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What Are the Best States for Retirees, Based on Taxes?

Danielle Letenyei - Author

Jan. 27 2022, Published 1:12 p.m. ET

As you get closer to retirement, you might start considering the best states for retirees to relocate that have low taxes. Several states are more tax-friendly than others for retirees.

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When researching the different states, you should make sure that low taxes aren’t made up in other high costs. For example, Hawaii has one of the lowest state and local taxes in the country, but everything else in the state costs well above that of other states. The sales taxes in Hawaii are the highest in the U.S. at 6.65 percent.

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The estate or inheritance tax in the state where you plan to retire is also important. If something happens to you, you want to ensure that a chunk of the money you leave for loved ones doesn’t end up in the government’s pocket.

Here's a list of the best states for retirees that offer low tax burdens. None of these states have estate taxes.

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Alaska offers the lowest tax burden in the U.S.

Total tax burden: 5.10 percent

Property taxes: 3.68 percent

State income taxes: 0.00 percent

Alaska is probably the last place anyone thinks about retiring to, but if your choice is strictly based on finding the lowest tax burden in the country, this is it. Besides having no state income taxes, you also won’t have to pay state taxes on Social Security income. However, like Hawaii, the cost of living in Alaska is high.

Tennessee has a minimal state income tax.

Total tax burden: 5.74 percent

Property taxes: 1.7 percent

State income taxes: 0.08 percent

You also won’t pay taxes on Social Security benefits in Tennessee, and the state’s income tax is minimal. These factors help the state have the second-lowest total tax burden in the country. However, state and local sales taxes are on the high end at 9.55 percent.

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Wyoming doesn't have state income taxes or Social Security taxes.

Total tax burden: 6.14 percent

Property taxes: 3.33 percent

State income taxes: 0.00 percent

The total tax burden in Wyoming is slightly higher than in Tennessee. Still, many people consider it a better option to retire because there aren't state income taxes or Social Security taxes. Wyoming has a low sales tax rate of about 2.81 percent. However, property taxes in the state are higher than in Tennessee, which puts the state in third place based on the total tax burden.

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Delaware has low property taxes.

Total tax burden: 6.21 percent

Property taxes: 1.77 percent

State income taxes: 3.25 percent

Although Delaware does levy state income taxes at 3.25 percent, it's still on the lower end compared to other states in the U.S. Where Delaware shines is with its low property taxes. The sales tax in the state is also on the low end at 1.19 percent.

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New Hampshire doesn't tax personal income or Social Security.

Total tax burden: 6.84 percent

Property taxes: 5.47 percent

State income taxes: 0.00 percent

New Hampshire ranks fifth for having the lowest overall tax burden in the country, but it also has one of the highest property tax rates of all the states. However, personal income and Social Security aren’t taxed, and there isn't any sales tax.

Florida has tax perks as well as warm weather.

Total tax burden: 6.97 percent

Property taxes: 2.74 percent

State income taxes: 0.00 percent

Florida has always been a haven for retirees. Although it only ranks sixth in the country when it comes to the total tax burden, its warm climate is something the other states on this list can’t compete with. Florida also doesn’t levy taxes on income and Social Security. Property taxes are below the national average in Florida. State and local sales taxes aren’t the highest in the country, but they aren’t the lowest either.


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