10 Most and Least Tax-Friendly States for Seniors
Yep, Florida is on the list of the best, but the other top nine and bottom five may surprise you.
While the climate can be downright frigid, the tax-friendliness will warm you up. In addition to no taxes on social security or other retirement income, Alaska has no income tax, so if you don’t want to sit on the porch watching the moose go by, you can get a part-time job and still pay no additional income tax. An added bonus is that Alaska actually pays people to live in the state, doling out a Permanent Fund Dividend annually. According to Kiplinger, some localities can levy taxes, but the average rate is still low at 1.43 percent. Tax analyst, Jill Gonzalez at Wallet Hub, helped Reader’s Digest compile this list.
There’s no inheritance or estate tax and social security benefits aren’t taxed in the Sunshine State. Combined with the warm climate, Florida is a big draw for the senior set; it has the highest population of folks 65 and older. That means you’ll have plenty of opportunities for an active social life.
Southern charm extends to taxes if you’re a senior living here—no taxes on social security and other forms of retirement income like private and public pensions, 401(k)s, and IRAs. Other noteworthy perks are the Magnolia State ranks fourth for lowest cost of in-home services according to Wallet Hub, and there’s a tax exemption for homeowners 65 and older on the first $75,000 of a home’s value. Here are some smart strategies for making the most of your social security income.
Whether the casinos or the beautiful rock formations of Overton lure you here, you won’t have to fork over much in regards to retirement-related taxes. There are no taxes on social security and other income from retirement, and there is no inheritance or estate tax. On the downside, the sales tax rate is on the higher side at 6.85 percent. Maximize your funds with these 11 ridiculously easy ways to save money.
There’s always a show to see in Pennsylvania, which Wallet Hub ranked fifth for most theaters per capita. You can afford to buy tickets to your favorites with the money you keep from not paying taxes on social security and other retirement-related income. Also, seniors 65 and older on limited incomes who own or rent a home are eligible for rebates on rent and property tax.
When deciding which state is best tax-wise for you to retire in, the answer depends on your unique situation.”To find the state where you’ll owe the lowest bill, you’ve got to consider income tax, property tax, sales tax, taxes on retirement-account withdrawals, and more,” says Andrea Coombes, tax specialist for NerdWallet. For comparison, Coombes points to Maryland and Pennsylvania—neither taxes social security and the sales tax are the about the same, but that’s where the similarity ends. “If you’re going to be taking money out of a retirement account, like a 401(k) or an IRA, you could easily find yourself bumping into Maryland’s state and local taxes on that type of income—a problem you won’t encounter in Pennsylvania.”
From the Black Hills to the Badlands and Mount Rushmore, you’ll have plenty of wide open spaces to explore in your golden years, and it won’t tax your wallet. There is no state income tax, so your social security benefits or other forms of retirement income, like IRAs, 401(k)s, and pensions are all yours. State tax is relatively low at 4.5 percent, but things like groceries and nonprescription drugs and other services are taxed. Find out 13 retirement facts you should take seriously.
Everything’s bigger in Texas, including your social security and pension checks as the Lone Star State lets you keep all the money, tax-free. There’s also no personal income tax, inheritance, or estate tax. The caveat is Texas is the 12th highest of the 50 states for property taxes based on median income according to Taxrates.org., but homeowners 65 and older can qualify for exemptions from school district taxes and local property taxes. No personal income tax makes these simple ways to earn cash even sweeter.
A mild year-round climate, excellent health care, and plenty of coffee houses aren’t the only benefits for seniors; there is no tax on social security, pension, or other retirement accounts. The state levy tax is a bigger bite to chew at 6.5 percent, and local municipalities can add up to 3.9 percent. But Washington balances it out with a property tax exemption, a tax deferral program, and a property tax assistance program for seniors who qualify. Here are 9 things seniors get for free or discounted.
The cowboy state may not be your first choice to retire, but Wyoming rounded up a host of tax-friendly benefits for seniors that could change your mind. Besides not paying taxes on social security, pensions, IRAs, or 401(k)s, Wyoming has a tax rebate for people who are 65 and older with qualifying income levels, and they can receive refunds from the Wyoming Department of Health on their utilities, sales/use tax and property taxes. To sweeten the deal, there is no income tax and the state levy tax is just 4 percent. Thinking about downsizing?
The adjusted cost of living is pretty low here: Wallet Hub ranked Arkansas number two, following Mississippi and Arkansas tied with North Carolina in fifth place for the lowest cost of in-home services, an essential factor to consider if you need help later in life. The Razorback state also ranks among the lowest in property taxes. Seniors aren’t taxed on social security or pensions but withdrawals from retirement accounts, like a 401(k) or IRA are partially taxed, and the state levy tax is relatively high at 6.5 percent. Discover 15 budget-friendly towns that are made for retirees.
The least tax-friendly states
Utah, Minnesota, North Dakota, Rhode Island, and Vermont round out the bottom five according to Wallet Hub. The common thread? All tax social security and pensions. State sales taxes were higher too within the bottom five, with Minnesota imposing an average combined tax rate of 7.43 percent and Utah taxing groceries at 3 percent. Find out 13 smart money moves to make before the end of the year.