Thursday, March 29, 2012

Most Tax-Friendly States for Retirees

Robert Powell breaksdown the list based on data from CCH and the Tax Foundation and tells you why they need to be considered:
Alaska: Alaska might not seem like a retirement haven based on the usual factors considered such as, say, weather. But it might be the perfect place for one’s golden years if taxes are a big concern. Alaska doesn’t tax personal income, including Social Security benefits and pension income. And, there’s no state-imposed sales tax. This is not to say that you won’t pay any taxes in Alaska. Instead, it means that you’ll pay other types of taxes, such as property taxes.

Nevada: Many retirees rely on income from several sources to make ends meet these days. If you fall into that camp, Nevada might be the place for you. This state doesn’t tax income, Social Security benefits or pension income. And its property taxes are reasonable, too. Its sales tax, however, is higher than the national average.

South Dakota: It might not be the first or even the second state that you think of when contemplating where to live in retirement. But South Dakota is nothing if not a tax friendly state. The state doesn’t tax individual income, Social Security benefits or pension income. And the overall tax burden is among the lowest in the nation.

Wyoming: There’s no individual income tax on Social Security benefits or pension income in Wyoming, according to CCH. But that’s not to say you won’t have to pay any taxes in Wyoming. Property taxes and sales taxes tend to be higher than the national average.

Texas: In Texas, there’s no individual income tax. But property and sales taxes tend to be higher than the rest of the nation.

Florida: There are plenty of reasons why people choose to retire to the Sunshine state, the low tax burden being among those reasons. There’s no individual income tax on Social Security benefits or pension income. There are pipers to pay, however, in the forms of property and sales taxes.

Washington: Another state not generally viewed as a traditional retirement haven is, however, income tax friendly for retirees. There’s no individual income tax on Social Security benefits or pension income. But if you plan on spending lots money while in retirement, Washington might not be your first choice. It has a relatively high sales tax.
Note: Although Powell identifies sales taxes in some states as a negative, what really eventually occurs is that the sales  tax works its way backwards to land and labor, so that the consumer really doesn't pay. Thus, a sales tax may not be much of an impediment for retirees, who do not plan on working part time.

21 comments:

  1. If you move to South Dakota move to the western side of the state. Very pretty.

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  2. What about, ummmm, New Hampshire? Even if it is not a good place to retire to yet, it might be in the near future (Free State Project).

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  3. I moved to Florida from the People's Republic of Maryland in 2001 and never looked back. Florida is a wonderful state! Added bonus: I got to stiff MD for all the state taxes I 'deferred' while working there adding to my 401k (now IRA); now its all state tax free!

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  4. PA doesn't charge an income tax for distributions from an IRA after 59 and a half

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    1. Neither does PA tax pensions or social security.

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    2. PA is another horrid liquor-control state. Wine stores or beer stores or spirits' stores. The state sets prices and chooses what you can buy. Phooey on that.

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  5. NH has crazy cost of living, high local taxes, and it's a liquor control state. 3 Strikes and you're out, I say. FSP is moving people in, but rising taxes in MA are moving people in faster, and the MA transplants want to bring MA-style government with them.

    The FSP should've picked Wyoming when it had the chance. NH is nice, and it has a pretty libertarian culture, but that culture is rooted in localism and traditionalism, which is to say that outsiders aren't encouraged to come in and steer the thing.

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  6. I investigated this issue a few months ago and came across some very nice reports (from the DC gov't of all sources!) comparing total tax burden of the 50 states and DC.

    http://cfo.dc.gov/cfo/cwp/view,a,1324,q,612643.asp

    The states that do not tax income, in almost all cases, do not make up for that lost revenue by increasing other taxes. It is true that some other taxes are higher, but the overall burden is lower in those states. As a MD resident, I found myself asking what additional benefits I'm getting for my substantially higher tax burden. The answer, of course, is that I get nothing for my additional tax burden in MD over the residents of the no-state-income-tax states.

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    1. vote republican next round......Maryland is organized democrats taking our hrad earned money for plenty of give-a-way programs......

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  7. What about Tennessee? No income tax, low property tax, great climate.

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    1. Tennessee does have an income tax.

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    2. Tennessee's income tax is only on 'un-earned income', like mutual funds, etc. What you arn by working, or investing under your control, is not taxed.

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  8. Don't forget to check on gasoline taxes, particularly if you won't be living in a major population center and will thus be driving a lot. Or consider living close to the state line of an adjacent state with a low gas tax.
    The Tax Foundation lists state gas taxes (cents per gallon) at http://taxfoundation.org/taxdata/show/26079.html
    For the states above, Alaska is 0, NV 33.1, SD 24, WY 14, TX 20, FL 35, WA 37.5 That's quite a spread.

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  9. Oops, Alaska's gas tax is 8 cents per gallon, not 0.

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  10. What Matt said. New Hampshirites look upon foreigners/tourists (you're the same thing) the same as the Massholes, if you'll pardon my slang. We'll take your money, but we won't like you.

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  11. Come to Mexico; cheap everything and a weak incompetent govt who will leave you alone.

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  12. Hawaii does not tax corporate, military and government pensions, social security. property tax is low, one-third of one percent. Though it has a general excise tax of 4.71 %(Oahu) and 4.1 (all other islands) for everything including food, and medical services in Oahu.

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    Replies
    1. Housing costs more than make up for anything gained in low taxes.

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  13. Western Maryland (Garrett county) taxes are high and the locals appreciate your paying 60% of entire county PLUS they "don't like you" either! Shunning is high on their list of ways to discourage newcomers from participating in the things that their taxes pay for! a good reason why this "service economy" will fail. and the voting turnout is close to the apathetic -20%. guess they're waiting for us to just "give our all to them" in terms of our $$.

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