This article takes a look at the 5 states that don’t tax retirement income. If you wish to check out our detailed analysis on navigating retirement taxes, you may go 13 States That Don’t Tax Retirement Income.
5. Nevada
Insider Monkey Score: 35
Cost of Living Index: 101
Tax-Friendliness: Very Tax-Friendly
Statewide Sales Tax Rate: 6.85%
Average Local Tax Rate: 1.386%
Average Property Tax Rate: 0.48%
Nevada’s lack of state income tax means retirees can enjoy their retirement income tax-free. With its sunny climate and cost of living near the national average, Nevada offers an appealing retirement destination. Property taxes are low, though sales tax is higher than average. Despite this, retirees find their dollars stretch further here, and it’s even feasible to retire solely on social security. Notably, Nevada boasts one of the lowest average retirement ages in the US, at 63 years.
4. Florida
Insider Monkey Score: 37
Cost of Living Index: 100.7
Tax-Friendliness: Very Tax-Friendly
Statewide Sales Tax Rate: 6%
Average Local Tax Rate: 1.002%
Average Property Tax Rate: 0.80%
Florida, renowned for its sunny weather and retirement-friendly atmosphere, stands out for its lack of income tax. Seniors flock to its many retirement havens, drawn by the absence of taxation on retirement income. Although sales and property taxes are present, they are close to national averages. Statewide sales tax rests at 6%, potentially reaching 8.25% with local additions. With its warm climate, tax benefits, and near-average cost of living, Florida remains a top choice for retirement in the US.
3. South Dakota
Insider Monkey Score: 37
Cost of Living Index: 92.4
Tax-Friendliness: Very Tax-Friendly
Statewide Sales Tax Rate: 4.20%
Average Local Tax Rate: 1.911%
Average Property Tax Rate: 1.08%
South Dakota emerges as another retiree haven with its absence of income tax, ensuring all retirement income remains tax-free. Adding to its appeal, the state boasts low sales tax rates, although property taxes tend to be higher. However, this is balanced by a cost of living 7.6% below the national average. Seniors can further benefit from the Homestead Exemption Program, which allows delaying property tax payment until the property is sold, with accrued taxes subject to a 4% annual interest rate. Eligibility criteria include being at least 70 years old, residing in the state for a minimum of 5 years, or owning a house for at least 3 years.
2. Mississippi
Insider Monkey Score: 44
Cost of Living Index: 86.3
Tax-Friendliness: Very Tax-Friendly
Statewide Sales Tax Rate: 7%
Average Local Tax Rate: 0.062%
Average Property Tax Rate: 0.75%
Mississippi offers a tax haven for retirees with its exemption of all retirement income from taxation. Enjoy warm winters and a cost of living 13.7% below the national average. With low property taxes and moderate sales tax, it’s financially favorable. Seniors can also benefit from a homestead exemption.
1. Wyoming
Insider Monkey Score: 47
Cost of Living Index: 92.4
Tax-Friendliness: Very Tax-Friendly
Statewide Sales Tax Rate: 4%
Average Local Tax Rate: 1.441%
Average Property Tax Rate: 0.55%
Wyoming stands out among the best states in the US for its lack of income tax, meaning retirees enjoy tax-free social security benefits and other retirement incomes. With low sales and property taxes, it’s a haven for seniors. Property taxes are a mere 0.6%, among the nation’s lowest, while sales tax sits at 4%, with a combined rate of 5.36%. Adding to its allure, the cost of living is 7.6% below the national average. With its stunning landscapes and affordable lifestyle, Wyoming beckons retirees seeking tranquility and financial ease.
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