“If you’re considering moving when you retire, have you considered the potential tax issues?” Eric Coons
Many retirees choose to move after retiring, whether to be closer to kids and grandkids, enjoy more leisure activities, or make their retirement dollars go further.
However, if you’re thinking of relocating, be sure you don’t focus solely on finding the state with the lowest cost of living. Taxes are also a significant factor in whether you’ll have enough money to last the rest of your life. Some states and cities with lower prices for housing, energy, food, and other necessities often have higher property, income, and sales taxes.
Several states make the grade in treating their citizens better when it comes to taxes. If you want to move when you stop working, you may want to look at these eight states with the friendliest tax environments. Bear in mind that within each of these states, there are cities that may not be as cost-effective for those on limited incomes as others. It pays to do as much specific research as possible to find your ideal location within a given state.
Washington: Because it has no state income or Social Security taxes, Washington is a mecca for retirees. Although Washington’s sales tax is notoriously high, property taxes are lower than over half of the other states, currently at 0.92%. The capital city of Olympia is one of the most affordable cities for those desiring affordable, active lifestyles.
Tennessee: Tennessee, with its scenic mountains, hiking trails, and laid-back vibe, is an increasingly popular state with retirees. Tennessee has no state income tax, property taxes are low at around 0.73%, and the state doesn’t tax Social Security benefits. In 2021, Tennessee also eliminated its’ tax on investment income. However, you should be aware that Tennessee’s state and local average sales taxes are among the highest in the country.
South Dakota: South Dakota’s higher-than-average property taxes may not be an issue for some people, especially since there isn’t the burden of a state income tax and no tax on Social Security.
Florida: It’s more than balmy weather and beautiful beaches that’s been drawing older Americans to Florida for decades. Florida’s lack of state income tax and lower to middle sales and property taxes make it an ideal place for retirees to stretch their dollars.
Nevada: Nevada doesn’t have a state income tax, nor does it tax Social Security benefits. However, Nevada’s sales tax rate outpaces that of most other states.
Delaware: Delaware is perhaps the best state to retire tax-wise, with neither a state tax on Social Security nor state or local sales taxes. State income tax rates for those over 65 are around 5.55%. A bonus is that Delaware boasts some of the lowest property taxes in the nation.
Wyoming: Wyoming is another exceptional state for retirees trying to avoid large tax bites. Wyoming has no state income tax, and its’ sales and property tax rates are some of the lowest in the United States.
Alaska: Due to its’ remote location and short summers, Alaska’s cost of living is understandably higher than other states. However, some of the higher living expenses in Alaska are offset because there are no state income taxes and typically low sales tax rates.
Summing it up: If you are thinking about a move when you stop working, it makes sense to consider the overall cost of living of your chosen location and its tax rates. Before committing to a particular state or city, sit down with your tax planner, financial advisor, or relocation expert and do the math. With a bit of research and strategic planning, it’s possible to discover a new place to live that is enjoyable and easy on your wallet.