The Top 10 Most Tax-Friendly States For Retirement

April 17, 2018

You want to focus on enjoying your retirement years, and there are a lot of factors that determine if this is a time of recreation and relaxation or not. Good health, the ability to live independently, and to take part in engaging activities are all vital at this stage of life. Having enough money to live comfortably is necessary for pursuing your ideal retirement lifestyle. While considering each state’s cost of living is essential, retiring to a tax-friendly state helps you to stretch your retirement income.

We analyzed multiple top tax-friendly state lists and looked in depth at each state’s income tax, average tax on purchases, gas tax, and whether or not there is an estate or inheritance tax. As a practical side note, in addition to altogether avoiding states with an estate tax, keeping all of your assets and financial accounts in a trust is a sound move for shielding heirs from this tax.

#1: Wyoming

  • State income tax: None

  • Average state and local sales tax: 5.45%

  • Estate tax/Inheritance tax: None

  • Gas tax/fees: 24 cents per gallon (national average is 32 cents per gallon)

Grand Tetons, WY

Grand Tetons, WY. Source: Getty

With no state income tax, no estate tax, no inheritance tax, and a low sales tax, Wyoming is the clear winner as the most tax-friendly state. Wyoming also rates high on the quality-of-life scale for other such as easy access to outdoor activities, top-ranked schools and clean air ratings. Wyoming has one of the lowest median property tax rates in the country. A retiree with a home valued at $184,000 would pay $1,058 in property taxes, which is why we gave it the edge over Alaska. Most residents pay 0.58 percent of the home’s value.

In fact, Wyoming is ranked as the fourth best taxpayer state, and the state also ranks fourth overall in affordability for retirees in multiple publications.

#2: Alaska

  • State income tax: None

  • Average state and local sales tax: 1.78%

  • Estate tax/Inheritance tax: None

  • Gas tax/fees: 12 cents per gallon

Alaska is another state with no state income tax, and no estate tax or inheritance tax. It also has the second-lowest average state and local sales tax of 1.78 percent. This serves to counter the median property tax, which is one of the highest in the country. A retiree with a $232,900 home in Alaska can expect to pay $2,422 in property taxes. Most residents pay 1.04 percent of the property’s market value.

Alaska holds the top spot in WalletHub’s taxpayer ranking and also has the most elder-friendly work market for retirees who might want to earn extra income. The state has the highest percentage of workers who are 65 years old or older.

Anchorage, AK

Anchorage, AK. Source: Getty

#3: South Dakota

  • State income tax: None

  • Average state and local sales tax: 5.84%

  • Estate tax/Inheritance tax: None

  • Gas tax/fees: 30 cents per gallon

Mt Rushmore

Mt Rushmore, SD. Source: Getty

South Dakota is another state with no state income tax, no estate or inheritance tax, and very low average state and local sales taxes, and is another great state for retirees.

The average homeowner pays 1.28 percent of their property’s value in taxes. Homeowners with a house valued at $126,200 will typically pay $1,620 a year property taxes. This lands the state right in the middle in the 27th place among the fifty states.

South Dakota is also another very elder-friendly work state and has the third highest percentage of workers who are 65 years old or older.

#4: Mississippi

  • State income tax: 3% on less than $5,000 of taxable income, 5% on more than $10,000

  • Average state and local sales tax: 7.07%

  • Estate tax/Inheritance tax: None

  • Gas tax/fees: 19 cents per gallon

Mississippi

Biloxi, MS. Source: Getty

Mississippi has no estate or inheritance tax. The state income tax is very low, starting at 3 percent, and stands out as a great place for retirees for other non tax-related reasons such as low cost of living and its warm climate. It has the fourth lowest median property tax rate in the U.S., which is an average of 0.52 percent. Taxes on the average home in Mississippi valued at $98,000 would be $508 a year.

The state also has the lowest adjusted cost of living in the country and the fourth lowest annual cost of in-home services.

