Obviously, one factor to be taken into consideration by anyone searching for the best place to retire is an analysis of the tax consequences of retirement in a new domicile and the tax ramifications that will accrue as a result of relocating to a new State. Clearly, there are some States that can be deemed to be the best places to retire for tax purposes.
While it is not our intent to provide a detailed tax analysis for each of the 50 different States, this page should serve as a readily available resource whereby retirees can compare the various taxes imposed at the State level and make a choice based on their personal circumstances.
Personal Income Taxes
Although many retirees are primarily concerned about the personal income taxes which may be imposed at the State level, it is also important to consider the property tax burdens and sale taxes which you may encounter in moving to a new retirement location.
Several States, notably Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no personal income taxes, and in Tennessee and New Hampshire, income taxes are imposed only on dividends and interest.
State Sales Tax .
Alaska, Delaware, Montana, New Hampshire and Oregon do not have a sales taxes. While some States have a uniform rate. others allow counties and municipalities impose a local option tax onto the base tax rate. States with a single rate include Connecticut, Hawaii, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Rhode Island, Vermont, Virginia, and West Virginia.
The highest sales tax are found in California (7.25%), Mississippi (7.0%), New Jersey (7.0%), Tennessee (7.0%), Rhode Island (7.0%), Minnesota (6.5%), Nevada (6.5%), and Washington (6.5%). The final tax will be higher, though, in those jurisdictions which permit a local option tax.
Property taxes remain the biggest source of revenue for most county and municipal governments throughout the U.S.However, the basis for assessing such taxes and the specific rates will vary greatly.Once you have identified an area that is being considered for relocation, it is best to study the tax situation for that locale in detail before making your final decision.
Statistics obtained from the U.S. Census Bureau does give some insight into which States have the lowest and highest property taxes.
States with the lowest local property taxes per capita, based on figures for 2002, are:.
Arkansas ($191)
Alabama ($285)
Kentucky ($376)
New Mexico ($380)
States with the highest local property taxes per capita:
New Jersey ($1,871)
Connecticut ($1,733)
New York ($1,402)
Rhode Island ($1,369)
A quick reference site with specific rates for property, income and sales taxes in any given zip code can be found at Sperling's Best Places. Property tax rates will be included under data for Housing and income and sales taxes information in listed under Cost of Living.
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For a more accurate picture of the true tax burden that retirees will incur in each State, it may be helpful to review the ratio of tax revenues as a percentage of personal income. This calculation reveals these States as the ten with the highest tax burden:
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These States are the ten with the lowest tax burden:
States with Lowest
Tax Burden
Total Taxes
($ million)
Per Capita
Rank
% of
Pers. Income
Rank
New Hampshire
2,022
1,544
48
4.3
50
Colorado
7,648
1,640
47
4.6
49
Texas
32,785
1,434
49
4.7
48
South Dakota
1,110
1,430
50
4.8
47
Missouri
9,544
1,645
46
5.4
46
Tennessee
10,007
1,678
45
5.7
45
Virginia
15,919
2,104
26
5.9
44
Georgia
15,676
1,728
42
5.9
43
Oregon
6,523
1,791
41
5.9
42
Illinois
26,412
2,069
29
6.0
41
Source: U.S. Bureau of the Census and Bureau of Economic Analysis.
Note: Attention should also be given to the estate taxes that may be applicable in some jurisdictions.While most states have already eliminated such taxes, they are still in effect in some places.It is advisable to consult you own tax counsel to ascertain if they are still in force in any State that you may be considering.
