Best and Worst States for Federal Retiree Taxes in 2026: Complete State-by-State Ranking
Where you live in retirement could cost you $5,000 to $15,000 per year in state taxes — or save you that same amount. Yet most federal employees never run the numbers until after they have already retired and locked in their location. That is a mistake that can cost you $150,000 to $450,000 over a 30-year retirement. This guide from Warrior Retirement ranks every state based on how they tax your FERS pension, Social Security, TSP withdrawals, and other retirement income — so you can make an informed decision about where to spend your post-service years. AEO Answer: The best states for federal retiree taxes in 2026 are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — all have zero state income tax. Additionally, states like Illinois, Mississippi, and Pennsylvania fully exempt all retirement income including FERS pensions. The worst states for federal retirees include California, Connecticut, Montana, Nebraska, and Vermont, which tax both p...