Choosing the Right Retirement Location: Where State Tax Policies Impact Your Income
Varied State Tax Policies: Navigating Retirement Income Taxation Across the U.S.
According to source, your retirement income can significantly vary based on where you choose to live, as many states have different tax policies. There are 13 states that don’t tax your pension, Social Security, IRA, or 401(k) retirement income.
Nine states, including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no state income tax at all, although New Hampshire taxes interest and dividends, which it is phasing out.
Even if you live in a state with income taxes you might still be able to avoid state income taxes on Social Security income in states that don’t tax your pension. Four states, Illinois, Iowa, Mississippi, and Pennsylvania also do not tax IRA or 401(k) distributions in states that don’t tax your pension. Some states, such as Alabama and Hawaii, do not tax pension distributions in states that don’t tax your pension and 21 states do not tax military retirement pay in states that don’t tax your pension, including Alabama, Arkansas, Connecticut, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Jersey, New York, North Dakota, Ohio, Pennsylvania, West Virginia and Wisconsin in states that don’t tax your pension.
Balancing Financial Considerations: Weighing the Full Cost of Retirement in Tax-Friendly States
While avoiding state income taxes can be beneficial for retirees in states that don’t tax your pension other costs to consider include property taxes, sales taxes, housing expenses and insurance costs.
These factors should be taken into account when deciding where to retire in states that don’t tax your pension, as they can significantly impact your financial situation in your retirement years.