#5: Florida

  • State income tax: None

  • Average state and local sales tax: 6.66%

  • Estate tax/Inheritance tax: None

  • Gas tax/fees: 37 cents per gallon

Florida has no state income tax, no estate or inheritance tax, and an average state and local sales tax of 6.66 percent. Regarding property taxes, it ranks 23rd in the nation. With a home valued at $182,400, a homeowner in Florida would pay $1,773 a year in property taxes. The average Floridian pays 0.97 percent in property taxes.

The state is quite popular with retirees. In fact, Florida stands out as being the state with the highest percentage of residents who are 65 years of age or older. The state is not an elderly-worker state with the fourth lowest percentage of senior workers in the country. However, this may be because the majority of the population of Florida retirees are not interested in working.

Ft. Lauderdale, FL

Ft. Lauderdale, FL. Source: Getty

#6: Pennsylvania

  • State income tax: 3.07%

  • Average state and local sales tax: 6.34%

  • Estate tax/Inheritance tax: No/Yes

  • Gas tax/fees: 76 cents per gallon

Philadelphia, PA

Fall In Philadelphia, PA. Source: Getty

Even though Pennsylvania’s tax on gas is the highest in the nation, there’s no estate tax in Pennsylvania. There’s a 3.07 percent state income tax, and an average state and local sales tax of 6.34 percent. The state ranks seventh in property taxes, with an average 1.35 percent assessment. A property owner with a $164,700 house would pay roughly $2,223 a year in taxes. Finally, Pennsylvania has an inheritance tax of 4.5 percent.

Pennsylvania is also prominent state for retirees. It has the has the fifth highest percentage of residents who are 65 years of age or older.

#7: Nevada

  • State income tax: None

  • Average state and local sales tax: 7.98%

  • Estate tax/Inheritance tax: None

  • Gas tax/fees: 34 cents per gallon

Reno, NV

Reno, NV. Source: Getty

Nevada has no state income tax, and no estate or inheritance tax. The average state and local sales taxes are 7.98 percent. It’s in the middle of the pack – 24th in the U.S. – in property taxes. A Nevadan with a home valued at $207,600 would pay $1,749 each year in property taxes.

Nevada also has the fifth best taxpayer ranking by WalletHub.

#8: New Hampshire

  • State income tax: None

  • Average state and local sales tax: None

  • Estate tax/Inheritance tax: None

  • Gas tax/fees: 23 cents per gallon

New Hampshire is a good state for retirees because residents don’t pay state income taxes, state and local sales taxes, and they don’t pay estate or inheritance taxes. The reason New Hampshire is not higher on our list is that it has the third highest property tax rates in the country. Residents pay an average 1.86 percent, and a homeowner would pay $4,636 for a home valued at $249,700.

New Hampshire also has the lowest property crime rate in the U.S.

Portsmouth, N.H.

Portsmouth, NH. Source: Getty

#9: Kentucky

  • State income tax: 2% on less than $3,000 of taxable income, 6% on more than $75,000

  • Average state and local sales tax: 6%

  • Estate tax/Inheritance tax: None

  • Gas tax/fees: 27 cents per gallon

Lexington, KY

Lexington, KY. Source: Getty

Kentucky does not charge estate or inheritance taxes. However, move to this state, and you will pay other taxes. State income tax ranges from 2 percent to 6 percent, and the average state and local sales tax rate is 6 percent.

Kentucky also has the eighth lowest property tax rate in the country. A homeowner with a house valued at $120,200 would pay approximately $1,042 a year.

#10: Georgia

  • State income tax: 1% on the first $750 of taxable net income for single filers/$1,000 for those filing jointly, and 6% on taxable income over $7,000 for singles /$10,000 for those filing jointly

  • Average state and local sales tax: 7.01%

  • Estate tax/Inheritance tax: None

  • Gas tax/fees: 26 cents per gallon

Georgia has no estate tax and no inheritance tax. State income taxes are low, ranging from 1 percent to 6 percent, and the average state and local sales tax rate is 7.01 percent.

Georgia is ranked 33rd in the country for property taxes. Homeowners pay an average 0.83 percent, and the yearly tax would be $1,346 on a home valued at $162,800. However, retire to Georgia, and you won’t see many fellow retirees. The state has the fourth lowest percentage of residents who are 65 years of age or older.

Macon, GA

Macon, GA. Source: Getty


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