For most American retirees, the weekly grocery run is a routine—and increasingly expensive—necessity. While inflation has driven up the cost of eggs, milk, and bread nationwide, residents in certain states face an extra hurdle at the checkout line: a sales tax on groceries.
As of early 2026, the majority of U.S. states have exempted groceries from state sales tax, recognizing that taxing essential food items disproportionately hurts those on fixed incomes. However, over a dozen states still levy some form of tax on the food you buy for home consumption. For a retiree living on a pension or Social Security, paying an extra 4% to 7% on every grocery bill can add up to hundreds of dollars in lost income each year.
If you are planning your retirement budget or considering a move, it is critical to know which states still tax your table. Here is the complete breakdown of the states that tax groceries in 2026, along with the “hidden” credits that could put money back in your pocket.
The “High Impact” States: Full Tax Rates
These states treat groceries like any other retail item, taxing them at the full state sales tax rate. If you live here, your grocery receipt likely includes a significant tax line item.
1. Mississippi (7%)
Mississippi currently levies the highest state grocery tax in the nation. At a full 7%, a $200 grocery trip effectively costs you $214. While the state offers a generally low cost of living, this specific tax hits hard at the register. Legislative efforts to reduce or eliminate this tax have been proposed frequently, but as of early 2026, the full rate remains in effect.
2. Idaho (6%)
Idaho taxes groceries at its full state sales tax rate of 6%. However, the state has a unique system designed to offset this cost. Idaho offers a refundable “Grocery Credit” that you claim on your state income tax return. For tax returns filed in 2026 (covering the 2025 tax year), this credit has been increased to $155 per person for most residents.
3. South Dakota (4.2%)
South Dakota is one of the few states that taxes groceries at the full state rate. The rate currently stands at 4.2%. In November 2024, voters rejected Initiated Measure 28, which would have repealed the tax on food. Consequently, the tax remains in place for 2026. Municipalities can also add their own local taxes (up to 2%) on top of the state rate, meaning your total tax at the register could be over 6% depending on where you shop.
The “Relief” States: Reduced Tax Rates
These states still tax groceries, but typically at a lower rate than their general sales tax. While better than a full tax, these costs still eat into a fixed income.
4. Tennessee (4%)
Tennessee does not tax income, but it makes up for it with consumption taxes. Groceries are taxed at a reduced state rate of 4% (compared to the general rate of 7%). While there have been temporary “tax holidays” in previous years suspending this tax for a few months, the base rate remains 4% for 2026. Keep in mind that local jurisdictions cannot add *additional* tax to food, which helps cap the total cost.
5. Hawaii (~4%)
Hawaii technically does not have a “sales tax,” but it has a General Excise Tax (GET) that is passed on to consumers. The rate is roughly 4% statewide, with county surcharges often pushing it to 4.5% or nearly 5%. Because almost everything is imported, grocery prices in Hawaii are already among the highest in the nation; the GET adds another layer of cost. Like Idaho, Hawaii offers a refundable tax credit to lower-income residents to help offset this expense.
6. Utah (3% Combined)
Utah levies a specific state tax rate of 1.75% on unprepared food. However, local counties levy an additional 1.25%, bringing the standardized total grocery tax to 3% statewide. This applies to basic groceries; prepared foods (like hot deli items) are taxed at the higher restaurant rate.
7. Alabama (2%)
Alabama has made recent progress. The state reduced its grocery tax from 4% to 3% in 2023, and effectively dropped it to 2% as of September 2025. While the state portion is shrinking, local municipalities in Alabama often levy their own penny-on-the-dollar taxes, so your actual receipt may still reflect a total tax of 3-5% depending on your city.
8. Missouri (1.225% + Local)
Missouri imposes a low state tax of 1.225% on food. The real “trap” in Missouri is local taxes. Cities and counties can—and do—add their own sales taxes to groceries. In some jurisdictions, the combined rate can still climb significantly higher. However, the state portion itself is relatively minimal compared to Mississippi or Idaho.
9. Virginia (1% + Local)
Virginia taxes food for home consumption at a reduced state rate of 1.5% (comprised of a 1% state portion and a 0.5% regional transportation portion in most areas). In many localities, the total effective rate you see on your receipt is 2.5% when including the local option. It is significantly lower than the general sales tax but not yet zero.
The “Tricky” States: Local Taxes & Recent Changes
Some states have recently eliminated their state-level tax, but you might still see a tax on your receipt due to local laws. It is important not to assume “tax-free” means completely free of charges.
