Which States Don't Tax Your Federal Pension? 50-State Guide for FERS & CSRS Retirees (2026)

Where you retire is one of the most consequential tax decisions a federal employee can make. The same FERS annuity, TSP balance, and Social Security check produces dramatically different after-tax income depending on which state's rules apply. A GS-14 retiree with $100,000 in annual retirement income pays zero state income tax in Florida or Texas — and $3,000–$7,500 per year in Virginia or Maryland.

This guide covers all 50 states: which fully exempt federal pensions, which offer partial deductions, and which tax your annuity, TSP withdrawals, and Social Security as ordinary income.

Tier 1: States with No State Income Tax

Nine states levy no broad-based personal income tax. All retirement income — FERS/CSRS annuity, TSP withdrawals, Social Security, and investment income — is completely free of state income tax.¹

• Alaska — No income tax. Also distributes a Permanent Fund Dividend each year. Low property taxes.
• Florida — No income tax. The most popular federal retirement destination outside DC metro. Moderate property taxes with homestead exemption. No state estate tax.
• Nevada — No income tax. No state estate tax. Higher sales tax offsets some savings.
• New Hampshire — No tax on wages, pension, or Social Security. NH previously taxed interest and dividends only; that tax is being phased out fully by 2027. High property taxes — factor into total cost.
• South Dakota — No income tax. Low property taxes, no state estate tax. Good fit for federal employees retiring away from high-cost metro areas.
• Tennessee — No income tax. Previously taxed interest/dividends only (eliminated 2022). No tax on retirement income of any kind. Low cost of living in most areas.
• Texas — No income tax. Significant DoD and federal civilian presence. Higher property taxes (~1.6–2.0% of assessed value) partially offset income tax savings.
• Washington — No income tax. Note: Washington has a capital gains tax on net gains above $262,000 (single or joint) — not relevant to annuity income, but relevant for TSP-to-IRA rollover sales.
• Wyoming — No income tax. Among the lowest overall state/local tax burdens in the country. Low property taxes.

Tier 2: States That Fully Exempt Pension or All Retirement Income

These seven states have a broad income tax but either exempt all pensions (public and private) or exempt all retirement income broadly. Federal retirees pay no state income tax on their FERS/CSRS annuity in these states.¹

States Where Federal Government Pensions Are Specifically Exempt

New York — Federal Pension Fully Exempt

New York fully exempts federal government pensions, New York State and local government pensions, and military retirement pay from state income tax. Private pensions and IRA/TSP distributions receive a $20,000 annual exclusion per person. Social Security is fully exempt at the state level. New York City imposes an additional city income tax up to 3.876%, but NYC also follows the state's pension exemption rules — your FERS annuity is exempt from city tax as well. The key consideration is New York's top state rate of 10.9% on high incomes; for a federal retiree whose annuity is exempt, TSP income above $20K/year faces that rate on amounts above $161,550 (single, 2026).²

Wisconsin — Federal Pension Exempt at Age 65+

Wisconsin exempts federal civil service pensions (FERS/CSRS) and military retirement pay from state income tax for taxpayers age 65 and older. For retirees under 65, federal pensions are taxable. Social Security is fully exempt in Wisconsin. TSP distributions are taxable as ordinary income at all ages. Top rate: 7.65% on income above ~$374,000 (single, 2026).²

States with Significant Partial Exemptions

Georgia — $65,000 Retirement Income Exclusion (Age 65+)

Georgia allows taxpayers age 65 or older to exclude up to $65,000 per person of retirement income from state income tax in 2026 (increasing to $70,000 starting in 2027). This exclusion applies broadly — FERS annuity, TSP distributions, Social Security, IRA withdrawals, and investment income all count toward it. A married couple, both 65+, can exclude up to $130,000 total, which shelters most or all retirement income for a typical federal retiree. Georgia's top rate is 5.49% (2026). Georgia is becoming a major federal retirement destination for employees leaving the DC metro area.³

Virginia — Age Deduction Up to $12,000 (Age 65+)

Virginia provides an age deduction of up to $12,000 for taxpayers age 65 and older (the amount phases out as income rises above approximately $50,000 adjusted gross income for single filers). This is a general income deduction, not a pension-specific exemption. Critically, Virginia does not grant any special exemption to federal government pensions — your FERS annuity is taxable ordinary income. However, Virginia fully exempts Social Security benefits from state income tax, regardless of income level. Virginia's income tax rate peaks at 5.75% on income above $17,001. For a GS-14 retiree at age 65 with $52,000 annuity + $25,000 TSP + $25,000 SS: the SS is exempt, the annuity + TSP ($77,000) minus the $12,000 age deduction and Virginia's $4,500 standard deduction (single) leaves roughly $60,500 taxable. Estimated state income tax: ~$3,200/year — and that's before county-level local taxes, which Virginia does not impose.⁴

Maryland — $40,600 Pension Exclusion (Age 65+), but Watch the SS Offset

Maryland's pension exclusion is larger than Virginia's in dollar terms — up to $40,600 for taxpayers age 65 or older (2026). But there is a critical catch: the exclusion is reduced dollar-for-dollar by Social Security and Railroad Retirement benefits received. A federal retiree collecting $25,000/year in Social Security can only use $15,600 of the pension exclusion ($40,600 − $25,000). That means $36,400 of annuity income is taxable, plus all TSP withdrawals. Maryland's state rates range from 2% to 5.75%, and Maryland imposes a county income tax of 2.25%–3.2% on top of state rates — bringing total effective rates to up to 8.95% in the highest-cost counties (Montgomery, Prince George's). For the same GS-14 retiree used above, Maryland state + county income tax can reach $5,500–$7,500 annually — roughly double Virginia's burden.⁵

