What is the state tax rate for retirement income?

Very tax-friendly · Alaska · Florida · Georgia · Mississippi · Nevada · South Dakota · Wyoming. California · Maryland · Colorado · New Jersey Most states don't tax Social Security income at all. Some of them, such as Texas and Florida, have no income tax. Others offer a specific deduction or exemption for Social Security retirement benefits.

The 12 states that tax Social Security are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia. Four states (Oregon, New Hampshire, Montana and Delaware) have no state or local sales taxes. Alaska has no state sales taxes, but it does have some local taxes. Hawaii has a general excise tax that is very similar to sales tax, although at 4% it would be one of the lowest sales taxes in the U.S.

UU. In the rest of the states, average total state and local tax rates range up to 9.55%. Tennessee and Louisiana are tied for the highest average sales tax rates in the U.S. See how each state treats retirees when it comes to income, sales, property and other taxes.

Three other states have income taxes, but offer retirees a discount on pension distributions and retirement plans. In many cases, we're talking about thousands of dollars between State A and State B (and don't forget local taxes, too). However, in some states, high property taxes or property taxes that can increase rapidly from year to year serve to deter retirees from owning a home. The only remaining state, New Mexico, taxes all Social Security income that is taxed at the federal level.

However, whatever reason you have for moving from one state to another, it's important to choose a tax-friendly state for retirees. If you are thinking of moving to another state, keep in mind that states often enact, modify and repeal their tax laws; contact your Tax Agency to verify that the information is accurate. One way many states help retirees limit the burden of property taxes is by offering exemptions or circuit breakers. Retired people have specific financial concerns, and some states have taxes that are better suited to those needs.

Some states, such as Alaska, South Dakota and Wyoming, have enough natural resources for the sale of mining rights to allow them to keep most taxes extraordinarily low and to skip income taxes altogether. Inheritance taxes generally offer exemptions or lower rates for immediate family members, while taxing non-family members in full. As described below, income taxes on things like Social Security retirement benefits and retirement account withdrawals vary widely from state to state. Also see the articles on specific taxes below the map, including our picks for the 10 most tax-friendly states for retirees and the 10 least tax-friendly states for retirees.

Glenna Penrod
Glenna Penrod

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