A 401(k) withdrawal is taxed twice in most of the United States: once by the federal government, under one set of rules, and once by the state, under fifty sets of rules. The federal layer is uniform and well understood. The state layer is where the questions live — which state taxes the withdrawal, at what rate, with what deduction, and what happens when the retiree moves. This guide explains the method by which the state answer is reached, states the nine no-tax states that can be verified, and is explicit about what it does not claim.

The two layers: federal and state

The federal layer is the same for every 401(k) withdrawal in the country. A pre-tax withdrawal is ordinary income, taxed at the federal marginal rates for the year, with the 10 percent early-withdrawal penalty before 59½ unless an exception applies, and with 20 percent federal withholding on an eligible rollover distribution paid directly to the participant. The calculator page computes that layer from the filing status, the other income, and the withdrawal amount, using the 2026 federal schedule under Revenue Procedure 2025-32, and the companion guide on withdrawal tax by age explains it in full. The state layer sits on top of the federal layer, and it is computed separately, under the state’s own schedule, from the state’s own definition of the income, with the state’s own deductions and credits.

The two layers interact in one respect that matters for planning: the state tax paid is not, in general, deductible against the federal tax in full, because the federal deduction for state and local taxes is capped, and the cap and its current level should be checked in the current year’s law. The interaction is modest for most retirees and it is not the subject of this guide, but it should be noted because it means the combined rate on a withdrawal is not simply the federal rate plus the state rate: the federal deduction, where it applies, shelters a portion of the state tax, and the effective combined rate is slightly lower than the sum. The calculator page’s state line is a simple multiplication — the withdrawal multiplied by the state rate entered — and it is labelled as an estimate for that reason: the true state bill depends on the state’s schedule, its deductions, and its treatment of retirement income, none of which a single rate captures.

The state layer also has its own withholding, its own estimated-payment rules, and its own return, and the federal withholding on a distribution does not cover the state bill. A retiree who withdraws from a 401(k) and has only federal tax withheld will owe the state tax at filing, with interest and possibly an underpayment penalty if estimated payments were required and not made. The practical discipline is to treat the state bill as a separate obligation from the day of the withdrawal: estimate it, withhold for it where the plan permits state withholding, or make estimated payments, and reconcile it on the state return. The sections below explain how to estimate it, and the last section explains where to confirm it.

The nine states with no broad income tax

Nine states levy no broad state income tax on wages, and therefore levy no state income tax on a 401(k) withdrawal as ordinary income. They are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. The list can be verified against each state’s revenue department, and it is stable in the sense that none of these states has a broad wage income tax to extend to retirement income. Two qualifications belong with the list, because both are commonly misstated. New Hampshire’s tax on interest and dividends was repealed effective 1 January 2025, which is why the state belongs on the list from that date; before the repeal it taxed investment income while exempting wages, and a 401(k) withdrawal, as ordinary income rather than interest or dividends, was not within the repealed tax in any case. Washington levies no tax on wages, but it does tax certain long-term capital gains above a threshold, at 7 percent, and that tax is a capital gains tax, not a tax on retirement income: a 401(k) withdrawal is ordinary income, not a capital gain, and it is not within the Washington capital gains tax.

Residence in one of the nine states therefore means no state income tax on the withdrawal, and the state line of the calculator should be entered as zero for a resident of one of them. The qualification is residence: the exemption follows the taxpayer’s domicile and residence, not the location of the plan, the former employer, or the bank that holds the account. A retiree who earned the 401(k) balance while working in a high-tax state and who now lives in Florida owes Florida’s tax on the withdrawal — which is none — and does not owe the former state’s tax on the withdrawal merely because the income was earned there, because federal law, in 4 U.S.C. section 114, prohibits a state from taxing the retirement income of a person who is not a resident of that state. The federal prohibition is the single most important protection for a retiree who moves, and it is the reason the domicile analysis in the later section matters more than the source analysis for retirement income.

The nine-state list is also the answer to the question most often asked about state tax and 401(k) withdrawals — which states do not tax them — and it is the only state list this guide prints as a verified fact, because it is the only list that can be verified completely and stated without qualification. The remaining forty-one states and the District of Columbia each tax retirement income under their own rules, and the rules differ enough that a summary table would be wrong for some states on the day it was printed and wrong for more states within a year. The next section explains the shape of those rules, so the reader can find their own state’s rule and apply it, rather than relying on a table that cannot be kept current.

