Did you know which are this year’s tax-friendly states for retirees?
When it comes to tax-friendly states, it is not about finding out whether or not the one you reside in is considered tax-friendly or not, but rather if there are better options for you in another state.
As retirees, stretching your savings in order to continue living in the state you have been in for the last couple of years may not be the best choice for you.
Relocating to a more tax-friendly state may be the best choice for you and your wallet, as with the same budget, you could end up making the most of lowered taxes and thus increasing the quality of life you have. Even if you do not end up saving a ton, it is still worth it for the peace of mind that comes along with not having to worry so much come tax season.
Since there are adjustments made to taxes each year, we have seen what experts talk about when it comes to taxes this year and gathered the best tax-friendly states that you could relocate to this year without issues.
Not only that, but all these states are great for retirees since, in addition to the favorable taxes for retirees, you will also have access to amazing healthcare facilities in the state and enjoy the amazing scenery! Curious? Keep on reading to discover them!
Have you considered relocating this year? Are there any states on your radar, and have you noticed them on our list as well? Would you relocate because of taxes? Let us know your answers in the comments!
Nevada
Nevada is one of the best states to relocate to if you are worried about taxes, especially since it is also known to have an overall low cost of living and is more affordable than other states.
A lot of older adults who are relocating to this state are glad to take advantage of the affordable prices, along with the likes of no income tax, especially on any form of retirement income, and no taxes on Social Security. Generally speaking, your egg nest is going to be safe from being taxed, as retirees are not some of the people who will have to deal with it in Nevada.
What’s more, if you are looking to buy property in the state as well, the property taxes are not that high, and they may be part of your budget as well. In the last year, the median property tax in the Silver State has been around $1,750 for a property that was valued at about $200,000.
In addition to that, you can expect a combined state and local sales tax rate of about 8.24%, so it’s not the worst out there.
When it comes to retirement living, Reno and Las Vegas have some of the best facilities when it comes to medical issues, with a lot of specialties available. Yet, if you have your eyes set on a rural area, do your research, as some of them have limited access to healthcare facilities.
Otherwise, the warm climate, amazing natural beauties, and vast entertainment options have made Nevada one of the new states retirees love!
Texas
Texas remains one of the most sought-after states for relocation when it comes to retirees, despite the testy political landscape at times. Texas is also considered a tax-friendly state since the state does not have an income tax whatsoever.
This means that the likes of pension payments, IRA and 401(k) distributions, or Social Security income are not going to end up being taxed, leaving you with a bigger nest egg to enjoy until your golden years.
The Lone Star State is considered to be able to offer a lot of diverse cultural and climate experiences, yet there are a few things to consider before relocating here.
The property tax is pretty high compared with other states (with the median property tax being about $2,200 for a $125k last year). This may not seem like much, but when you combine it with the local average sales tax rate, which sits at about 8.2%, it can end up being a lot.
Otherwise, if you relocate close to the major cities, healthcare facilities are centered around the likes of San Antonio, Houston, and Dallas.
Tennessee
Tennessee is not often seen on these types of lists, but it is actually a very tax-friendly state by a lot of standards, not just the ones that are appealing to retirees.
Here, the state does not have taxes on job earnings, Social Security, or pension income, and to that, you can also add that interest and dividends are also not subjected to any state taxes.
These tax benefits are attractive to most retirees, as they are a great way to minimize the burden that comes along with taxes in retirement while also maximizing the overall retirement income they will have at their disposal each month.
What’s more, you can also add that property taxes are going to be low, so relocating and buying property in the Volunteer State is not going to come along with a huge burden. For a home with a median value of $138k, the average property tax has been around $930 a year, which makes it the lowest on our list so far!
Where you will find that the state is more expensive than others is the local sales tax, which is combined with the state tax and sits at a rate of 9.55%. Yet, with the other taxes being so low, we think it makes up for the difference.
Otherwise, the state is definitely one for you if you enjoy the mountainside, especially Southeast Tennessee being a hub for music lovers!
And if you are worried about healthcare, know that Chattanooga, Nashville, and Memphis have high-ranking hospitals, so if you were to need medical treatment, you would be in good hands if you chose to be close to them!
Alaska
The Last Frontier state is no stranger to these types of lists, and it is still going strong as a great spot for retirees. If you know you love the outdoors and you do not mind a colder climate, the northernmost state may just be a new home for you!
Alaska is one of the states that collect no state income tax, but compared to some of the other states on our list, it also has no sales tax. You can expect to have local taxes, but the average rate here is low, sitting at about 1.82%, which makes it one of the lowest so far!
Yet, do not pack your bags yet. You may rejoice in the low and even lack of taxes so far, yet you need to be able to prepare ahead for high property taxes. The median last tear has been about $2,400 for a home valued at around $232k, which is pretty steep.
Despite this, once you have been living in the state for over a year, you will be able to access a financial perk that is unique to Alaska.
You will end up being eligible to receive an annual payout from an oil wealth trust fund, yet you need to be a registered resident in the state for over a year to get it!
All in all, Alaska is definitely a state to consider, but be aware of the weather if you are going to be able to withstand it.
Otherwise, hospitals in Fairbanks and Anchorage are considered top-tier, so you should not worry about being able to access healthcare as long as you are in a populated, not remote, area.
If you are interested in what living off-grid in Alaska may look like, we recommend you read One Man’s Wilderness: An Alaskan Odyssey! This book is by far the most popular in this genre, and it has been appreciated for over 50 years since it was published.
South Dakota
The laser state we are going to explore is South Dakota. As you have potentially predicted, this is another state that is attractive to retirees who have already relocated here due to the fact that it does not collect income tax.
Mount Rushmore State made sure that retirees who live there do not have to pay state tax on pension benefits, Social Security benefits, income earned from a part-time job, and even retirement account withdrawals!
Despite this, you still have to consider the sales taxes and property taxes, and while they are not as low as Alaska’s, they are still lower than other states.
South Dakota is definitely the state for you if you appreciate the quaint, rural life along with wide open spaces and nature. The climate here is also mostly pleasant, so not many find anything to complain about on these fronts.
You may be weary of the property tax, which sits at around $1,600 for a $126k-value home, and the combined median local sales tax, which is combined with the state tax, of around 6.11%. Overall, it sits around the other states we have talked about so far, so it’s definitely one you should give a fair chance to.
If you know you may need extensive healthcare, we recommend you look around Sioux Falls, which has the highest-ranking hospitals!
Even if you are not sure yet if relocating is the best move for you, we recommend you take advantage of all the tax breaks you can. If you or a loved one are over 65, make sure you check out all the tax breaks that you can benefit from in this article here!
