When you no longer need to live near your job, a world of possibilities opens up. Relocating can sometimes save you money if you can find more affordable housing and lower your tax bill. Residing near friends and your children and grandchildren can also play a role in your retirement happiness.
Retirees can help their savings last longer by moving to a state with lower taxes. Currently, 13 states do not tax Social Security or pension income. They may however have very different property and sales tax rates, which also should be taken into consideration.
13 States Without Pension or Social Security Taxes
Alabama does not tax Social Security benefits or traditional pension payments. Property owners in Alabama paid a median of just $556 in real estate taxes in 2015. The state sales tax rate is also relatively low @ 4%, but there may be additional local sales taxes in some areas of the state.
Property taxes can be high in Alaska. Homeowners paid a median of $2,979 for real estate taxes in 2015. However, Alaska is the only state with no state income tax and no state sales tax.
Florida has a state sales tax of 6 percent. Year-round warm weather isn’t the only perk of retirement in Florida. The state doesn’t levy an income tax. Real estate taxes were a median of $1,733 across the state in 2015.
In Illinois real estate taxes are high, costing homeowners a median of $4,101 in 2015. Shoppers also pay a 6.25 percent sales tax on many purchases. However, the state of Illinois allows retiree residents to subtract their Social Security income from their adjusted gross income. Income from federally qualified pension plans and IRAs are also generally exempt from state tax.
Mississippi has a relatively high state sales tax rate of 7 percent. Median real estate taxes were just $877 in 2015. However, pension and annuity payments and income from Keogh plans and IRAs are generally exempt from state tax in Mississippi, and income from Social Security is also not subject to taxation.
State sales tax in Nevada is at a rate of 6.85 percent. The casinos and nightlife could be what draws you to Nevada, but you might stay for the low tax rates. Nevada doesn’t have a state income tax. The median real estate tax bill was $1,529 in 2015.
Property taxes in New Hampshire are among the highest in the country. Homeowners paid a median of $5,349 for real estate taxes in 2015. However, there is no state sales tax. The only forms of Income New Hampshire taxes, dividends and interest.
Distributions from 401`(k)s and similar types of workplace retirement accounts and IRA withdrawals taken after age 59 ½ are also generally exempt from state income tax. Social security benefits are not included in taxable income in the state of Pennsylvania. But retirees will have to pay a 6 percent sales tax on their purchases. The median property tax bill was $2,671 in 2015.
Property owners in South Dakota paid a median of $2, 025 for real estate taxes. There’s also a state sales tax of 4.5 percent. South Dakota is also another state that doesn’t have an income tax.
Tennessee has a 7 percent sales tax. Homeowners also paid a median of $1,099 in real estate taxes. However, dividends and interest are the only forms of income that are taxable in Tennesse, and taxpayers age 65 or older with low incomes are exempt.
There is no state income tax in Texas, but the state raises revenue in other ways. There’s a 6.25 percent sales tax applied to many purchases and property owners faced a median of $2,755 in real estate taxes in 2015.
Homeowners in Washington state paid a median of $2,895 for property taxes in 2015. Washington State won’t tax your income, but it will tax your property. There is also a 6.5 percent sales tax.
Property taxes in Wyoming were a median of $1,256 in 2015. However, Wyoming does not levy an income tax. The sales tax is a relatively low 4 percent.
Retirement isn't supposed to be stressful, but it can be if you don't plan properly or the market goes awry. Beginning the retirement investment process at a young age often pays off in the long run.
Additionally, mortgage, insurance, and health care expenses can change unexpectedly, and it's important to know how to adapt to those changes after leaving the workforce.
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