KENT MCDILL writes: Retiring: Top 10 Tax-Friendly States. Not all retirees relocate, but for those that are thinking about it, individual state tax rates could help determine where the Baby Boomers will retire.
CNBC.com issued a list of the top 10 United States in terms of tax-friendly policies for Baby Boomers retiring in the near future. As CNBC writer Shelly Gigante noted, the states are not rated against each other because policies are so different from state to state. Instead, CNBC just selected the 10 states friendliest to retirees for whom taxes matter.
A recent Millionaire Corner study of wealthy investors found that only 41 percent of investors plan to relocate when they retire (or did so, if already retired). Of those that said they were going to move or already did so, 40 percent said taxes would be a factor in determining the location, but that several factors were more important, including weather (57 percent), cost of living (61 percent), proximity to friends and family (58 percent), and access to healthcare (44 percent).
The CNBC study noted that many states that have zero income tax still have other tax policies that make it less friendly to retirees, such as real estate or pension taxes. As a result, only three of the seven zero income tax states made its list – Alaska, Nevada and Wyoming. Not making the list were Florida, South Dakota, Texas and Washington.
In alphabetical order, the top 10 tax-friendly states for Baby Boomers retiring according to CNBC were:
Alabama – Senior citizens play no property taxes. Retirement income from Social Security is exempt. So is most income from pensions. There is no sales tax on prescription drugs, either.
Alaska – No state income tax, no state sales tax, and no state inheritance tax. How is that for starters? There is also a zero tax policy on retirement benefits, and every state citizen receives an annual federal tax payment that can reach the low four figures due to oil revenues. The drawback – it’s cold, and removed from the rest of the country, but that has nothing to do with taxes.
Delaware – The First State has no state sales tax, and a low state income tax. It’s property tax ranking is in the lowest five states in the union. There is no inheritance or estate tax, and up to $12,500 of retirement income is exempt for those 60 years of age and older.
Georgia – Did you know Georgia is the largest state east of the Mississippi? Still, the state income tax ranges from 1 to 6 percent, and no estate or inheritance tax. Also, the exemption for retirement income was recently boosted to $65,000 per individual.
Louisiana – The Pelican State has second lowest property tax rate in the nation, no Social Security tax, and no tax for government pensions. There is no estate or inheritance tax, either.
Mississippi – Mississippi is one of two states in the union – Pennsylvania is the other – which exempts all forms of retirement income from taxes. Medicare and Medicaid payments are also exempt.
Nevada – Income from retirement accounts and Social Security benefits are exempt, and there is no state income tax.
South Carolina – There is no tax on Social Security and homeowners over the age of 54 get a property tax break on the first $50,000 of the property’s market value. There is a retirement income deduction for residents 65 and older up to $15,000 per spouse. The state also has not inheritance or estate tax.
Tennessee – In 2016, the Volunteer State is going to eliminate its inheritance tax. There is no tax on income from salaries, Social Security or retirement income from IRAs or pensions.
Wyoming – Residential real estate is taxed at less than 10 percent of a property’s assessed value. There is no state income tax, and state sales tax is at 4 percent, except for groceries and prescription drugs, which have no sales tax.
From that list, Baby Boomers retiring have choices ranging from the Southeast, the East Coast, and non-coastal Western states. Oh, and Alaska.
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