Side-by-side for American retirees in 2026.
Cheapest of the major southern retirement states. Social Security, government pensions, and most defined-benefit pensions fully exempt — plus rock-bottom property taxes.
Florida's biggest rival for the snowbird crowd. Dry desert climate, lower humidity than the Southeast, a flat 2.5% income tax, and Social Security fully exempt.
| Progressive, top 5% | Income tax | Flat 2.5% |
| Exempt | Social Security | Exempt |
| Defined-benefit pensions + SS exempt; partial exemption for IRA/401k at 65+ | Pension treatment | Flat 2.5% on most retirement income; Social Security fully exempt |
| 0.40% | Property tax (effective) | 0.51% |
| 9.29% | Avg combined sales tax | 8.40% |
| 88.1 | Cost of living (US=100) | 102.5 |
| None | Estate / inheritance tax | None |
| Hot humid summers, mild winters. Gulf Coast (Mobile, Gulf Shores) has Florida-like climate. | Climate | Hot dry summers (100°F+ in Phoenix), mild winters. Flagstaff and Prescott offer cooler mountain climates year-round. |
| Mixed — strong in Birmingham (UAB), weaker in many smaller cities. Best to retire near a major medical center. | Healthcare | Excellent — Mayo Clinic Scottsdale, Banner Health, HonorHealth. Tucson has top geriatric care. |
| Fairhope, Huntsville, Auburn | Top retirement cities | Scottsdale, Tucson, Prescott |
Homestead exemption + age 65+ full state property tax exemption on principal residence
Senior property tax freeze available age 65+ with income under ~$45K (varies by county)
Alabama: Cheapest of the major southern retirement states. Social Security, government pensions, and most defined-benefit pensions fully exempt — plus rock-bottom property taxes. Arizona: Florida's biggest rival for the snowbird crowd. Dry desert climate, lower humidity than the Southeast, a flat 2.5% income tax, and Social Security fully exempt. The right choice depends on your income mix, climate preference, and whether state income tax matters more to you than property tax.
No, Alabama does not tax Social Security retirement benefits.
No, Arizona does not tax Social Security retirement benefits.
Alabama's cost of living index is 88.1 (US = 100). Arizona's is 102.5. Alabama is cheaper on average.
Enter your retirement income and see the after-tax difference between Alabama and Arizona in 30 seconds.
Open tax estimator →Tax data current as of 2026 publication. Rates and rules change annually — verify with a CPA before relocating. This page is educational and not personalized tax or legal advice.