If you want to keep your full New York State pension in retirement, the states that don’t tax NYS pensions fall into two clean groups: the nine states with no personal income tax at all, and a handful of states that impose income tax but fully exempt government pension income. Alabama, Hawaii, Illinois, Mississippi, and Pennsylvania belong to the second group. Several more states, including Georgia and Massachusetts, offer exclusions large enough to shelter most or all of a typical NYSLRS pension. A few popular retirement destinations tax every dollar.
New York Can’t Follow You Across the Border
Federal law settles the New York side of the question before you even pick a destination. Under 4 U.S.C. § 114, no state can tax retirement income paid to a nonresident.1Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income Your NYSLRS pension is already exempt from New York State and local income tax while you live in New York, so once you legally move, you never owe New York tax on it again.2Office of the New York State Comptroller. Taxes and Your Pension The only question is what your new state does with the income.
Nine States With No Income Tax
The simplest way to keep your full pension is to move to a state that doesn’t tax personal income at all:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
New Hampshire used to tax interest and dividends, but that tax was fully repealed effective January 1, 2025, making it a true no-income-tax state.3New Hampshire Department of Revenue Administration. Repeal of NH Interest and Dividends Tax Now in Effect Washington imposes a 7% tax on long-term capital gains above a high threshold, but retirement account distributions are explicitly exempt.4Washington Department of Revenue. Capital Gains Tax In all nine, you won’t file a state income tax return on your pension.
Watch the trade-offs. These states typically make up revenue elsewhere. Tennessee and Washington both carry combined state and local sales tax rates above 9.5%, and Texas property taxes run well above the national average.5Tax Foundation. Sales Tax Rates Compare overall cost of living, not just the income tax line.
States That Fully Exempt Government Pensions
Five states have active income tax systems but carve out complete exemptions for government pension income, including pensions earned in other states. If your NYSLRS pension is your primary retirement income, your state tax bill on it drops to zero.
Alabama. All income received from a defined benefit pension plan is exempt from state income tax, with no dollar cap.6Alabama Department of Revenue. Defined Benefit Plan Exemption
Hawaii. Benefits paid by any governmental plan comparable to the Hawaii Employees’ Retirement System are excluded from gross income, and NYS pensions qualify.7Legal Information Institute. Hawaii Code Rule 18-235-7-02 – Exclusion of Benefits Under Public Retirement Systems
Illinois. Federally taxed retirement income from qualified government plans is subtracted on Line 5 of the IL-1040, bringing your state liability on that income to zero.8Illinois Department of Revenue. 2025 Form IL-1040 Instructions You report the pension on your federal return, then take it back out on the state return.
Mississippi. All retirement income from federal, state, and private retirement systems is exempt from state income tax.
Pennsylvania. Public employee retirement benefits are not subject to Pennsylvania state or local income tax.9Pennsylvania Municipal Retirement System. Pennsylvania Municipal Retirement System – Taxes The state’s 3.07% flat income tax simply doesn’t reach distributions from public retirement systems, whether the pension originated in Pennsylvania or New York.
States With Exclusions Large Enough to Matter
Several states don’t exempt government pensions outright but offer exclusions big enough to shelter most or all of a typical NYS pension. Whether you owe anything depends on the size of your pension and your total income.
Georgia
Georgia has one of the country’s most generous retirement income exclusions. Residents aged 62 through 64 can exclude up to $35,000 of retirement income, and that limit jumps to $65,000 per person once you turn 65.10Georgia Department of Audits and Accounts. Tax Incentive Evaluation – Retirement Income Exclusion A married couple filing jointly where both spouses are 65 or older can exclude up to $130,000 combined. The exclusion covers pension income, interest, dividends, capital gains, and a small amount of earned income.11Georgia Department of Revenue. Retirement Income Exclusion For most NYS retirees, that covers the whole pension.
