When planning for retirement, it is important to know which states have the lowest taxes that affect retirees. This can help one to determine which state is the best to retire to.
First off, one must understand that it is impossible to say which state has the lowest taxes for retirees across the board. There are two main factors that will determine whether or not a state is the cheapest place for one to retire.
Property and Estate Taxes
The first factor is property. A retiree who owns property will, in most instances, be charged a property tax. This is often determined at a county level as opposed to a state level. A person who wishes to buy a house, apartment or condo will find that Alaska and Wyoming are good places to live in. Only twenty five counties in Alaska charge any sort of property tax.
Furthermore, Alaska does not charge income tax or sales tax. Wyoming has no income tax, a relatively low sales tax and only taxes a bit over 9% of the value of a property. This means that a person who owns a properly worth $200,000 would only have to pay taxes on $19,000 of the value of the property.
For additional information on the subject of property taxes, one should visit taxfoundation.org. This site offers a list of property tax rates for every single county in the United States. For a retiree who is unsure of where to buy a house, apartment or condo, this list can provide helpful advice that can save one thousands of dollars in taxes.
Income Taxes
Another factor that will determine whether or not a state is the cheapest place to retire to is one’s source of income. A retiree who is depending on part time work to supplement his or her retirement pension will want to live in a state that does not charge income tax. Alaska, Wyoming, South Dakota and Nevada are good places to consider as these states do not charge income tax of any sort. New Hampshire and Tennessee are also good places to consider retiring to, as these states only tax interest and dividends, not income.
A person whose main source of income is Social Security does not have to worry; only fourteen out of the fifty states tax Social Security benefits. One can find a graph of which states do charge social security taxes by visiting kiplinger.com.
A person living off of retired military pay will naturally want to live somewhere where this pay will not be taxed. States that do not tax military pay in any way, shape or form are Alabama, Alaska, Florida, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Nevada, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming.
There are ten states that exclude all federal, local or state pension income from taxation. These are Alabama, Pennsylvania, Hawaii, New York, Massachusetts, Illinois, Kansas, Mississippi, Michigan, and Louisiana.
When considering where to retire, it is important to consider the tax rate of a potential retirement spot. Tax laws are complicated and a state that may seem like a retirement tax heaven may end up being retirement tax hell. A lot depends on one’s age, source of income, whether or not a person owns property and whether or not he or she lives in the home or is renting it out.
A person who is deciding where to retire should consider the above information on which states have the lowest taxes that affect retirees and choose a retirement spot that is best suited to his or her needs and budget.
Continue on with our Free Newsletter Topics
Topic 1 – How to Easily Calculate your Retirement Income in Five Simple Steps
Topic 2 – How to Determine Which States Have the Lowest Cost of Living for Retirees
Topic 3 – How Does Living Abroad Compare to Living at Home – Tips on Comparing Costs
Topic 4 – How to Cut Costs to Make Your Cost of Living Lower and Stretch Your Dollars – Tips
Topic 5 – How to Know Which States Have the Lowest Taxes that Affects Retirees
Topic 6 – What are the Top 3 Cities Recommended for Retiring Cheaply in the US
Topic 7 – Where Can You Find a Great Deal on a House – Tips, Advice, and Options
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