Colorado — Age-Based Deductions, But Taxes Social Security

Colorado allows pension income deductions that phase in by age: up to $20,000 for taxpayers ages 55–64, and up to $24,000 for age 65+. However, Colorado is one of only eight states that still taxes Social Security benefits in 2026. Colorado's flat income tax rate is 4.4%. For federal employees considering Colorado, both pension income above the deduction limit and Social Security face state tax — a double hit that the Tier 1 and Tier 2 states avoid.²

The Social Security Layer: Independent of Pension Rules

Social Security is a separate question from pension taxation — and most states get this right. As of 2026, eight states still tax Social Security benefits at the state level: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. West Virginia eliminated its Social Security tax starting with 2026 tax returns.

The worst combination for a federal retiree: a state that taxes your FERS pension AND taxes Social Security. That applies to Colorado, Minnesota, Montana, New Mexico, and Vermont — states where both federal income streams face state tax simultaneously.

Most states — including Virginia, Georgia, Illinois, Pennsylvania, Alabama, and all no-income-tax states — exempt Social Security entirely. For federal employees who delay Social Security to 70 and collect a larger benefit, the SS tax treatment of the retirement state can be worth $1,500–$3,000 per year.

TSP Distributions: Generally Follow Pension Rules

Most states treat TSP distributions the same as IRA and 401(k) distributions. If the state exempts all retirement income (Illinois, Pennsylvania, Alabama, Mississippi), your TSP withdrawals are also typically exempt. If the state taxes pension income, TSP distributions are taxed as ordinary income. Hawaii is a notable exception where the FERS annuity is exempt but TSP distributions may be taxable — consult a Hawaii tax advisor. New York provides a $20,000/year exclusion that applies to TSP distributions (beyond the full federal pension exemption).

50-State Reference Table

Green shading = fully exempt. Yellow = partial. White = taxable. SS column indicates state-level taxation only — federal tax on SS is separate. Verify current rules with your state's department of revenue before making decisions.

Table is a general guide. State laws change annually. Individual circumstances (age, income, filing status) affect actual liability. Verify current rules with your state's department of revenue before making relocation decisions. "Partial" indicates an age-based exclusion, deduction, or income threshold applies.

GS-14 Worked Example: Florida vs. Virginia vs. Maryland

Assumptions: GS-14 Step 8, 30 years of service, retired at age 62 or later (1.1% multiplier). High-3 salary ~$157,000. Annual income: FERS annuity $52,000, TSP withdrawals $25,000, Social Security $25,000 at FRA. Total: $102,000/year. Single filer.

Virginia's estimate uses the $12,000 age deduction and $4,500 standard deduction (single). Maryland's range reflects county tax variation (2.25%–3.2%). These are simplified estimates; actual liability depends on credits, deductions, and AGI-based phase-outs. Over 25 years of retirement, the Florida–Maryland gap alone could exceed $150,000 in cumulative state income tax.

Beyond Income Tax: The Full Relocation Calculus

Income tax is one dimension of state tax burden. A "no income tax" state is not automatically the cheapest place to retire. Consider:

• Property taxes. Texas and New Hampshire have no income tax but above-average property taxes (1.6–2.0% of value). Florida's property taxes are moderate with homestead exemptions. Wyoming has some of the lowest property taxes in the country.
• Sales taxes. Tennessee's combined state/local sales tax (~9.5%) is among the highest nationally. Texas averages ~8.25%. States like Montana and New Hampshire have no sales tax.
• Estate taxes. Eleven states still impose a state estate tax (Massachusetts, Oregon, Washington, Minnesota, and others), with exemptions ranging from $1M (OR) to $7M+. The federal estate exemption is $15M per person (OBBBA, 2025 — permanent).
• Healthcare costs. Florida and the Mountain West states often have lower healthcare costs than California, New York, or the Northeast. This matters for federal retirees managing FEHB premium conversion to post-tax status.
• FEHB locality rates. FEHB premiums are national (not state-specific), but out-of-pocket costs and provider availability vary by location. Check whether your FEHB plan network covers your target state adequately before relocating.

Decision Framework

Ranked by combined income tax burden on FERS annuity + TSP + Social Security:

1. Best overall: Florida, Wyoming, South Dakota — no income tax and low property taxes
2. Best with an urban footprint: Texas (no income tax, strong metro areas; offset by property taxes), Nevada (Las Vegas, Reno; no income tax)
3. Best for retirees wanting to stay in the Mid-Atlantic: Pennsylvania — full retirement income exemption, low flat rate, lower COL than Virginia or Maryland
4. Best for Southeast retirees: Georgia ($65K exclusion covers most income), Alabama (full exemption), Mississippi (full exemption, COL low, declining to zero by 2030), Tennessee (zero income tax)
5. Worst combinations: Minnesota, Vermont, Montana — tax the pension AND tax Social Security at meaningful rates