Retirement is the perfect time to reap the rewards of your hard work and enjoy a well-deserved break. For many, this means considering the financial aspects of retirement, especially when it comes to taxes. While taxes are an essential part of our society, retirees often seek places where they can minimize their tax burden and make the most of their retirement income. In this blog post, we'll highlight 13 states that don't tax retirement income and provide insights into their tax policies. However, keep in mind that while low or no taxes on retirement income are appealing, they should not be the sole factor when deciding where to retire.
13 States That Don't Tax Retirement Income:
Alaska
Florida
Nevada
South Dakota
Tennessee
Texas
Washington
Wyoming
New Hampshire (except for interest and dividend income)
Illinois
Iowa (for those aged 55 or older)
Mississippi (with certain requirements)
Pennsylvania (with certain exceptions)
40 States That Don't Tax Social Security Benefits: Social Security benefits are a significant income source for retirees. Fortunately, many states recognize this and do not tax Social Security benefits. Here's a list of 40 states and Washington, D.C., where you can enjoy your Social Security benefits without state taxation:
Alabama, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming
States That Tax Social Security Benefits (12 States):
Colorado
Connecticut
Kansas
Minnesota
Missouri
Montana
Nebraska
New Mexico
Rhode Island
Utah
Vermont
West Virginia
Federal Taxation of Social Security Benefits: While your state's tax policy on Social Security benefits is essential, don't forget about federal taxation. The federal government may tax up to 85% of your Social Security benefits, depending on your combined income. Understanding the federal thresholds can help you plan accordingly.
Consider the Big Tax Picture: When choosing where to retire, remember that taxes come in various forms. While some states might not tax income at all, they may have higher sales or property taxes. Your choice should align with your overall financial strategy for retirement.
Aim for Comprehensive Retirement Planning: While tax-friendly states are appealing, a well-rounded retirement plan involves more than just minimizing taxes. Saving and investing for retirement are crucial to ensure a comfortable lifestyle. Explore various investment options and consider seeking professional financial advice to secure your golden years.
Ready to plan your tax-friendly retirement? Contact Done with Debt today, and let's embark on a journey to create a comprehensive retirement plan that suits your financial goals and dreams.
Choosing a tax-friendly state for retirement is a wise financial decision, but it should be part of a broader retirement plan. By considering all aspects of your financial future, you can make an informed choice that leads to a fulfilling and stress-free retirement. At Done with Debt, we're here to guide you every step of the way.
Comments