8 States To Move to If You Don’t Want To Pay Taxes on Social Security
Not all states tax equally. In fact, some states impose a tax on the money you withdraw from Social Security.
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So, after working hard for decades and having money deducted from your paycheck for Social Security, your savings might be a little less than you hoped.
Luckily, if you’re looking for relief, you can move to Washington, D.C., or one of these 39 states that don’t tax Social Security: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming. (Note: Colorado does tax Social Security for recipients under age 65.)
If you’re wondering which states are best for retirees, GOBankingRates looked into which states have the lowest taxes. Here are the top states to move to for those retiring soon based on their taxes.
Alaska
State sales and average local tax: 1.76%
State tax on Social Security: None
Effective property tax: 1.04%
Income tax rate (65+): 0%
Alaska is the most tax-friendly state for retirees because it has no state income tax or tax on Social Security. However, it is one of the top 10 states for cost of living, coming in at No. 6. What you’ll save in taxes, you’ll be using to pay for housing.
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Wyoming
State sales and average local tax: 5.36%
State tax on Social Security: None
Effective property tax: 0.56%
Income tax rate (65+): 0%
Wyoming also does not have taxes on Social Security or an income tax, and it has lower property taxes than Alaska. However, it does have a 4% sales tax, which Alaska does not.
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Delaware
State sales and average local tax: 0%
State tax on Social Security: None
Effective property tax: 0.61%
Income tax rate (65+): Graduated rate from 2.2% to 6.6%
Delaware doesn’t impose a state or local tax, which is great news for its residents. However, there is a graduated income tax that will hit your earnings.
New Hampshire
State sales and average local tax: 0%
State tax on Social Security: None
Effective property tax: 1.93%
Income tax rate (65+): 4% (applies only to interest and dividends income)
New Hampshire is one of the best places to live for retirees to escape taxes. It has no sales tax, no state income tax (with the exception of a flat 4% tax on income from interest and dividends) and no tax on Social Security.
However, it does have pretty high property taxes, so if you buy a home there, you’re going to pay quite a bit to Uncle Sam.
Nevada
State sales and average local tax: 8.23%
State tax on Social Security: None
Effective property tax: 0.59%
Income tax rate (65+): 0%
In addition to not taxing Social Security, Nevada also does not have an income tax. However, you still will have to pay taxes on any property you own, plus Nevada’s average sales and local tax is pretty steep.
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Florida
State sales and average local tax: 7.002%
State tax on Social Security: None
Effective property tax: 0.91%
Income tax rate (65+): 0%
It’s no wonder so many retirees flock to Florida. There are no taxes on income or Social Security benefits. Its property tax is about average for the United States, and the sales tax rate is fairly low in comparison to other states.
South Dakota
State sales and average local tax: 6.40%
State tax on Social Security: None
Effective property tax: 1.17%
Income tax rate (65+): 0%
Another state without income tax makes the list, meaning retirees won’t have to worry about their benefits being taxed. They’ll also enjoy fairly low state and local taxes. However, the property tax in South Dakota is above the national average of 0.99%.
North Dakota
State sales and average local tax: 6.97%
State tax on Social Security: None
Effective property tax: 0.98%
Income tax rate (65+): 1.10%+
Though North Dakota won’t tax Social Security payments, it will tax income from a retirement account, like a 401(k) or an IRA. How much depends on your income. However, that tax rate is still fairly low.
Gabrielle Olya contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: 8 States To Move to If You Don’t Want To Pay Taxes on Social Security