How the other states tax a withdrawal

In the states that levy an income tax, a 401(k) withdrawal is generally taxed as ordinary income of a resident, at the state’s marginal rates, in the same way wages are taxed. The withdrawal is added to the resident’s state taxable income, the state’s deductions and exemptions are applied, and the state’s schedule produces the bill. The variation between states is in the details, and the details are where the money is. Some states offer a deduction or exclusion for retirement income, up to a stated amount, for taxpayers above a stated age, or for particular kinds of retirement income. Some states exclude Social Security benefits while taxing 401(k) income, or exclude pension income from government service while taxing private-plan income. Some states have a flat rate, so the marginal rate is the same at every income; others have graduated schedules, so the marginal rate on the withdrawal depends on the year’s total income, in the same way the federal marginal rate does. The calculator’s single state rate is therefore an approximation in a graduated state, and the true bill should be computed on the state’s schedule.

The exclusions deserve a paragraph of their own, because they are the provisions most often overstated. A state that excludes a portion of retirement income does so under its own conditions: an age threshold, a cap, a phase-out, a definition of qualifying income that may or may not include 401(k) distributions, and sometimes a distinction between public and private pensions. A claim that a state “does not tax retirement income” is, for most states, a claim about a partial exclusion with conditions, not a claim about a complete exemption, and the conditions should be read in the state’s statute or in its revenue department’s guidance before the claim is relied on. This guide deliberately does not print per-state exclusion amounts, because they change with legislation and with indexing, and because the conditions attached to them are as important as the amounts. The official source for any state’s rule is the state’s revenue department and its current-year instructions, and the last section gives the route to them.

A further variation is the state’s treatment of the early-withdrawal penalty. The 10 percent federal penalty is a federal charge, and the states do not, in general, impose a separate state early-withdrawal penalty: the withdrawal is taxed as ordinary income, and the federal penalty is not replicated at the state level. A state may, however, disallow a deduction or apply its own addition for a distribution that is penalised federally, and the state return’s treatment of the federal penalty should be checked where it is material. The general position — ordinary income tax at the state level, penalty at the federal level only — holds for most states, and the exceptions are narrow enough that the state revenue department’s guidance settles them. The planning implication is that the state cost of an early withdrawal is the state income tax on the distribution, without a state penalty on top, which makes the combined cost of an early withdrawal the federal tax plus the federal penalty plus the state tax, with no second penalty.

Domicile, source, and the move

The state that taxes a 401(k) withdrawal is, in general, the state of residence, not the state where the income was earned. Federal law prohibits a state from imposing an income tax on the retirement income of an individual who is not a resident or domiciliary of that state, and the prohibition covers qualified plan distributions, including 401(k) withdrawals, as well as IRA distributions and pension payments. The protection is the reason a retiree who earned a career’s 401(k) balance in one state and retires to another owes the retirement state’s tax on the withdrawals, not the working state’s. The working state’s claim ended when the retiree left, for retirement income, even though the income was earned there, because the statute draws the line at residence for this category of income.

Domicile and residence are related but distinct, and the distinction matters for a move. Residence is where a person lives; domicile is the permanent home, the place to which a person intends to return, and a person has one domicile at a time, even while living elsewhere temporarily. A retiree who spends the winter in Florida and the summer in New York, and who intends New York to remain the permanent home, remains domiciled in New York, and New York taxes the retirement income. A retiree who moves permanently to Florida, abandons the New York home, registers to vote, obtains a licence, and forms the intention to remain, becomes domiciled in Florida, and Florida’s no-tax position applies. The intention is evidenced by conduct — the home, the licence, the voter registration, the location of bank accounts and professional advisers, the place where the person returns — and a state that loses a high-income retiree will examine the conduct closely. The move must be real, and the evidence of it must be consistent, because a claimed domicile that the conduct contradicts will not survive an audit.

The timing of the move relative to the withdrawal matters, and it is the part-year rule of the next section. A withdrawal taken while resident in the first state is taxed by the first state; a withdrawal taken after the move, while resident in the second, is taxed by the second. The withdrawal does not carry the tax of the state where the balance was earned, and it does not carry the tax of the state the retiree intends to move to next year. The state that taxes it is the state of residence on the date of the distribution, under that state’s part-year rules for the year of the move. The planning implication is straightforward: a large withdrawal planned for the year of a move should be timed with the move in view, and the timing decision should be made with advice, because the saving from a well-timed withdrawal can be large and the cost of a badly timed one is the higher state’s tax on the whole amount.

Part-year residents and multi-state income

A person who moves during the year is a part-year resident of each state for the part of the year lived there, and each state taxes the income received during its part of the year, under its own rules, with its own part-year return. The 401(k) withdrawal is allocated to the state of residence on the date it was received, and the part-year returns for the two states together cover the year, with the income allocated between them by date. A withdrawal taken in January, while resident in the first state, appears on the first state’s part-year return; a withdrawal taken in November, after the move, appears on the second state’s. A withdrawal taken on the day of the move, or in the week around it, is allocated by the residence on the date of receipt, and the records — the distribution statement, the move date, the evidence of residence — should be kept to support the allocation.

