There are also three other states with income taxes that give retirees a well-deserved break on pensions and retirement plan distributions. For instance, Illinois has a 4.95 percent flat income tax, and it won’t tax distributions from the majority of pensions and 401(k) plans, but also IRAs.

Also, Mississippi’s maximum state tax is 5%, and it doesn’t tax any retirement distribution, while Pennsylvania has a 3.07 percent flat tax, and doesn’t tax retirement plans at all.

When it comes to other states, it seems that the next best thing is carving out a couple of exemptions for retirement income. For instance, besides those nine states that don’t have any income tax, it seems that no less than 21 states don’t apply any kind of tax on military pay.

These states are Alabama, Arkansas, Connecticut, Hawaii (who would’ve thought?), Illinois, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota (everyone expected this from Minnesota!), Mississippi, Missouri, New Jersey, and New York (as expensive as this state is, the least they could do was to exempt military tax), North Dakota, Ohio, Pennsylvania, but also West Virginia, and Wisconsin.

Dorothy