Which States Tax Your 401(k) Withdrawal or Roth Conversion in 2026

The nine states where neither is taxed

Eight states have no broad-based individual income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming. New Hampshire is the newest addition to this list — its interest-and-dividends tax was fully repealed effective January 1, 2025, so as of 2026 it has zero individual income tax of any kind. Washington makes a ninth: it has no tax on wages or ordinary income, only on long-term capital gains, so a 401(k) distribution or Roth conversion isn't taxed there either — even though Washington isn't a “no income tax” state in the broader sense.

Three states where a distribution and a conversion are taxed differently

This is the part worth reading closely if you're in one of these three states, because the two paths genuinely lead to different tax outcomes — not just different account types.

• Illinois exempts retirement income broadly, including amounts rolled or converted to a Roth IRA, with no age requirement — one of the cleanest state exemptions in the country. Both an early distribution and a Roth conversion are exempt from Illinois tax. Verified directly against Illinois DOR Publication 120, which lists Roth IRA conversion amounts as subtractable retirement income on IL-1040 Line 5 (statutory basis: 35 ILCS 5/203(a)(2)(F)).
• Mississippi taxes an early/pre-retirement-age 401(k) or IRA distribution (35 Miss. Code R. §3-02-07-104 excludes early distributions from the state's general retirement-income exemption) — but has a separate, unconditional statutory exclusion for Roth conversions specifically (Miss. Code §27-7-15(4)(ff)), regardless of age. A Mississippi resident cashing out early pays state tax on it; the same person converting that money to a Roth instead does not.
• Pennsylvania uses cost-recovery accounting for early distributions — previously taxed contributions come out tax-free first, and only gains are taxed as compensation. A Roth conversion, by contrast, is treated by Pennsylvania as a rollover rather than a distribution, and isn't a taxable event there regardless of age (one caveat: any amount withheld for taxes during the conversion, rather than actually deposited into the Roth, is treated as a taxable distribution). Verified against the PA Department of Revenue's Personal Income Tax Guide.

Every state, at a glance

“Typical top rate” below is informational only — a state's actual rate on a lump-sum conversion depends on your total taxable income that year, not just this one figure. States marked with an asterisk were individually verified against primary state statute, regulation, or Department of Revenue guidance; the rest are assumed to follow the federal default (ordinary income tax on both an early distribution and a conversion) rather than individually confirmed — worth a quick check with your state's Department of Revenue before you rely on it for a large conversion.

Why this matters more for a conversion than a distribution

A Roth conversion is usually a choice, not a necessity — you're deciding to trigger a taxable event now in exchange for tax-free withdrawals later. That makes the state-tax question directly actionable: if you live in one of the three states above, or you're planning to relocate before converting a large balance, the state-tax difference between converting this year versus next can be real money, not just a rounding error. The 401(k) Rollover Calculator lets you plug in your own state to see the estimated tax hit before you commit to a conversion.

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