Massachusetts
Massachusetts uses a reciprocal rule: it exempts out-of-state government pensions when the other state offers similar treatment for Massachusetts public pensions.12Commonwealth of Massachusetts. Tax Treatment of Out-of-State Government Pensions for MA Residents Because New York fully exempts government pensions for its own residents, NYS pensions qualify. Age requirements and dollar caps apply, so higher-income retirees may still owe something.
Michigan
Michigan has been phasing in a broader retirement income subtraction. By 2026, the phase-in reaches up to 100% of eligible retirement benefits, which can effectively eliminate state tax on a NYS pension.13State of Michigan. Retirement and Pension Benefits The calculation depends on your birth year and which subtraction method you elect, so check the current instructions.
Louisiana
Louisiana exempts at least $12,000 of annual pension and annuity income for residents aged 65 and older, with the amount adjusted annually for inflation starting in 2026.14Louisiana State Legislature. Louisiana Revised Statutes 47:44.1 Retirees with larger NYS pensions will owe Louisiana tax on the balance above the exclusion.
South Carolina
South Carolina allows a deduction of up to $3,000 per year of qualifying retirement income for taxpayers under 65, rising to $10,000 at age 65.15South Carolina Department of Revenue. Retirees – Lower Your Individual Income Tax Bill With These Five Tips Most NYS retirees will owe state tax on the amount above $10,000.
Popular Retirement States That Tax the Full Pension
Not every warm-weather destination gives retirees a break. Arizona, North Carolina, Virginia, and California treat out-of-state pension income as fully taxable, with little or no special exclusion for government pensions. Colorado offers a partial subtraction that helps but doesn’t eliminate the bill for most retirees. The difference between a state that taxes your $40,000 pension in full and one that exempts it entirely can amount to several thousand dollars a year, so the state line matters when you’re choosing between, say, North Carolina and South Carolina.
Making the Move Stick With New York
All of this only works if New York actually agrees you’ve left. The New York State Department of Taxation and Finance is aggressive about residency audits, and the burden of proof is on you. Getting this wrong can mean owing New York income tax on your pension years after you thought you were done with the state.
The 184-Day Rule
New York treats you as a statutory resident if you maintain a permanent place of abode in the state for substantially all of the tax year and spend 184 days or more in New York during that year.16New York State Department of Taxation and Finance. Frequently Asked Questions About Filing Requirements, Residency Any part of a day counts as a full day, with a narrow exception for passing through the state to reach an airport. “Substantially all of the tax year” means roughly 11 months. Keeping your old apartment and visiting often can trip this test without you realizing it.
The Domicile Test
Even under 184 days, New York can still claim you as a resident based on domicile. Your domicile doesn’t change until you show with clear and convincing evidence that you’ve abandoned it and established a new one. New York’s own guidance says filing a certificate of domicile or registering to vote in another state is not enough by itself.16New York State Department of Taxation and Finance. Frequently Asked Questions About Filing Requirements, Residency Auditors look at where you keep your most valued personal belongings, where your family lives, the relative size and value of your homes, where your doctors and social connections are, and how much active business involvement you still have in New York.
What Auditors Actually Check
Auditors have used cell phone location data, E-ZPass records, credit card statements, and flight manifests to reconstruct how many days you actually spent in the state. If your calendar says Florida but your credit card says Manhattan, that’s a problem. The strongest defense is a clean break: sell or give up the New York residence, move your belongings, transfer your medical care, and build a genuine life in the new state. Keeping a vacation condo in New York is possible, but it invites scrutiny most retirees would rather avoid.
The Year You Move
The transition year is the most complicated. You’ll likely file a part-year resident return in New York covering the period before your move, plus a part-year or full-year return in your new state. New York will prorate your standard deduction and tax credits based on the portion of the year you were a resident. Pension income received after you establish residency elsewhere should not be included as New York income, but the allocation between the two returns has to be handled carefully. This is the year where professional help usually pays for itself.