The Top 10 Tax Friendly States To Retire In
Retirement

The Top 10 Tax Friendly States To Retire In

The best states to retire in based on taxes: Alaska, Delaware, Georgia, and more.

Ever thought about relocating when you retire? Before you say goodbye to the neighborhood, this week’s post may help you make smarter plans based on recent tax data.

Each year JP Morgan Asset Management releases an updated Guide to Retirement (2017). This year was no different. The annual guide covers 4 major areas that include: retirement landscape, saving, spending, and investing

One great takeaway from this year’s Guide to Retirement was JP Morgan Asset Management’s Comparison of State Taxes Paid by A Retiree Household. Here are the top ‘tax friendly’ states to retire in according to their methodology.

Image courtesy of JP Morgan Asset Management

Top 10 Tax Friendly States

1. Alaska: Taxes for retirees in Alaska are lower than any other state. They have a modest sales tax (7.5% or lower) with low property taxes and no state income taxes.

2. Delaware: Delaware taxes are low and weighted toward property and income taxes. Delaware does not impose sales taxes on goods or services sold in the state.

3. Georgia: Like most states, Georgia sales tax varies by region. The effective tax rate currently ranges from 6.0% to 8.0% in the major metro areas. Georgia has lower and property and income taxes for retirees.

4. Nevada: Like Alaska, Nevada does not charge an income tax. They make most of their revenue from sales taxes (8.25%). Property taxes vary by area and are subject to senior exemptions.

5. Wyoming: Wyoming is another one of the 7 states that does not assess an income tax. Their state sees revenue from property and sales taxes. Property taxes tend to be lower for retirees in Wyoming.

6. Mississippi: Sales tax in Mississippi is usually 7.0% unless taxes for certain items. They also have a graduated income tax based upon your income. Property taxes are more reasonable compared to most other states.

7. Kentucky: Kentucky enjoys a relatively low 6.0% sales tax state wide. However, they assess income and property taxes depending on household income and property values.

8. Colorado: Sales tax in Colorado varies by jurisdiction. They also charge a flat 4.63% income tax regardless of your annual income. Colorado also assesses property taxes.

9. Florida: Florida is another state that does not charge income tax. Sales tax depends on the region and item sold and property taxes in Florida vary by city and county.

10. South Dakota: Rounding out the top 10 tax-friendly states, South Dakota does not levy an income tax. However, they make up for it with higher sales taxes on various items and property taxes.

Image Courtesy of JP Morgan Asset Management

Planning Retirement Going Forward

State taxes can change every year. What looks great in 2017 may not make as much sense in 2018 or beyond. We don’t recommend selling the homestead and moving to Alaska just yet, but it may make sense to talk to us about your retirement plans. We help our clients balance these concerns with other considerations so you can enjoy a stress-free retirement. Call us today.

 

JP MORGAN ASSET MANAGEMENT CHART DISCLOSURES:

Tax favorability based on household overall effective state tax rate: Top tax friendly (<8%), Tax friendly (8%-9.9%), Less tax friendly (10%-13%), Not tax friendly (>13%). Retired married household age 65. 1 State income tax liability is based on all taxable sources of retirement income minus allowable state personal exemptions and a standard deduction. State-specific exemptions, deductions and/or credits related to eligible retirement income and Social Security are included. States with no income tax: AK, FL, NV, SD, TX, WA, WY. States that tax interest and dividends only: TN and NH. States that tax Social Security: CO, CT, KS, MN, MO, MT, NE, NM, ND, RI, UT, VT, WV. States that do not tax retirement plan distributions or Social Security: IL, MS, PA. 2 State property tax applies to home value only and includes state-specific homestead exemptions/credits. 3 States with no sales tax: AK, DE, MT, NH, OR (local taxes may apply).

Of note: CA imposes a 1% surtax on taxpayers earning more than $1M ($1,052,886 married) for a top marginal tax rate of 13.3%. NYC levies an additional 2.907-3.876% on taxable income. HI top marginal income tax rate reduced to 8.25% in 2017.

Retired married household age 65. 1 State income tax liability is based on all taxable sources of retirement income minus allowable state personal exemptions and a standard deduction. State-specific exemptions, deductions and/or credits related to eligible retirement income and Social Security are included. States with no income tax: AK, FL, NV, SD, TX, WA, WY. States that tax interest and dividends only: TN and NH. States that tax Social Security: CO, CT, KS, MN, MO, MT, NE, NM, ND, RI, UT, VT, WV. States that do not tax retirement plan distributions or Social Security: IL, MS, PA. 2 State property tax applies to home value only and includes state-specific homestead exemptions/credits. 3 States with no sales tax: AK, DE, MT, NH, OR (local taxes may apply).

Of note: CA imposes a 1% surtax on taxpayers earning more than $1M ($1,052,886 married) for a top marginal tax rate of 13.3%. NYC levies an additional 2.907-3.876% on taxable income. HI top marginal income tax rate reduced to 8.25% in 2017.

Source: J.P. Morgan Asset Management. The presenter of this slide is not a tax or legal advisor, and this slide should not be used as such. Clients should consult a personal tax or legal advisor prior to making any tax- or legal-related investment decisions.

 

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