The freedom from being dependent on your career is retirement’s greatest benefit. Retirees might use this as an opportunity to go wherever they like. Due to this, many retirees may move throughout their later years. It is crucial to take into account the proximity to family and friends, the climate, and other factors while selecting a state for your retirement. But most essential, make sure to check the state taxes.
Why Are Taxes Such a Big Deal?
When compared to other states in the U.S., some are more tax advantageous for retirees. The rates of income tax, sales tax, and property tax levied by the state influence these jurisdictions’ comparative advantages.
According to tax information gathered by the personal finance website Kiplinger, the cost of taxes in one state can differ from another state’s cost by roughly a thousand dollars annually. Therefore, it is useful to be aware of the tax advantages that various governments offer to retirees.
States with the Lowest Retiree Tax Rates
Wyoming
Since Wyoming does not impose an income tax, retirees do not need to be concerned about a significant state tax burden. In addition to its breathtaking natural beauty, Wyoming has a cheap sales tax of only 4%.
Wyoming is one of the best states for retirement since it has a relatively low cost of living and no inheritance or estate taxes. Per $100,000 of a home’s value, the average property tax is $635.
Florida
Retirement residents are welcome in Florida, which has no state income tax. Therefore, those who wish to continue working part-time can maximize their profits.
Six percent sales tax is available in Florida. Additionally, the typical property tax is $1,041 for every $100,000 of home value.
South Carolina
South Carolina may be the best choice for retirees looking for seaside living with generous retirement income exclusions. The income tax rate in this state ranges from three to seven percent.
In addition, the property taxes are reasonable at $601 for every $100,000 of home value. Better yet, no estate or inheritance taxes are imposed.
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Delaware
Delaware provides retirees with extensive coastlines as well as a sales tax-free state. The percentage of state income tax varies from 2.2 to 6.6. There is no estate or inheritance tax, despite the fact that the property tax may be a little greater than in certain other states.
Overall, Delaware is a fairly tax-friendly state that gives you more money to spend in retirement because there is no sales tax on any purchases made within the state.
Nevada
Another tax-friendly state for retirees with no state taxes is Nevada in the west. Without having to worry about a significant tax penalty, retirees can withdraw their retirement money and collect their social security checks.
There are no estate or inheritance taxes, and the average annual property tax rate is $693 per $100,000 of assessed home value. The state sales tax, however, is 6.85 percent, which is a little excessive.
Tennessee
Social Security benefits, wages from jobs, and pension benefits are all exempt from taxation in Tennessee. The state only levies taxes on interest and dividends. Furthermore, these taxes do not apply to pensioners over 65 with low incomes. Tennessee is another state you might wish to retire to because it offers both urban and rural settings, has no estate or inheritance tax, and has cheap property taxes of roughly $768 per $100,000 of house worth.
Remember to account for the seven percent sales tax you will be charged while purchasing while making your decision.
Arizona
The state tax in Arizona is comparatively low, ranging from 2.59 to 4.5 percent. Even better, the state doesn’t tax social security benefits, making it a desirable place to retire.
In addition, Arizona has a $617 average property tax rate per $100,000 of house value and does not have an estate or inheritance tax.
Alabama
The cost of living is cheap and taxes are reasonable in Alabama. The income tax rate ranges from 2% to 5%. Additionally, the state’s four percent sales tax is among the lowest in the nation.
This state is excellent for seniors looking for a calm area to live in because of all these advantages.
Colorado
The average property tax in Colorado is $494 per $100,000 of house value, making it the third-lowest in the nation. The state has a flat income tax of 4.55 percent. Since there is no estate or inheritance tax in the centennial state, there are additional tax savings.
Alaska
Not everybody would think of Alaska when making retirement plans. However, this country’s northernmost and largest state is the only one without a state income tax or a state sales tax. The state levies a hefty property tax to raise money for the services it must offer its citizens.
Mississippi
In Mississippi, certain retirement incomes are exempt from state income tax. Pensions, social security benefits, IRA withdrawals, and 401(k) contributions are all examples of income that can be excluded from taxable income. In this state, the property tax rate is $862 for every $100,000 of home value.
Retirement travelers are advised to consider the 7% state sales tax before selecting this as their retirement location.
Hawaii
Hawaii, a state known for its tropical splendor, enables retirees to save money by exempting social security payouts from taxes. Depending on the taxable income, the state income tax may range from 1.4% to 11%.1
Despite the high cost of living in this island state, property taxes are among the lowest in the US, averaging $280 per $100,000 of the assessed value of homes.
Conclusion
When you have to stretch your retirement assets, the state in which you choose to retire can significantly affect your situation. When you have a fixed retirement income, the less money you pay in taxes, the better off you are financially.
If you anticipate a respectable amount of post-retirement income, the state income tax should be your top concern. Property taxes and sales taxes, on the other hand, are more crucial if you plan to live off of social security benefits.
The states mentioned in this article make excellent choices for potential retirement locations. In the end, deciding where to retire is a personal decision, thus it is advisable to consider all options before making a choice.
Featured Image: Unsplash @ Towfiqu barbhuiya
[1] https://taxfoundation.org/state/hawaii/
