Posted on Thu, Jul. 2, 2009
People seeking tax-friendly places to live in retirement face a hodgepodge of state tax laws to comb through. While experts recommend looking at total potential tax obligations, not just income or property taxes, here are some lists of states falling into tax categories of interest:
STATES WITH NO PERSONAL INCOME TAX (7): Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming. Two others, New Hampshire and Tennessee, impose income taxes only on dividends and interest (5 percent for New Hampshire and 6 percent for Tennessee in 2008).
STATES THAT DON'T TAX SOCIAL SECURITY BENEFITS (27): Alabama, Arizona, Arkansas, California, Delaware, (District of Columbia), Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin.
Many other states provide partial exemptions. The only states that fully tax Social Security are Minnesota, Nebraska, New Mexico, North Dakota, Rhode Island, Vermont and West Virginia.
STATES THAT TAX MOST RETIREMENT INCOME (6): California, Montana, Nebraska, New Mexico, North Dakota, Vermont. These are particularly tough on retirees because they have a relatively high top tax bracket and fully tax most retirement income.
STATES THAT PERMIT SOME DEDUCTION OF FEDERAL INCOME TAXES (9): Alabama, Iowa, Louisiana, Missouri, Montana, North Dakota, Oklahoma, Oregon, Utah. This would be a consideration if you are deciding between two states with similar rate structures.
Sources: Retirement Living Information Center, CCH Inc.
On the Net:
A guide to taxes by state: www.retirementliving.com/RLtaxes.html
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