Whether you owe state tax on IRA withdrawals depends on three things: the state you live in when you take the distribution, whether the account is traditional or Roth, and whether your state offers a full or partial exemption for retirement income. Nine states charge no income tax at all. A few others tax wages but exempt IRA distributions entirely. Most of the rest tax withdrawals as ordinary income, sometimes with a sizeable exclusion for older filers.
Nine States That Don’t Tax IRA Withdrawals at All
If you live in one of these nine states, your IRA distributions escape state taxation completely as of 2026: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire joined this group in January 2025 after phasing out its former tax on interest and dividends.
Washington enacted a capital gains tax on profits from selling stocks and other long-term assets, but that tax specifically excludes retirement account transactions, including withdrawals from IRAs and 401(k)s.1Washington State Department of Revenue. Frequently Asked Questions About Washington’s Capital Gains Tax So all nine states leave your IRA distributions untouched.
States That Have Income Tax but Exempt IRA Withdrawals
A smaller group of states levies income tax on wages and investment earnings but leaves retirement distributions alone.
Illinois lets residents subtract the federally taxed portion of IRA distributions from their state return, zeroing out the state tax on that income. Pennsylvania exempts IRA withdrawals taken after age 59½, provided no federal early withdrawal penalty applies. Premature withdrawals in Pennsylvania remain taxable to the extent they exceed your previously taxed contributions.
Mississippi exempts income from federal, state, and private retirement systems from state taxation. In these states, the exemption typically shaves roughly 3% to 5% off what a retiree would otherwise pay, depending on the state’s rate structure.
States With Partial Retirement Income Exclusions
Between the states that tax everything and the states that tax nothing sits a middle group: states that let you exclude a portion of retirement income before calculating tax. The amounts and age thresholds vary.
- New York allows residents aged 59½ or older to exclude up to $20,000 in retirement income per person. A married couple filing jointly can shelter up to $40,000 of IRA distributions.
- Georgia uses a tiered system tied to age. Residents between 62 and 64 can exclude up to $35,000; those 65 and older can exclude up to $65,000.
- Colorado offers a subtraction of up to $20,000 for qualifying taxpayers under age 65, rising to $24,000 at 65 and older.
These exclusions aren’t automatic. You claim them on your state return, and some states reduce or eliminate the exclusion once your total income exceeds a threshold. If your combined retirement and non-retirement income runs high enough, the exclusion may phase out entirely. Check your state’s instructions for the specific income cap before counting on the full deduction.
How Traditional and Roth IRAs Differ at the State Level
Traditional and Roth IRAs get different treatment because the money was taxed at different points. Traditional IRA contributions were deducted from your income in the year you made them, so neither the federal government nor your state collected tax on that money going in. When you withdraw, the full amount counts as ordinary income at both levels.
Roth IRA contributions went in after tax. You already paid federal and state income tax on those dollars before depositing them. As long as you’re at least 59½ and the account has been open for at least five years, qualified Roth withdrawals are completely tax-free at the federal level, and nearly every state follows that treatment. If you’ve met those two conditions, a Roth distribution won’t add a dollar to your state tax bill even in a high-tax state.
Nonqualified Roth distributions are a different story. Pull earnings out before the five-year mark and the federal government taxes the earnings portion and may charge a 10% penalty. Your state will generally follow suit by including those earnings in your taxable income.
Early Withdrawal Penalties by State
Pulling money from a traditional IRA before age 59½ triggers a 10% federal early withdrawal penalty on top of ordinary income tax, unless you qualify for an exception.2Internal Revenue Service. Pensions and Annuity Withholding Most states simply include the early distribution in your taxable income and apply their normal income tax rate, without a separate state penalty.
California is the notable exception. It charges an additional 2.5% state penalty on early distributions, rising to 6% for withdrawals from SIMPLE plans within the first two years of participation.3Franchise Tax Board. Early Distributions Federal exceptions to the 10% penalty, such as distributions for a first home purchase, certain medical expenses, or substantially equal periodic payments, generally carry over at the state level, but not always. Check your state’s rules rather than assuming federal and state treatment mirror each other.
How State Withholding Works on IRA Distributions
State tax withholding on IRA distributions splits into three categories depending on where you live.
Some states require mandatory withholding whenever federal tax is being withheld. Kansas, Maine, Massachusetts, Nebraska, and Vermont, among others, will automatically take a cut unless the distribution comes from a Roth IRA. A second group, including California, Michigan, Minnesota, North Carolina, and Oregon, requires withholding by default but lets you opt out by filing a form with your custodian. The remaining states either make withholding voluntary or have no income tax to withhold in the first place.
If your state doesn’t require withholding and you don’t arrange it voluntarily, you’ll owe the full state tax when you file your annual return. On a large distribution, that can mean a four- or five-figure bill in April, potentially with underpayment penalties on top. Quarterly estimated tax payments are the usual workaround.
Moving to a Lower-Tax State Before You Withdraw
State tax on IRA withdrawals follows your legal residence at the time of the distribution, not where you earned or saved the money. Federal law explicitly prohibits any state from taxing the retirement income of someone who is no longer a resident or domiciliary of that state.4Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income If you spent your career in a high-tax state but move to Florida before withdrawing your IRA, your former state cannot claim a share of those distributions.
The catch is proving you actually changed your domicile. Most states use some version of a 183-day rule: spend more than half the year physically present in a state and that state has a strong argument that you’re still a resident. Day-counting alone isn’t enough. States also look at where you registered to vote, where you hold a driver’s license, where your primary home is, where your doctors and banks are, and where you spend holidays. Aggressive states like New York audit retirees who claim to have moved but still maintain a home and social ties in the state.
If you’re relocating specifically to reduce the tax bite, the cleanest approach is to make the move before you begin taking large distributions. Establish your new domicile, update your records, and keep documentation showing where you physically spend your time. Maintaining homes in two states creates exactly the ambiguity auditors exploit.
Inherited IRAs and Your State’s Tax
When you inherit a traditional IRA, the distributions you take are generally taxable as ordinary income, just as they would have been for the original owner.5Internal Revenue Service. Retirement Topics – Beneficiary Your state taxes you based on your residence and your state’s rules, not the deceased’s. If the original account holder lived in a high-tax state but you live in a no-tax state, you won’t owe state tax on inherited distributions.
Inherited Roth IRAs are friendlier: withdrawals of contributions are tax-free, and earnings are typically tax-free as well, as long as the account has been open for at least five years. Non-spouse beneficiaries should note that under current federal rules, most inherited IRAs must be fully distributed within 10 years of the original owner’s death. That accelerated timeline can push larger taxable amounts into fewer years, which matters more in states with graduated tax brackets where bigger annual distributions land in higher rate tiers.