Best places to pay less

Are you looking for a great place to retire? Or wondering if the state you live in is too expensive? Property values, cost of living and lifestyle issues are important considerations when deciding where to live.

However, don’t forget to consider government taxes. Some states are more tax-friendly on retirement than others. Find out more about retirement taxes below, discover the best states for taxes and review income and sales tax rates in all 50 states.

You can save big money over your lifetime by really thinking about where you live and what taxes are imposed on the location.

What are the different types of taxes that countries impose?

Not only do income tax rates differ in each state, but different locations have different types of taxes.

State income tax: Income tax is usually the biggest concern.

Benefits and profits: Some states levy little taxes on income, but more on interest and dividends on assets.

Sales taxes: Sales taxes typically consist of a combination of state sales tax and local sales tax.

Property Taxes: Property taxes, as well as property values ​​– can vary greatly depending on your location. You will need to consider the property tax rate as well as the cost of the property.

Property Taxes: Estate taxes also vary widely from state to state, but most states do not tax your financial inheritance.

Taxes on Social Security and pensions: Very few states tax Social Security and pensions.

So what are the best states for retirement taxes overall?

The absolute best case for retirement taxes will depend a little on your financial profile.

For example: If you are leaving large assets to heirs, avoid states with large estate taxes. Or, if you have valuable assets and will receive large returns, you may want to look for states that have low taxes on interest and dividends.

However, here are some thoughts on low and high government taxes in general:

Low tax countries

However, according to the latest analysis from USA factsHere are five of the best states in terms of overall retirement taxes. Their analysis looks at tax revenues as a percentage of personal income in order to account for differences in average income nationwide. (This is different from comparing tax rates, which is a percentage of every dollar collected by the state or local government for each tax bracket.)

  • Alaska by 5.4%
  • Tennessee by 6.3%
  • New Hampshire by 6.4%
  • Wyoming by 6.6%
  • Florida 6.7%

Countries with high taxes

US Facts data ranks these five states as having the highest state and local tax burden:

  • New York by 13.1%
  • Hawaii 13%
  • Maine by 11.2%
  • Vermont by 10.4%
  • Connecticut by 10%

Income taxes by state

As of the beginning of 2024, seven states have zero income tax: Nevada, Wyoming, South Dakota, Texas, Florida, and Tennessee. California has the highest income tax rate at 13.3% and the lowest in Arizona and North Dakota at 2.5%.

Find your income tax rate by state on the map below:

Sales taxes by state

According to the Tax FoundationIn 2023, the five countries with:

  • The highest combined average state and local sales tax rates are Tennessee (9.548 percent), Louisiana (9.547 percent), Arkansas (9.44 percent), Washington (9.40 percent), and Alabama (9.24 percent).
  • The lowest combined average rates are Alaska (1.81 percent), Hawaii (4.44 percent), Wisconsin (5.43 percent), Wyoming (5.44 percent), and Maine (5.50 percent).

Property tax by state

Looking at property tax rates can be misleading. For example, a low rate on an expensive property may mean more spending than a high rate on a lower-value home.

However, here is data from the Tax Foundation on average property taxes paid by county as of 2021.

state Property Taxes

According to the latest compilation from the Tax Foundation, very few states have an estate tax. Those include: Washington, Oregon, Minnesota, Illinois, New York, Maine, Vermont, Rhode Island, Hawaii, and Connecticut.

Maryland has an estate and inheritance tax.

state Taxes on Social Security and pensions

Social security: Not all states tax Social Security, and for those that do, there are often exemptions or ways to reduce or eliminate the tax. You can get a full summary of Social Security state taxes here.

pensions: According to a report from AARP In 2021, Washington, Alaska, Nevada, Wyoming, South Dakota, Iowa, Illinois, Texas, Mississippi, Alabama, Tennessee, Florida, Pennsylvania and New Hampshire will impose no tax on pension distributions.

How to estimate your state and federal retirement taxes

Filing your taxes for a year can be stressful and unpleasant. Just thinking about tax planning for your entire retirement may seem impossible.

However, NewRetirement Planner makes it easy to predict taxes and optimize your retirement income, no matter where you live.

For Basic Planner (Free Edition) users, income taxes are modeled using the combined state and federal rate.

For PlannerPlus subscribers, the income tax form is more accurate, detailed, and transparent. You can:

  • See annual estimates for federal, state, and capital gains taxes
  • Review annual taxable income and realized capital gains
  • Determine itemized deductions and estate taxes.

Log in to see your expected taxes over a lifetime and strategize how to reduce this burden.

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