See how retirement income taxes in each of the 50 states and the District of Columbia compare in 2024.
Navigating taxes in retirement isn’t always easy. After all, there are a number of variables that affect how your retirement income is taxed, including the kind of income you receive, your state of residence, and federal taxes. Retirement income is not taxed in every state, and certain states only tax certain kinds of income. Taxes on different types of retirement income can vary even between states.
An overview of the taxation of employment income, investments, pensions, retirement distributions, and Social Security is given in each state and the District of Columbia by means of this alphabetical list.
It’s a good idea to research how each state handles retirement income taxes if you’re thinking about moving, so before you make a decision Additionally, even if you’re not moving, this list can help you get a sense of the retiree tax environment in your state.
Understanding State Taxes on Roth IRA Distributions
While Roth IRA contributions aren’t tax-deductible, qualified distributions from a Roth account are tax-free at the federal level. However, the tax treatment of Roth IRA distributions at the state level varies depending on where you live. This article provides a comprehensive overview of how different states tax Roth IRA distributions, helping you understand your potential tax liability.
States that Don’t Tax Roth IRA Distributions
The following states do not tax Roth IRA distributions:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Wyoming
States that Partially Tax Roth IRA Distributions
Some states partially tax Roth IRA distributions, meaning that only a portion of the distribution is subject to state income tax. These states include:
- Arizona
- Colorado
- Connecticut
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- Utah
- Vermont
- Virginia
- Washington
- West Virginia
- Wisconsin
States that Fully Tax Roth IRA Distributions
A few states fully tax Roth IRA distributions, meaning that the entire distribution is subject to state income tax. These states include:
- Alabama
- Arkansas
- California
- Delaware
- District of Columbia
Factors Affecting State Taxability of Roth IRA Distributions
Several factors can affect the state taxability of Roth IRA distributions, including:
- Your state of residence: The state where you reside at the time of the distribution will determine whether your distribution is taxable.
- Your filing status: Your filing status, such as single, married filing jointly, or head of household, can impact your tax liability.
- The type of Roth IRA distribution: Qualified distributions, such as those taken after age 59 1/2 or due to disability, are generally tax-free at the state level. However, non-qualified distributions may be subject to state income tax.
- State-specific tax laws: Each state has its own tax laws, which can affect how Roth IRA distributions are taxed.
Strategies to Minimize State Taxes on Roth IRA Distributions
If you live in a state that taxes Roth IRA distributions, there are several strategies you can use to minimize your tax liability:
- Consider moving to a state with no or lower taxes on Roth IRA distributions: If you’re planning to retire in the near future, consider moving to a state that offers more favorable tax treatment for Roth IRA distributions.
- Convert your traditional IRA to a Roth IRA: Converting your traditional IRA to a Roth IRA can help you avoid paying state income tax on the distributions in the future. However, you will need to pay taxes on the amount converted in the year of conversion.
- Withdraw only qualified distributions: By withdrawing only qualified distributions, you can avoid paying state income tax on the distributions.
- Consult with a tax advisor: A tax advisor can help you understand your specific tax situation and develop a strategy to minimize your tax liability.
Understanding how your state taxes Roth IRA distributions is essential for making informed financial decisions. By carefully considering the factors affecting state taxability and implementing strategies to minimize your tax liability, you can ensure that you’re maximizing your retirement savings.
Additional Resources
- Realized 1031: Are Roth IRA Distributions Taxable at the State Level?
- Kiplinger: Taxes in Retirement: How All 50 States Tax Retirees
Disclaimer: This article is for informational purposes only and should not be considered tax advice. Please consult with a qualified tax advisor for specific guidance on your individual situation.
What taxes do retirees pay in Maine?
While there is a $30,000 ($35,000 in 2024) pension exclusion, Maine taxes some retirement income. However, Maine has an estate tax. The estate exemption is $6. 41 million, and heirs are taxed between 8% and 12%.
Income Tax on Taxable Income: Low of 5. Eight percent (up to $24,500 for single filers and $49,000 for joint filers) and a high of 15% (on amounts greater than $58,050% for single filers and $161,100% for joint filers)
- Social Security: Not taxable
- Pensions: Partially taxable (Federal pension income is exempt)
- 401(k) and IRA Distributions: Taxable
Is retirement income taxable in North Dakota?
Many taxpayers in North Dakota now find income tax to be reasonably priced thanks to recent legislation. The maximum rate you will pay is 2 even for retirement income that is liable to state income tax. 9%.
Tax on Taxable Income: Low of 200 percent (up to 44,725% for individual filers and $74,750 for joint filers) and a high of 20 percent 9% (on amounts greater than $222,975% for single filers and $275,100% for joint filers)
- Social Security: Taxable
- Pensions: Taxable (Excluding military retirement pay)
- 401(k) and IRA Distributions: Taxable
Are Roth IRA Distributions Taxed? How To Avoid Penalties and Taxes on Roth IRA Distributions
FAQ
Do you have to pay state taxes on a Roth IRA withdrawal?
What taxes do you pay on Roth IRA distributions?
Are Roth IRAs taxed by states?
Are IRA distributions taxed at the state level?
Which states do not tax IRA distributions?
Nine of those states that don’t tax retirement plan income simply have no state income taxes at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Are IRA distributions taxable by states?
Are Roth distributions tax-free?
The account grows tax-free and when you take distributions, all withdrawals, including contributions and earnings, are subject to state and federal income taxes. Contributions to a Roth account are made on a “post-tax” basis. Which states do not tax Roth distributions?
Do you have to pay tax on a Roth IRA?
Unlike traditional IRAs, you don’t ever have to withdraw money from a Roth IRA account. However, Roth IRA distributions are counted as part of the $20,000 exclusion by New York State, so you could end up paying state income tax on any withdrawals. At what age is Social Security no longer taxed?
Are Roth IRA contributions taxed?
Roth IRA contributions aren’t taxed because the contributions you make to them are usually made with after-tax money, and you can’t deduct them. Earnings in a Roth account can be tax-free rather than tax-deferred. However, the withdrawals you make during retirement can be tax-free. How do I report a Roth IRA distribution on my taxes?