When evaluating the state tax policies, retirees have some special concerns. These may be about Social Security benefits, estate taxes, property taxes, or some other kind of taxes that the state imposes. These taxes can highly affect the financial security of senior citizens who are living on a fixed income.
Therefore, we have come out with the top 10 states that are tax-friendly for retirees. These places impose minimal taxes on old people. Almost all of these states do not include Social Security benefits in the state taxes. Some of them do not include a portion of retirement income, like withdrawals and pensions from retirement plans that are tax-deferred.
However, before packing your stuff and shifting to a state that does not impose income tax; you should also pay heed to the trade-offs, as some states that do not impose income taxes charge taxes for goods and services or above-average sales tax. Even property taxes can be higher. Just have a look.
The best 10 tax-friendly states for retirees
1. Alaska
State sales tax: No
State income tax: No
Inheritance and estate tax: No; no
Alaska is a true haven for retirees looking for low tax states. The Last Frontier is a nice place for retireeswho want to avoid income as well as other types of taxes. Besides no income tax, the state does not impose any sales tax, in addition to inheritance and estate tax. This means that your retirement plan gains and withdrawals from your investments, plus your Social Security benefits would not be taxed.
2. Florida
State sales tax: 6%
State income tax: No
Inheritance and estate tax: No; no
Florida is quite popular with retirees, for its great weather as well as no personal income tax. However, the sales tax in the Sunshine State can go as much as 7.5%, depending on your place of residence. The state has an average combined local and state tax rate of 6.65%.
3. Nevada
State sales tax: 6.85%
State income tax: No
Inheritance and estate tax: No; no
Nevada offers plenty of tax savings to retirees. The Silver State does not impose any state income tax, inheritance tax, and estate tax. This means that you can redeem your retirement plans without having to give a huge state tax bill.
4. South Dakota
State sales tax: 4%
State income tax: No
Inheritance and estate tax: No; no
South Dakota is a nice place for retirees to reside in. The Mount Rushmore State provides a tax-friendly environment to senior citizens. It does not impose any state income tax, which means that your Social Security benefits and other forms of retirement income comes free of cost. The state sales tax is comparatively low at 4% and covers a wide range of services.
5. Wyoming
State sales tax: 4%
State income tax: No
Inheritance and estate tax: No; no
Wyoming is a great spot for retirees who want to avoid taxes as well as people. The Equality State offers a tax-friendly atmosphere to its residents, particularly retirees. The state does not impose any personal income tax, estate tax, and inheritance tax. Moreover, its state sales tax is relatively low at 4%.
6. Louisiana
State sales tax: 4%
State income tax: 2% to 6%
Inheritance and estate tax: No; no
Louisiana provides a wide assortment of tax breaks to older citizens. The state income tax of the Pelican State does not include Social Security, civil-service, local and state government pensions, and military. Moreover, income and Railroad Retirement benefits from state police and municipal employees’ retirement plans are exempt from their taxable income.
7. Arizona
State sales tax: 5.6%
State income tax: 2.59%to 4.54%
Inheritance and estate tax: No; no
Arizona is considered as one of the best retirement destinations for its low state income tax rated and sunshine weather. The Grand Canyon State does not include Social Security benefits in its personal income tax rates. Furthermore, the state tax is exempt from Railroad Retirement benefits.
8. Delaware
State sales tax: No
State income tax: 2.2%to 6.6%
Inheritance and estate tax: No; yes
Delaware does not impose any sales tax and inheritance tax. The personal income tax rates of the First State are also modest. The state income tax is exempt from Social Security benefits and other forms of retirement income.
9. Georgia
State sales tax: 4%
State income tax: 1%to 6%
Inheritance and estate tax: No; no
The state of Georgia offers a low tax climate to its inhabitants, especially retirees. The Peach State does not impose any inheritance tax and estate tax. Even the sales tax rates and the personal income taxes are low. Moreover, the state tax does not include the income from Social Security.
10. Mississippi
State sales tax: 7%
State income tax: 3% to 5%
Inheritance and estate tax: No; no
Mississippi offers sweet tea as well as a tax-friendly environment to retirees. The Magnolia State carries a sales tax rate of 7%, which is the second-largest in the U.S. Furthermore, it does not include Social Security benefits in its personal income taxes.
These tax-friendly states are ideal locations for retirees to settle down. They help your financial well-being in various ways, while reducing your taxable income and other forms of income derived from retirement plans.
ERNIE BUSTAMANTE