Looking for the perfect place to retire? Or wonder if the state you live in is too expensive? When deciding where to live, consider property values, cost of living, and All issues of style are important considerations.
But don’t forget to think about state taxes. Some states offer more favorable retirement tax treatment than others. Learn more about retirement taxes below, find the best state for your taxes, and see income and sales tax rates for all 50 states.
By carefully considering where you live and the local taxes, you can potentially save a lot of money over your lifetime.
What are the different types of taxes imposed by states?
Not only do income tax rates differ from state to state, but different locations apply different types of taxes.
State income tax: Usually the biggest concern is income tax.
Interest and dividends: Some states levy little income tax but high taxes on interest and dividends on assets.
Sales tax: Sales tax typically consists of a combination of state and local sales taxes.
Fixed asset tax: In addition to property values, property taxes can vary widely depending on location. In addition to real estate prices, you also need to consider property taxes.
inheritance tax: Inheritance taxes also vary widely by state, but most states do not tax financial estates.
Taxes on social security and pensions: Few states tax Social Security and pensions.
So which states are best overall for retirement taxes?
The absolute best situation when it comes to retirement taxes depends somewhat on your own financial situation.
For example: If you are leaving a large amount of assets to your heirs, avoid states with high estate taxes. Or, if you have valuable assets and plan to earn a large profit, you may want to look for a state with lower taxes on interest and dividends.
However, here are some insights into how low and high overall state taxes are.
low tax states
According to the latest analysis, us facts, here are five of the states with the highest overall retirement taxes. Their analysis focuses on tax revenue as a share of personal income to explain differences in average incomes across the country. (This is different from a tax rate comparison, which is the percentage of each dollar collected by a state or local government by tax category.)
- Alaska 5.4%
- Tennessee 6.3%
- New Hampshire 6.4%
- Wyoming 6.6%
- Florida is 6.7%
high tax states
USA Facts data ranks these five states as having the highest state and local tax burdens.
- New York: 13.1%
- Hawaii is 13%
- Maine 11.2%
- Vermont 10.4%
- 10% in Connecticut
Income tax by state
As of early 2024, seven states have zero income tax: Nevada, Wyoming, South Dakota, Texas, Florida, and Tennessee. California has the highest income tax rate at 13.3%, and Arizona and North Dakota have the lowest at 2.5%.
Find income tax rates by state on the map below.
Sales tax by state
by tax foundationby 2023 there will be five states:
- The states with the highest average state and local sales tax rates are Tennessee (9.548 percent), Louisiana (9.547 percent), Arkansas (9.44 percent), Washington (9.40 percent), and Alabama (9.24 percent). is.
- States with the lowest total average rates are Alaska (1.81%), Hawaii (4.44%), Wisconsin (5.43%), Wyoming (5.44%), and Maine (5.50%).
Property taxes by state
Looking at property tax rates can be misleading. For example, if a very expensive property has a low interest rate, you may end up spending more than if a lower value home has a higher interest rate.
However, below is data from the Tax Foundation on the median property taxes paid by counties from 2021.
state inheritance tax
Few states impose an inheritance tax, according to the Tax Foundation’s latest summary. This includes Washington, Oregon, Minnesota, Illinois, New York, Maine, Vermont, Rhode Island, Hawaii, and Connecticut.
Maryland has both inheritance and estate taxes.
state Social security and pension taxes
social security: Not all states tax Social Security, and those that do often have ways to exempt, reduce, or eliminate the tax.Get a complete overview of Social Security state taxes here.
pension: According to a report from AARP In 2021, pension distributions are tax-free in Washington, Alaska, Nevada, Wyoming, South Dakota, Iowa, Illinois, Texas, Mississippi, Alabama, Tennessee, Florida, Pennsylvania, and New Hampshire.
How to estimate state and federal retirement taxes
Filing your taxes for the year can seem daunting and unpleasant. Just thinking about planning for all your taxes in retirement can seem impossible.
However, NewRetirement Planner makes it easy to predict your taxes and optimize your retirement income no matter where you live.
For users of Basic Planner (free version), income taxes are modeled using mixed state and federal tax rates.
For PlannerPlus subscribers, your income tax model will be more accurate, detailed, and transparent. you can:
- See your annual federal, state, and capital gains tax estimates.
- Check your annual taxable income and realized capital gains
- Specify itemized deductions and property taxes.
Log in to see your expected lifetime taxes and strategize how to reduce this burden.
