States that are tax friendly to retirees

Retirement often brings about a significant decrease in income and that income may be fixed. That makes it important to be in a state that is tax-friendly to retirees. Federal taxes will be the same no matter what state you live in. The things that need to be considered, are the rate of state income tax accessed, local taxes, any exemptions for retiree pensions and Social Security and the rate of sales tax in the state. All of these combine to make a state either friendly or unfriendly for retirees. Some stats are just friendlier than others.

Alabama 

Alabama is one of the friendliest states for retirees. In addition to a wonderful climate, its state sales taxes of 4 percent is among the lowest in the country. One thing that isn’t friendly in Alabama is the fact that food is also taxed but the good news is, prescriptions aren’t and that is an important consideration for retirees. Homeowners are exempt from state property tax if they are disabled or make less than $12,000 and most pensions and social security are not taxed. The state income tax ranges from 2-5 percent. Local municipalities may have their own property taxes so it is important to research before moving there but the fact that Alabama has no inheritance taxes is another feature that makes it a popular retirement choice. 

Alaska 

If you don’t mind long dark winters and short summers, Alaska can be a paradise for retirees. The state has no income tax and no state sale tax. Municipal sales tax averages out to about 1.7 percent. Real estate property taxes are about 1 percent but home prices can be a bit high. Perhaps that permanent resident dividend payment from Alaska’s vast oil wealth account which for 2014 was more than $1800 per person will help offset that.

Delaware

Delaware has no sales tax which is a major bonus. State income tax is on the higher side, however, ranging between 2.2 and 6.95 percent. Exemptions are offered, however, and Social Security is one of them. A $12,500 exemption for residents over 60 for pensions and investment income is also available. Additional tax credits that the retiree may qualify for are offered. Real estate qualifies for a variety of taxes. In Delaware, renting may be the best option for a retiree.

Pennsylvania

The north is not known as a retiree-friendly area for the most part. Pennsylvania is an exception. It has a 6 percent sales tax which is higher than Alabama but it also does not tax food, clothing, prescription and non-prescription drugs and fuel for heating. Social Security and pensions are also exempt from state income tax which is a flat rate of 3.07 percent. Property tax is determined on the local level and can be quite steep depending on the area, large urban areas being on average higher. All in all, when living on a pension, Pennsylvania is quite a friendly place for retirees to choose. 

Wyoming

If you are looking for a quiet place where your money will go a long way in retirement, look no further than Wyoming. Wyoming has no state income tax and the sales tax is a low 4 percent. Right off the bat, you will have more money in your pocket. Retirement income is not taxed at all on the state or municipal level. What there will be is personal property tax and of course, this can be avoided by renting but there are exemptions if you choose to own making this arguably the best state for retirees in the United States.

Many things can make a place good for retirement, taxes is certainly one of them. These five states are places that every senior should consider when it is time to retire especially if money is a serious consideration.