The part-year allocation is not the only multi-state complication. A retiree with income from more than one state — rental income in one state, a part-time job in another, a 401(k) withdrawal as a resident of a third — files in each state where the income arises or where residence requires it, and the states’ credits for tax paid to another state prevent the same income from being taxed twice, where the credit applies. Retirement income is generally sourced to the state of residence, so the credit mechanism is less often needed for a 401(k) withdrawal than for rental or business income, but the principle should be understood: the states’ systems are designed, imperfectly, to avoid double taxation, and the retiree’s returns should claim the credits the law allows. A retiree with genuinely multi-state income, or with a move that straddles a large withdrawal, should take advice, because the allocation and credit rules are state-specific and the amounts at stake justify it.

A final multi-state note concerns the states that tax non-residents on income earned within the state. A non-resident who works in a state owes that state’s tax on the wages earned there, and a non-resident with rental property in a state owes that state’s tax on the rental income. Retirement income is different: the federal prohibition described above removes it from the non-resident tax base, so a former resident who has moved does not owe the former state’s tax on 401(k) withdrawals merely because the employment was there. The distinction is sometimes missed by state tax software and by retirees themselves, and a former state’s return should not include retirement income received after the move, where the prohibition applies. The state revenue department’s non-resident instructions state the position for each state, and the federal statute is the authority where the instructions are unclear.

Withholding: what is taken, and what it is not

Federal withholding on a 401(k) distribution paid directly to the participant is 20 percent for an eligible rollover distribution, and it is mandatory: the plan must withhold it, and the participant cannot elect out of it for that category of distribution. For a distribution that is not an eligible rollover distribution — a periodic payment, a required minimum distribution, or a hardship distribution — the withholding rules differ, and the participant may be able to elect the withholding rate or to elect out of withholding, with the election made on the form the plan provides. The withheld amount is a prepayment of the tax, credited on the return, and it is not the tax: in the calculator page’s example, the $4,000 withheld on a $20,000 distribution is credited against the $5,750 combined bill, leaving $1,750 to be paid at filing. A participant who has too little withheld owes the balance; a participant who has too much withheld receives a refund; in neither case is the withholding the final bill.

State withholding is separate, and it is governed by the state’s rules and by the plan’s procedures. Some states require withholding on retirement distributions, some permit the participant to elect state withholding at a chosen rate, and some require no withholding at all. The plan administrator’s distribution form typically offers a state withholding election, and the participant should elect an amount that approximates the state bill, or make estimated payments to cover it, rather than leaving the whole state bill to filing day. The federal withholding does not cover the state bill, and the state withholding does not cover the federal bill, and the two must be managed separately. A participant who moves should update the state withholding election with the move, because withholding at the former state’s rate after the move overpays the former state and underpays the new one, and the correction is made on the returns, with the delay and the paperwork that implies.

Estimated payments are the backstop where withholding is insufficient or unavailable. The federal and state estimated-payment systems both require quarterly payments where the withholding will not cover the liability, and both impose underpayment penalties where the required payments are missed, subject to safe harbours based on the prior year’s liability and the current year’s liability. A large 401(k) withdrawal in a year with little withholding is the classic estimated-payment case, and the payment should be made in the quarter of the withdrawal, not at filing, because the penalty is computed quarterly. The calculator page reports the amount owed at filing for the example, but the timing of the payments — withholding during the year, estimates during the year, and the balance at filing — is the participant’s responsibility, and it should be planned at the time of the withdrawal, not at the time of the return.

Hypothetical examples: reading the calculator’s state line

The calculator page’s state line is an estimate: the withdrawal multiplied by the state rate the user enters. The examples in this section are hypothetical, labelled as such, and they exist to teach the reading of that line, not to state any state’s rate. Take a $20,000 withdrawal. At a hypothetical state rate of 5 percent, the state line is $1,000. At 3 percent, it is $600. At 8 percent, it is $1,600. The differences are the whole of the state planning question in miniature: the same withdrawal, the same federal bill, and a state bill that varies by a thousand dollars across the hypothetical rates, because the state rate is the only variable that changes. The reader’s own state rate, applied to their own withdrawal, produces their own state line, and the calculator’s state input exists for exactly that entry.

