Moving to another state in retirement: the tax side

Many people move when they retire. They want to be near family, find a warmer climate or cut costs. Taxes are often part of the decision, and sometimes the main reason.

State taxes on retirees vary more than most people expect. Some states have no income tax at all. Others tax wages heavily but exempt most retirement income. This guide covers what to compare, how much a move can save, and how to time it.

What to compare between states

Income tax is the obvious item, but it's only one of several:

• Income tax rates and brackets. Flat rates, graduated brackets, or none.
• How retirement income is treated. Many states exempt Social Security. Some also exempt pensions, IRA and 401(k) withdrawals, fully or up to a limit.
• Capital gains. Most states tax them as ordinary income, without the lower federal rates.
• Property tax. Often the largest state and local tax for a retiree who owns a home.
• Sales tax. Matters more if you spend a lot on taxable goods.
• Estate and inheritance taxes. A handful of states tax estates far smaller than the federal exemption.
• Cost of living. Housing, insurance and health care can outweigh any tax difference.

How states treat retirement income

A few examples from the 2026 rules show the range:

• No income tax. Florida and Texas, among others, don't tax wages, pensions or IRA withdrawals.
• Full exemption for retirement plans. Illinois taxes income at a flat 4.95%, but fully exempts 401(k), IRA and government pension income. Pennsylvania, at 3.07%, exempts most retirement income from eligible plans once you've retired.
• A partial exclusion. New York excludes up to $20,000 a person of private pension and IRA income from age 59.5.
• Graduated brackets with few exemptions. California's rates rise from 1% to 12.3%. Social Security isn't taxed, but pensions and IRA withdrawals are.

Rules like these change often, and each has conditions. Check the current rules for any state you're considering.

A worked example

Ruth and Dan are 66 and live in California. Each year they take $100,000 from IRAs and a pension. They also receive Social Security, which California doesn't tax. They're thinking of moving to Florida.

California starts from federal adjusted gross income and subtracts Social Security. After California's standard deduction of $11,800 for a couple, $88,200 is taxable. Using 2026 brackets for married couples:

Exemption credits lower that a little further. Moving to Florida would save them about $2,000 a year in state income tax. That's real money, but a higher home insurance bill could cancel it.

Now suppose they take $250,000 a year instead. Their California tax rises to about $14,788, because more income falls in the 9.3% bracket. At that level, a move saves far more each year. The same is true in years with large Roth conversions or capital gains.

The lesson: a no-income-tax state pays off most for retirees with high taxable income. If most of your income is Social Security, a move may save little.

Timing the move

When you move can matter as much as where:

• Big taxable events after the move. If you're moving to a lower-tax state, delay Roth conversions and large gain sales until you're a resident there.
• Or before it. If you're moving to a higher-tax state, do them before you leave.
• The year you move. You'll usually file part-year returns in both states. Each taxes the income you received while a resident.
• Payments after you leave. Federal law stops your former state from taxing most retirement plan payments you receive as a nonresident, such as IRA withdrawals and pensions.

Making the move stick

High-tax states sometimes audit people who say they've left. Your legal home is called your domicile, and you need to show you've changed it:

1. Get a driver's license and register to vote in the new state.
2. Claim any homestead exemption on your new home.
3. Move the things that matter to you, and update your will and other documents.
4. Keep records of where you spend your days, especially if you keep a home in the old state.

Estate taxes travel with you

Some states tax estates well below the federal exemption of $15,000,000. Oregon's estate tax, for example, starts at $1,000,000. A few states also tax what heirs inherit. Moving can change what your heirs receive. See estate basics.

How the app handles a move

Under Taxes and where you live in the plan, you set your state now and add a move with its date. You can also enter an optional local tax area. The app has a tax data file for every state and DC, and it switches rules on the move date.

If you've planned a move to a state with an income tax, Ways to improve tests a move to a state without one instead. It uses Florida as the test case. If you're already moving to a state without income tax, it tests moving a year sooner. Other costs such as housing, insurance and property tax stay as you entered them, so adjust them for the state you have in mind.

The Estate screen applies state estate and inheritance taxes for the states that have them, based on where you live when the plan's deaths occur.

Frequently asked questions

Do I have to change my Roth conversion plan?

Not necessarily, but check it. A move from a high-tax state makes conversions cheaper after the move. A move into one makes them cheaper before.

Will my old state tax my pension?

Generally no, once you're a nonresident. Federal law protects most retirement plan payments from source-state tax. Deferred compensation is protected only under certain payout schedules. See deferred compensation payouts.

Is it worth moving just for taxes?

Rarely on its own. Compare the full cost of living, and where family and health care are. Taxes can tip a close decision.