Which States Won't Tax My Retirement Income?
I'm thinking about moving to a new state when I retire and would like to find a state that won't tax my retirement income. Which states have no income tax?
Seven states do not impose an income tax : Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. And several other states don't tax certain kinds of pensions or retirement accounts, or they give special tax breaks to people age 65 or older. Mississippi and Pennsylvania, for example, don't tax public or private pensions or distributions from retirement accounts. New Hampshire and Tennessee tax only dividends and interest. And both have special breaks on this income for retirees: New Hampshire exempts $1,200 of it from taxes for people age 65 or older; Tennessee exempts it for people age 65 or older if their income is $33,000 or less ($59,000 or less for joint filers).
Income taxes are only one part of the overall tax picture. Most states don't tax Social Security benefits , but a few states do. Minnesota and Rhode Island, for example, tax Social Security income to the same extent--up to 85%-- as the federal government. And some states with low or no income taxes have high property taxes or sales taxes. Washington State, for instance, has no state income taxes but has relatively high sales and property taxes (it does have some special property tax relief programs for retirees). Property taxes could make a big difference if you're moving to a high-priced retirement dream home but not as much if you're downsizing - and not at all if you're renting.