Choosing the perfect state to retire in involves many considerations, but the overall tax burden is a critical factor for many retirees. This article explores the top ten states to retire based on various taxes, including sales tax, income tax, taxes on retirement distributions, dividends, property tax, and other relevant taxes.

1. Florida

  • Sales Tax: 6% (state rate), local surtaxes can add up to 1.5%.
  • Income Tax: None.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: None.
  • Property Tax: Median property tax rate is 0.83%.
  • Other Taxes: No estate tax or inheritance tax.

Florida’s lack of state income tax and favorable taxation on retirement income make it a top choice for retirees. The property tax rate is also below the national average.

2. Wyoming

  • Sales Tax: 4% (state rate), local taxes can add up to 2%.
  • Income Tax: None.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: None.
  • Property Tax: Median property tax rate is 0.61%.
  • Other Taxes: No estate tax or inheritance tax.

Wyoming offers one of the lowest overall tax burdens in the country, with no income tax and a low property tax rate, making it very attractive for retirees.

3. Nevada

  • Sales Tax: 6.85% (state rate), local surtaxes can increase it to 8.375%.
  • Income Tax: None.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: None.
  • Property Tax: Median property tax rate is 0.53%.
  • Other Taxes: No estate tax or inheritance tax.

Nevada’s lack of state income tax and low property tax rates make it a financially favorable state for retirement.

4. South Dakota

  • Sales Tax: 4.5% (state rate), local surtaxes can add up to 2%.
  • Income Tax: None.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: None.
  • Property Tax: Median property tax rate is 1.14%.
  • Other Taxes: No estate tax or inheritance tax.

South Dakota offers a low overall tax burden with no state income tax and favorable tax treatment for retirees.

5. Alaska

  • Sales Tax: No state sales tax, local taxes can add up to 7.5%.
  • Income Tax: None.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: None.
  • Property Tax: Median property tax rate is 1.19%.
  • Other Taxes: No estate tax or inheritance tax.

Alaska’s lack of state income and sales taxes, combined with unique benefits like the Permanent Fund Dividend, make it an attractive state for retirees.

6. Tennessee

  • Sales Tax: 7% (state rate), local surtaxes can add up to 2.75%.
  • Income Tax: None.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: None (as of 2021).
  • Property Tax: Median property tax rate is 0.64%.
  • Other Taxes: No estate tax or inheritance tax.

Tennessee’s elimination of tax on dividends and interest, combined with no state income tax and low property taxes, is beneficial for retirees.

7. New Hampshire

  • Sales Tax: None.
  • Income Tax: None on earned income; 5% on dividends and interest over $2,400.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: 5% on interest and dividends.
  • Property Tax: Median property tax rate is 2.18%.
  • Other Taxes: No estate tax or inheritance tax.

New Hampshire has no sales tax and no tax on retirement distributions, although property taxes are higher compared to other states on this list.

8. Texas

  • Sales Tax: 6.25% (state rate), local surtaxes can add up to 2%.
  • Income Tax: None.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: None.
  • Property Tax: Median property tax rate is 1.80%.
  • Other Taxes: No estate tax or inheritance tax.

Texas is favored for its lack of state income tax and taxes on retirement income, though property taxes are relatively high.

9. Washington

  • Sales Tax: 6.5% (state rate), local surtaxes can add up to 3.9%.
  • Income Tax: None.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: None.
  • Property Tax: Median property tax rate is 0.93%.
  • Other Taxes: No estate tax, but there is an inheritance tax.

Washington’s lack of state income tax and favorable tax treatment for retirees makes it an attractive option despite the relatively high sales tax rate.

10. Mississippi

  • Sales Tax: 7% (state rate).
  • Income Tax: Exempts Social Security and retirement income from state taxes.
  • Tax on Retirement Distributions: None.
  • Tax on Dividends: Standard income tax rates apply.
  • Property Tax: Median property tax rate is 0.81%.
  • Other Taxes: No estate tax or inheritance tax.

Mississippi’s tax exemption for retirement income and lower property tax rates provide a favorable tax environment for retirees.

Conclusion

When planning for retirement, considering the overall tax burden in different states is essential. The states listed above offer a combination of no or low income tax, favorable treatment of retirement income, reasonable property taxes, and other tax benefits that can help retirees maximize their savings and enjoy a comfortable retirement.