Finding the Best Places to Retire Since 2006!
5 of the Most Tax Friendly States for Retirement
The tax bite varies from state to state, and the taxes paid during retirement can make or break a budget. Some states are very friendly toward retirees, while others are downright unfriendly. Below are five of the best states when it comes to taxes and retirement.
1) Wyoming. This wide open windy western state has no state income tax, so Social Security benefits and all other forms of retirement income are not taxed. Real estate is taxed at just 9.5% of its market value (so a $200,000 home is only taxed on $19,000). Wyoming residents enjoy several tax relief programs, including tax relief of up to half of a homeowner's property tax bill, depending on income and length of residency. Seniors have even more tax breaks, including a $800 to $900 refund for sales taxes, property taxes and utility taxes. The state sales tax is just 4% (food and prescriptions are exempt), and there is no inheritance or estate tax, either. Overall, Wyomingites have one of the lowest tax burdens in the nation.
2) Pennsylvania. The Keystone State does not tax Social Security, public or private pensions, Railroad Retirement benefits, 401(k)s, deferred compensation plans or IRAs after age 59 1/2 and if the resident is fully retired. The income tax on other forms of income is just 3.07%. Widows and widowers age 50 or better and homeowners age 65 or better who have $35,000 or less in annual income may be eligible for a $650 to $975 property tax rebate (and renters with $15,000 annual income may also be eligible). Social Security is not included in the $35,000 or $15,000. Property taxes can, however, be high in some jurisdictions, so check those before buying a house in Pennsylvania. The state sales tax is 6%, but heating fuel, food, clothing and prescription and non-prescription drugs are not taxed. The estate tax has essentially been phased out.
3) Georgia. This retirement favorite does not tax Social Security benefits, and up to $35,000 in other retirement income is excluded from taxation for people age 62 to 64 as well. For people age 65 or better, up to $65,000 of retirement income is not taxed. All residents receive a $2,000 property tax homestead exemption, and real estate is taxed at just 40% of market value. People age 62 or better with an annual income of $30,000 or less receive an exemption from county property taxes. People age 65 and better can are exempt from all state property taxes. The state sales tax is just 4% (prescription drugs and food are not taxed). The income tax rate starts at a low 1% and tops out at 6%.
4) South Carolina. Social Security benefits are not taxed in the Palmetto State, and for residents age 65 or better, up to $15,000 in qualifying retirement income, which includes public pensions, IRAs, Keogh plans and military retirement, may be excluded from state taxes. Property is taxed at just 4% of market value, and for people age 65 or better, the first $50,000 of a home's value is exempt from property taxes. The state sales tax is 6%, but food, hearing aids and prescription drugs are exempt.
5) Alabama. This coastal state does not tax Social Security benefits or qualified private pensions, military pensions, civil service pensions, state or local pensions (IRAs and 401(k)s, though, are taxed). Alabama property is taxed at just 10% of market value, and homeowners age 65 or better pay no state property tax at all. Depending on income, they may also receive an exemption of $2,000 to $5,000 from county taxes. Overall, Alabama has some of the lowest property taxes in the nation. The income tax starts at a low 2% and rises to 5%. The state sales tax is 4% (prescription drugs, but not food, are exempt).
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