States with the lowest state taxes can be ideal places to retire. A retiree can in fact save a lot of money by living in a state with a low tax burden.
Paying a reduced tax rate enables a retiree to stretch his or her income further and live a comfortable life.
State Income Tax and Sales Tax
State income tax rates vary from state to state. The rate also depends on a person’s income. However, there are nine states that do not charge state income tax.
These are Washington, Alaska, Texas, Florida, Nevada, Wyoming, Tennessee, South Dakota and Vermont. However, not all of these states have the lowest state taxes overall. Florida, Washington and Texas, for instance, charge a high sales tax.
There are five states that do not impose a sales tax. These are Alaska, Montana, New Hampshire, Delaware and Oregon. Other states impose a sales tax ranging from one to over six percent of the purchase.
When calculating which state has the lowest taxes overall, one has to consider not only income tax and sales tax but also cigarette tax, fuel tax and property tax (which is determined on a county level as opposed to a state level). Some states have low state income tax rates but high sales tax rates and vice versa.
States with the Lowest Taxes Overall
The five states with the lowest taxes overall are Alaska, New Hampshire, Tennessee, Delaware and Alabama. Each one of these states has a tax burden of less than nine percent. Out of all of these states, Alabama and Tennessee are probably the most attractive retirement destinations. These states have great weather year round and plenty of things to do. Alabama is a particularly attractive retirement spot as it provides special tax breaks for senior citizens.
That is not to say that the other states mentioned above are not good places to retire. While Alaska and New Hampshire are not a popular retirement destinations, these states are beautiful places to live and there are many things to do for active retirees. Delaware is a pleasant place to live in the summer, as the weather is not as hot as it is in the southern United States.
Choosing a retirement spot is not easy. One good step is to consider which states have the lowest state taxes. Retiring in a tax friendly environment can save one a lot of money and enable one to live comfortably on a limited pension or savings account.
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