This article takes a look at the 5 states that do not tax social security or retirement income. If you wish to check out our detailed analysis on social security gaps, investment strategies, and tax-friendly states, you may go to 15 States That Do Not Tax Social Security or Retirement Income.
5. South Dakota
Insider Monkey Score: 17
Tax Friendliness: Very Tax Friendly
Cost of Living Index: 91.8
South Dakota is a very tax-friendly state with a cost of living that is 8.2% lower than the national average. The state does not have an income tax. Therefore, social security retirement benefits and all sorts of retirement income aren’t taxed at the state level. The state also boasts low sales taxes. However, property taxes are high here.
4. Georgia
Insider Monkey Score: 18
Tax Friendliness: Very Tax Friendly
Cost of Living Index: 90.9
The state of Georgia does not tax social security benefits. Moreover, all types of retirement income are provided a maximum deduction of $65,000 per person for seniors aged 65 or older. In other words, withdrawals from retirement accounts and public and private pensions are partially taxed. The cost of living in this state is 9.1% lower than the national average.
3. Tennessee
Insider Monkey Score: 19
Tax Friendliness: Tax Friendly
Cost of Living Index: 90.4
The state of Tennessee does not have an individual income tax. Therefore, Social Security retirement benefits and other forms of retirement income are not taxed in the state. Public and private pension income is not taxed either. The cost of living here is 9.6% lower than the national average. However, the one tax that can hit hard is sales tax.
2. Iowa
Insider Monkey Score: 19
Tax Friendliness: Moderately Tax Friendly
Cost of Living Index: 89.9
In the state of Iowa, all Social Security retirement benefits are exempt from taxation. Moreover, until the tax year 2022, Iowans were provided deductions on other types of retirement income. The tax year 2023 is going to be different as Iowans aged 55 and older will be exempt from paying state taxes on retirement income. The state is also a nice place to retire because of its low cost of living, which is 10.1% lower than the national average.
1. Mississippi
Insider Monkey Score: 23
Tax Friendliness: Very Tax Friendly
Cost of Living Index: 86.7
The state of Mississippi is one of the best states to retire on social security owing to its tax-friendliness and low cost of living. All forms of retirement income in the state are exempted from taxation. This includes social security benefits, income from IRAs, pension incomes, and even income from 401(k)s. Not only do seniors enjoy tax-free retirement income at the state level, but also get to stretch their retirement savings from low living costs. The cost of living in this state is 13.3% lower than the national average.
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