Finding the Best Places to Retire Since 2006!
Five of the Most Tax Friendly States for Retirement
Taxes are just one thing to consider when choosing a state for retirement, but if you plan to live on a budget or want to keep more of your money in your pocket, then state taxes are an important factor. Luckily, some states understand this and keep the retiree tax bite to a minimum. Here are five of them.
1) Arizona The Grand Canyon State has a retirement friendly reputation for good reason. It has a low personal income tax rate and levies no estate, gift, or inheritance taxes. Social Security and railroad benefits are excluded from taxation. As much as $2,500 of some retirement income may also be exempt. Arizona's statewide sales tax is just 5.6%. Keep in mind, though, that all counties and some cities impose a sales tax, and combined totals can reach 12%. Local jurisdictions set property taxes, and they can vary significantly, but homeowners who are at least 65 years old and have annual income less than $36,000 (single) or less than $45,000 (married) may apply to have the valuation of their property frozen for three years.
2) Alaska If you can handle a long winter, Alaska may be the place for you. This Last Frontier State levies no income tax, no sales tax, no estate tax, and no inheritance tax. To ice the cake, the state also sends permanent residents an annual dividend check from its oil wealth savings account (in 2019, each Alaskan received $1,606). Only 25 municipalities tax property. Beware, though. There are municipalities that charge a local sales tax of up to 7%. Real estate is taxed, but homeowners 65 and better are exempt from municipal taxes on the first $150,000 of assessed value of their property.
3) Delaware The best place for taxes on the East Coast is the First State. It has no sales tax, and its income tax rate is from 2.2% to 6.6%. Social Security and railroad benefits are not taxed. There is no inheritance tax. Citizens who are age 60 or better can exclude up to $12,500 in qualified pension benefits or investment income (IRAs, 401(k)s, Keogh plans and government-deferred compensation plans). Property taxes are some of the lowest in the country.
4) Louisiana Good times roll in the Sugar State partially because of the taxes. The sales tax is a low 4.4%. Keep in mind, though, that local jurisdictions do levy their own sales taxes that can boose the rate to 10.75%. There is no estate or inheritance tax. The income tax rate is only 2% to 6%. Social Security and military benefits are exempt from taxation as are local government pensions. For individuals age 65 and better, up to $6,000 of private pension, annuity income, or IRA distribution is exempt ($12,000 if married). Property taxes are some of the lowest in the nation. Retirees who are age 65 or better may be able to have their home's assessed value frozen.
5) Nevada The Sagebrush State is one of the West's most tax-friendly states. Nevada does not tax Social Security benefits or any other income and has no estate tax or inheritance tax. Its sales tax is only 6.5% (counties may add up to an additional 1.25%). However, all property is subject to tax, and there are no breaks for seniors. Making up for that, though, is the state's low real estate tax rate, just .006 on $100,000 of assessed value.
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