Retirement will change many aspects of your daily life. But some things never seem to change, and income taxes are definitely one of those things! Most retirees do still file an income tax return each year and do owe some taxes each spring. Unfortunately, some are shocked to learn that their pension or Social Security benefits can be taxed.
At the federal level, taxes apply no matter where you live. But because individual states do impose their own tax code, choosing a location can be critical in the retirement years. That’s why so many retirees choose to relocate after their working years have ended.
Some states don’t impose income taxes at all. Others do, but exclude Social Security benefits, pension, or both from their calculations. Since you’re now free to live anywhere you want, you might be curious which states fall into that category. The following states have been identified as more tax-friendly to retirees, either because they don’t tax retirees or simply have no income tax at all.
- Alabama
- Alaska
- Arkansas
- California
- Florida
- Hawaii
- Illinois
- Indiana
- Iowa
- Kentucky
- Louisiana
- Maine
- Maryland
- Michigan
- Mississippi
- Nevada
- New Jersey
- North Carolina
- New Hampshire
- Oregon
- Pennsylvania
- South Dakota
- Tennessee
- Texas
- Washington
- Wisconsin
- Wyoming
Of course, you should remember that income taxes are not the only type of tax faced by retirees. You might still owe property taxes, sales taxes, and other taxes depending upon the state. It’s important to research each state’s tax structure carefully, and choose one that matches your budget.
Let’s discuss your intended retirement destination at our next appointment, and we can help you determine whether this is a good choice from a tax savings standpoint.