The Best Tax States For Retirees

When the golden years approach, many soon-to-be retirees start looking for better horizons. A higher quality of life often means relocating to a new state. When it comes time for you to retire, you may get the relocation bug, like many other retirees before you. While a considerable number of retirees stay right where they are, thousands of retirees decide to up stakes and move. There are many reasons why retirees move. They include:

Wanting to Downsize

Lots of retirees decide to sell the family home and move so they can downsize their lives. The home where they reared children and hosted dinner parties is too large to be practical. They’re empty-nesters who want to uncomplicate their lives. They don’t want the hassle of cleaning a four-bedroom house with stairs. So, they put on a garage sale, sell what they don’t need and downsize to a smaller living arrangement. 

Adjusting to a Fixed Income

Another big reason why retirees often move is because they are now living on a fixed income. They want to minimize energy bills and their living expenses in general. Moving into a condo, they can enjoy reduced energy bills that will help keep money worries at bay.

Desire For a More Temperate Climate

Retirees also move because they can’t deal with winter anymore. They aren’t so young to be able to adeptly deal with snow and ice, so they opt to move to a location where winters are less harsh or non-existent. 

Opportunity to Leverage the Housing Market

Sometimes retirees move to take equity gain from their homes. When a person has lived in their home for several years, home values may have increased to the point where the retiree can gain a lot of cash simply by selling the home and moving into a smaller home or condo. Then they can take those gains and invest them to supplement their retirement accounts. 

Reduced Taxes

Savvy retirees move where they can enjoy reduced taxes. They know that even downsizing might not be enough if the taxes are high where they live. This often necessitates not just moving across town, but to a whole new state. This is why choosing from the best tax states for retirees makes good economic sense. 

Why Retire in a New State?

For many of the reasons mentioned above, retirees often opt to retire to a new state instead of simply moving to a nearby town or city. Retiring to a new state can offer its own benefits, like:

• Interesting new places to dine

• Different culture

• New people to meet

• Change of climate

• Better tax situation

• Less crime

• Be closer to grandchildren

• And more…

The Best Tax States For Retirees

Taking into consideration that it’s smart to try to lower taxes when you’re relocating, the following are the best tax states for retirees:

Tennessee

Tennessee is nicknamed “the volunteer state.” Presumably, this is because residents of Tennessee are generous with their time. That’s great for retirees who enjoy volunteering in their free time. But this is also one of the best tax states to retire in because Tennessee has no income tax, including no tax on social security income. Furthermore, there is zero inheritance tax and estate tax, which makes it ideal for beneficiaries of retirees. Property taxes are well below the national average, and there are property tax relief programs in place for lower-income seniors. Homeowners aged 65 and older also enjoy a property tax freeze. 

Florida

Florida has been a favorite retiree destination for decades. Whether you’re planning to relocate to The Villages or somewhere else, you’ll enjoy numerous tax benefits from the sunshine state. Although it has higher than average living costs, it does have the 5th lowest overall tax burden in the country. It also has no state income tax, and does not tax social security income. 

Arkansas

Arkansas may not be the obvious retiree destination, but there are good tax reasons to relocate there. Arkansas has a median property tax rate of just $612 per year, no estate or inheritance tax, and a tiered income tax system that favors lower-income retirees. Plus, there are no taxes on social security income.

Delaware

Delaware often rates as one of the best states for retirees. It has no sales tax, lower than average property taxes, no estate or inheritance taxes and very low income tax rates. It’s also another state where social security income is tax-free. 

New Hampshire

New Hampshire doesn’t offer year-round sunshine, but it does offer no sales tax, and no tax on social security, pensions and retirement account distributions. The biggest downside to retiring in New Hampshire is that property taxes in New Hampshire are higher than average.

Hawaii

Surprisingly, Hawaii rates as one of the best states for retirees as far as taxes go. Property taxes are fairly low, and social security income is not taxed. Also, retirees won’t get hit with taxes on retirement account distributions or pension accounts. Sales tax hovers around 4%, since localities are permitted to add as much as .5%. However, groceries are taxed, which isn’t the case in many other states.

Wyoming

Wyoming offers low sales tax, and income, inheritance or estate tax. Those are huge benefits, considering that Wyoming also has a lovely weather climate, where snow shovels are not needed. 

When it comes time to make your retirement plans, make sure you include your CPA in the conversation. Your CPA can help you to make smart decisions that could shield you from higher taxes on the sale of your home, property and any business assets you may have. No matter where you relocate in retirement, you’ll want to ensure that your fixed income goes as far as possible. 

REFERENCE: https://www.kiplinger.com/retirement/601814/most-tax-friendly-states-for-retirees