far from grandchildren or losing an established relationship with good doctors. Tax is a factor in the decision, not the decision. Federal Warrior covers the full retirement relocation picture for federal employees ↗, including the non-tax factors that often matter more.

If the income tax does matter to you, the cleanest options are the nine no-income-tax states and the handful that fully exempt retirement income — Illinois, Pennsylvania, Mississippi, Iowa for those 55+, and effectively Michigan as of 2026. Those are the states where a federal retiree’s pension, Social Security, and TSP all arrive without a state income tax layer.

Confirm before you move. State retirement-tax rules change often. Several states are mid-phase-out of taxes they used to charge; others periodically add or adjust exemptions. Verify the current rules with the state’s revenue department before making a relocation decision — what was true two years ago may not be true now, and what’s true now may change again.

Remember the federal bill doesn’t move. Whatever state you choose, the federal tax treatment of your pension, Social Security, and TSP is unchanged. The provisional income formula, the OBBBA senior deduction, IRMAA, and RMDs all follow you. State planning optimizes one layer of the bill — a worthwhile layer, but one layer. The rest of this pillar covers the layer that travels with you.