Which States are the Most Tax Friendly for Retirees

According to my readings,  a substantial number of baby boomers intend to downsize and relocate for reasons that include cost of living. That being the case, knowing which states  are the most tax-friendly to retirees is important. When you investigate this question, the answers may surprise you.

Some states that hit working taxpayers hard are less aggressive with retirees. To understand this, you must consider all forms of taxes and and all sources of income. Location-specific taxation of retirees can include income taxes, property taxes (state and local), sales taxes, and use taxes. For some, inheritance taxes may also be relevant. Regarding income taxes, pension and Social Security income may be treated differently from investment and employment income. For example, our state of Tennessee has no conventional “income tax” but has a special “Hall Tax” that applies to certain sources and levels of investment income.

CCH is a major player in the tax publication industry and likes to create charts, calculate and rank tax burdens by state. Market Watch used the CCH data to create a slide show featuring the states most tax-friendly to retirees.

Number one is Alaska but given other cost of living issues, its remoteness, and weather, it would not be on my list.

Texas and Florida make the list also, which is a plus for them.

If course, these are generalized rankings. If the gap between your anticipated retirement income and desired spending budget is small, it would be important to do an individualized analysis based on your own sources of income, etc. and to look at related taxation trends. For example, Nevada has a low tax burden on retirees but that may have to change somewhat for Nevada to get its finances in order

Here is the link to the slide show and article.


Comments

  1. says

    for those of us who stayed home with the children and did not think of retirement, i strongly urge all women in this category to take out an IRA, and consider it a bill- not if money is left over.
    for me, i got divorced at age 55, and was only on ssdi and disability from where i work. always had part time jobs at night in which little SS was taken out. now my ex- has a wonderful retirement package including pd. health insurance, and i am subject to alimony and the above mentioned. at age 65, i lose my disability insurance, and alimony is lowered leaving me at 1700 while my ex- nets$72,000. so warn all young women to get their IRAs each yr. especially if you are a stay at home mom.

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