Need to work in retirement? Before you start applying for jobs or looking into gig work, it will benefit you to learn how your state taxes retirement income. Hawaii and California may appear to be picturesque for the next chapter but lack the tax-friendliness of other states if you need to be employed as a retiree.
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GOBankingRates was able to determine the worst states to relocate to if you work in retirement by surveying income taxes at the federal and state level (including FICA), property taxes and sales taxes. After calculating these taxes as an annual amount, GOBankingRates found each state’s total annual taxes paid, total tax burden and overall cost of living index. A full methodology is available at the end of this story.
Below, see which 15 states you should avoid relocating to if you plan to work in retirement.
15. Maine
- Median household income: $71,773
- Tax burden: 32.3%
- Cost-of-living index: 113.5
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14. Minnesota
- Median household income: $87,556
- Tax burden: 33.1%
- Cost-of-living index: 95.3
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13. New Hampshire
- Median household income: $95,628
- Tax burden: 28%
- Cost-of-living index: 111.5
New Hampshire is the only state out of the 15 mentioned where the total tax burden is under 30%. The state doesn’t have a sales tax either.
12. Utah
- Median household income: $91,750
- Tax burden: 31.6%
- Cost-of-living index: 109.5
11. Illinois
- Median household income: $81,702
- Tax burden: 35.8%
- Cost-of-living index: 95.5
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10. Maryland
- Median household income: $101,652
- Tax burden: 32.5%
- Cost-of-living index: 98.9
9. Washington
- Median household income: $94,952
- Tax burden: 31%
- Cost-of-living index: 113.6
8. Vermont
- Median household income: $78,024
- Tax burden: 35.1%
- Cost-of-living index: 114.1
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7. Rhode Island
- Median household income: $86,372
- Tax burden: 34.1%
- Cost-of-living index: 112.4
6. Connecticut
- Median household income: $93,760
- Tax burden: 37.1%
- Cost-of-living index: 111.7
5. New York
- Median household income: $84,578
- Tax burden: 39.2%
- Cost-of-living index: 123.4
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4. New Jersey
- Median household income: $101,050
- Tax burden: 40.4%
- Cost-of-living index: 114.8
At nearly 41%, New Jersey has the highest total tax burden out of the 15 ranking states.
3. California
- Median household income: $96,334
- Tax burden: 38.4%
- Cost-of-living index: 144.7
2. Massachusetts
- Median household income: $101,341
- Tax burden: 37.1%
- Cost-of-living index: 146.9
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1. Hawaii
- Median household income: $98,317
- Tax burden: 35%
- Cost-of-living index: 184.6
Methodology: To generate the best and worst states to relocate to if you plan to work in retirement, GOBankingRates surveyed three key taxes: (1) Income taxes at both the federal and state level (including FICA), (2) property taxes, and (3) sales taxes. Incomes are based on 2023 American Community Survey median household figures and income tax estimates were created by using an in-house calculator for a person who was filing their taxes as a single person and using the standard deduction (with 2024 tax brackets). Property taxes were calculated using each state’s average rate as sourced from Tax Foundation and Zillow’s median home value index data as of December 2024. Sales taxes were calculated using each state’s “state and local combined sales tax rate”, sourced from the Tax Foundation, and factored against each state’s average annual consumer expenditure. Estimates on annual consumer expenditure in each state were created by taking the Bureau of Labor Statistics’ 2023 Consumer Expenditure Survey’s national average annual expenditures estimate and factoring it out for each state using the Missouri Economic Research and Information Center’s cost of living indices for the 3rd Quarter of 2024. Once the three above taxes were calculated as an annual amount, GOBankingRates found each state’s total annual taxes paid and (4) total tax burden. GOBankingRates also found the (5) overall cost of living index for each state. For final calculations factors (1) to (5) were scored and combined with the lowest score being best. In final calculations, factor (3) was weighted 0.5x and factor (5) was weighted 2x. All data was collected on and up to date as of Feb. 5, 2025.
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This article originally appeared on GOBankingRates.com: 15 States To Avoid If You Plan To Work in Retirement in 2025
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