10. Illinois (Local Taxes Remain)
Illinois is a major transitional state for 2026. The state officially eliminated its 1% state grocery tax effective January 1, 2026. However, the new law allows local municipalities to implement their own grocery taxes to make up for lost revenue. Many cities have rushed to pass these local ordinances. So, while the state of Illinois no longer taxes your bread, your city likely does. Check your local receipt carefully.
Honorable Mention: Arkansas
As of January 1, 2026, Arkansas has joined the “tax-free” list by eliminating its remaining 0.125% state grocery tax. However, like Illinois and Alabama, Arkansas allows local cities and counties to tax groceries. In some areas, these local taxes can be quite high (often 1-2%), so retirees in Arkansas should budget for local sales tax even if the state portion is gone.
“Inflation is taxation without legislation.” — Milton Friedman
Don’t Miss Out: Grocery Tax Credits
If you live in a state that taxes groceries, you might be leaving money on the table. Several states use a “rebate” system rather than an exemption. This means you pay the tax at the store, but the state pays you back at the end of the year—but only if you ask for it.
- Idaho: The Grocery Credit is refundable. For 2026 returns (2025 tax year), it is $155 per person. A retired couple could get $310 back. You must file a return or a specific refund form to claim it.
- Hawaii: The Food/Excise Tax Credit is available for residents with an adjusted gross income (AGI) under $60,000 (joint filers) or $40,000 (single). The credit acts on a sliding scale, maxing out around $220 per qualified exemption for the lowest earners.
- Oklahoma: While Oklahoma eliminated its state grocery tax in late 2024, it previously offered a credit. Ensure you aren’t owed back-credits from prior years if you are filing amended returns.
Actionable Strategies to Lower Your Bill
If you live in one of the “Taxing 10,” you don’t have to simply accept the higher costs. Here are three practical ways to keep your budget in check.
1. The “Border Hop” Strategy
If you live near the border of a state that does not tax groceries, it may be worth doing your bulk shopping there.
Example: A retiree living in Southaven, Mississippi (7% tax) is just minutes away from Memphis, Tennessee (4% tax). While both tax groceries, the 3% difference on a $300 monthly grocery bill saves you over $100 a year.
Better Example: A retiree in Coeur d’Alene, Idaho (6% tax) is a short drive from Spokane, Washington, where groceries are tax-exempt. Shifting your major shopping trips across the border effectively gives you a 6% discount instantly.
2. Understand the “Prepared Food” Trap
Almost all states—even those that don’t tax groceries—tax “prepared foods.” This distinction is vital for your budget.
Taxed (Prepared): A hot rotisserie chicken, a made-to-order sandwich, or heated soup.
Untaxed/Lower Tax (Groceries): A cold raw chicken, a loaf of bread and deli meat, or a can of soup.
Tip: In states like Utah or Virginia, buying the cold version of an item often qualifies for the reduced tax rate, while the hot version triggers the full restaurant tax rate. Buy cold and heat it at home!
3. Use “Pick-Up” to Check Taxes
Unsure if your local city adds a grocery tax? Start a mock online grocery order for pickup at your local store. Proceed to checkout to see the estimated tax line. Then, change the store location to a neighboring town or county. You may find that driving 10 minutes down the road moves you from a high-tax municipality to a lower-tax one.
Frequently Asked Questions
Q: Are prescription drugs taxed in these states?
A: Generally, no. Most states, even those that tax groceries (like Mississippi and South Dakota), exempt prescription medications from sales tax. However, over-the-counter drugs (like aspirin or vitamins) are often taxed at the full rate.
Q: Does the SNAP (Food Stamp) program cover sales tax?
A: No. Federal law prohibits charging sales tax on items purchased with SNAP benefits. If you pay with an EBT card, the sales tax should automatically be deducted from your transaction, regardless of which state you live in.
Q: Is the Illinois grocery tax officially gone for good?
A: The state portion (1%) is gone as of January 1, 2026. However, your local mayor or city council has the power to bring it back as a local tax. You need to check your specific city’s ordinances to see if you are truly paying 0%.
Pitfall to Watch For: Many retirees assume “grocery” means everything in the cart. In many states, items like soda, candy, and dietary supplements are not considered “food for home consumption” and are taxed at the full 7-9% sales tax rate, even if bread and milk are taxed at a lower rate.
Staying informed about these costs is a key part of stretching your retirement dollar. By knowing the rates and claiming the credits you are owed, you can keep more money in your pocket for the things that matter most.
The information in this guide is meant for educational purposes. Your specific circumstances—including income, savings, health coverage, and goals—may require different approaches. When in doubt, consult a licensed professional.
Last updated: February 2026. Retirement benefits, tax laws, and healthcare costs change frequently—verify current details with official sources.
