As you approach retirement (or if you’re already there), you may be thinking about moving to a different state to spend your golden years. If that’s the case, you’ll want to consider climate, proximity to family and friends, access to quality health care, and a host of other important factors. And make sure you’ve added state taxes to the list of considerations.
Depending on your situation, the total state and local tax burden in one state could be thousands of dollars more each year than in another. Some states exclude all or a significant portion of income from retirement savings, while others tax nearly all of your retirement income, including Social Security. If you plan to own a home in your new state, property taxes could also put a big dent in your budget, and in many states, those taxes have been rising (see “Ahead,” on page 9). To help seniors avoid a state tax bombshell, Kiplinger has created a state-by-state guide to taxes on retirees (we also included Washington, D.C.). Our results are based on the estimated 2020 state and local tax burden in each state for two hypothetical retired couples with a mixture of income from wages, Social Security, traditional and Roth IRAs, private pensions, 401(k) plans, interest, dividends, and capital gains. One couple had $50,000 in total income and a $250,000 home, while the other had $100,000 of income and a $350,000 home (see the box on page 61 for more about our methodology).
All but one of the states on our most-tax-friendly list completely exempt Social Security benefits from state income taxes. Most also allow an exemption for at least a portion of our hypothetical couples’ other retirement income, such as private pensions or IRA withdrawals.
For details on taxes in every state, including estate and inheritance taxes, go to kiplinger.com/kpf/retireetaxmap.
This story is from the March 2022 edition of Kiplinger's Personal Finance.
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This story is from the March 2022 edition of Kiplinger's Personal Finance.
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