The hypothetical examples also illustrate why the single-rate estimate is an approximation in a graduated state. A state with a graduated schedule taxes the first dollars of income at a lower rate and the last dollars at a higher rate, so a $20,000 withdrawal that sits on top of $60,000 of other income is taxed at the marginal rate on the top slice, while a $20,000 withdrawal in a year with no other income is taxed across the lower brackets, and the effective rate on the withdrawal differs between the two cases. The single-rate entry should therefore be the marginal rate the withdrawal will actually face, estimated from the state’s schedule for the year’s total income, rather than the state’s headline rate or its lowest rate. The state revenue department’s schedule, for the current year, is the source for that marginal rate, and the schedule should be consulted for the year of the withdrawal, not for a prior year.

A third hypothetical illustrates the move. A retiree who withdraws $20,000 while resident in a state with a hypothetical 6 percent rate owes $1,200 of state tax on the withdrawal. The same retiree, having moved to a no-tax state before the withdrawal, owes nothing. The saving is $1,200, and it is entirely a function of the residence on the date of the distribution. The example is hypothetical, the rates are invented, and the principle is real: the state that taxes the withdrawal is the state of residence when it is taken, and the timing of a large withdrawal around a genuine move is a legitimate planning decision, to be made with advice and with the domicile evidence in order. The calculator cannot make that decision; it can only show the arithmetic once the rate and the timing are entered.

Checking your own state: the official route

The official route to any state’s rule is short, and it should be followed for every state, every year, because the rules change. First, identify the state of residence on the date of the distribution, under the domicile and residence analysis above. Second, go to that state’s revenue department website — every state publishes its income tax instructions, its schedule, and its guidance on retirement income — and find the current-year instructions for the treatment of pension and retirement income, the deductions or exclusions for retirement income, and the part-year resident rules if the year includes a move. Third, apply the state’s schedule to the year’s total state taxable income, including the withdrawal, to find the marginal rate the withdrawal actually faces, and enter that rate in the calculator. Fourth, elect state withholding or make estimated payments to cover the resulting bill, in the quarter of the withdrawal.

The route has two cautions. The first is the year: state tax law changes annually, through legislation and through indexing, and a rule found in a prior year’s instructions or in a general guide — including this one — may have changed. The current year’s instructions, for the year of the distribution, are the authority. The second is the source: general guides, articles, and tables summarise the rules, and summaries omit conditions. The state’s own instructions state the conditions, and the conditions — the age threshold, the cap, the definition of qualifying income, the phase-out — are where the money is. A summary that states a state “excludes retirement income” without the conditions is a summary that should not be relied on, and this guide has avoided summaries of that kind deliberately.

The closing point is the one with which the guide began: the state layer is fifty systems, not one, and the method for navigating them is the same in every case. Identify the residence, find the state’s current rule, apply the state’s schedule, and manage the withholding. The nine no-tax states are the only list that can be printed without qualification, and it is printed above. Everything else is a method, and a method that is followed carefully produces the right answer for the reader’s own state, in the reader’s own year, which is more useful than a table that is right for someone else’s state in someone else’s year. The 401(k) Withdrawal Tax Calculator will do the arithmetic once the rate is known; the official route is how the rate is known.

Frequently asked questions

Which states do not tax 401(k) withdrawals?

Nine states levy no broad state income tax on wages, and therefore no state income tax on a 401(k) withdrawal as ordinary income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Every other state taxes the withdrawal under its own rules, with its own rates and any retirement-income deductions.

Does my former state tax my 401(k) after I move?

No, for retirement income. Federal law (4 U.S.C. section 114) prohibits a state from taxing the retirement income of a person who is not a resident of that state. The state that taxes the withdrawal is the state of residence on the date of the distribution. The move must be genuine, evidenced by domicile conduct such as the home, licence, and voter registration.

Is there a state early-withdrawal penalty?

In general, no. The 10 percent early-withdrawal penalty is a federal charge. States tax the withdrawal as ordinary income, without replicating the federal penalty, though a state may have its own addition or disallowance in narrow cases. Check the state’s instructions where it is material.

Should I move to a no-tax state before withdrawing?

A genuine move to a no-tax state before a large withdrawal can eliminate the state tax on it, because the taxing state is the state of residence on the distribution date. The move must be real and permanent, with consistent domicile evidence, and the timing should be planned with advice. A claimed move that the conduct contradicts will not survive an audit.

How do I estimate my state tax on a withdrawal?

Find your state’s current-year schedule and its treatment of retirement income, compute the marginal rate the withdrawal will face on the year’s total income, and multiply the withdrawal by that rate. The calculator’s state line does exactly that multiplication with the rate you enter; the rate itself must come from the state’s current instructions.

Is state tax withheld from a 401(k) distribution?

Separately from federal withholding, and under the state’s own rules. Some states require it, some permit an election, and some require none. Elect state withholding where the plan offers it, or make estimated payments in the quarter of the withdrawal, so the state bill does not arrive entirely at filing with possible underpayment penalties.