There are lots of factors to weigh when choosing where to spend your retirement — climate, proximity to family, access to quality medical care. And if you’re looking to make the most of your retirement income, you’ll want to add taxes to the list. The state you live in can have a big effect on your tax burden. Here are seven good choices for stretching those dollars and enjoying a tax-friendly retirement.
With its plentiful beaches and balmy weather, Florida is a popular hub for retirees. But the benefits extend beyond the abundant sunshine: Florida has no state income tax, meaning residents don’t pay state tax on Social Security benefits or other retirement income. Florida also has no inheritance or estate tax, and offers a generous homestead exemption to offset property taxes for qualifying seniors.
While Louisiana residents pay state income taxes, income from Social Security and military, civil, local, and state government pensions is exempt. Residents over age 65 may also be able to exclude up to $6,000 of retirement income from their taxable income. Louisiana’s property tax rates are among the lowest in the US, making the state appealing — especially for fans of Cajun and Creole food, music, and culture.
With no income, estate, or inheritance taxes, Nevada is yet another popular retiree destination. Wealthy retirees planning to pass wealth to their heirs may also appreciate the state’s generous asset-preservation laws. For retirees who are more interested in the outdoors than in slot machines, check out Reno, known for its 300 days of sunshine per year, proximity to the Sierra Nevada mountains, and the world’s largest free hot-air balloon festival.
Retirees looking to enjoy the best of all four seasons should consider this New England state. New Hampshire only taxes income from dividends and interest, and offers a $1,200 exemption for residents 65 and older. It’s also one of a handful of states that doesn’t levy a sales tax, and it has one of the lowest crime rates nationwide.
Pennsylvania doesn’t tax Social Security or most income from pensions, and the cost of living tends to be lower than in nearby New Jersey or New York. However, the Keystone State generally does levy a state inheritance tax on assets passed to heirs other than a spouse. Retirees might look into Bethlehem, a former steel town that’s transformed its mill into an arts center. Bethlehem also earns praise for its walkability and affordable housing.
South Dakota has no individual income tax, so retirees won’t have to dish out taxes on income they receive from Social Security, pensions, or retirement plans. The state also has no inheritance tax and a low sales tax of 4.5 percent. The low cost of living and highly rated health care make South Dakota among the most desired retirement destinations. A favorite location among retirees is Rapid City, located near the Mount Rushmore National Memorial and boasting some of the area’s best medical facilities.
With its low crime rates, low property taxes, a low sales tax of 4 percent, and no state income, inheritance, or estate taxes, Wyoming is an affordable destination to retire in — so long as the brisk winters don’t scare you off. For retirees seeking culture, check out Casper (with a sales tax of 5 percent), Wyoming’s second-largest city, or Laramie (with a sales tax of 6 percent), home to the University of Wyoming.
A version of this article appeared in our partner magazine, The Essential Tax Guide: 2023 Edition.
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