How to Find the Best Places to Retire and Save on Taxes
Federal taxes will be the same no matter where you move for retirement; however, state and local taxes vary from one state to the next. A lot depends on your financial situation before deciding where to retire for the best tax savings. Make sure to research places to retire before making a decision to move. Here are some suggestions to help you make a decision about where to move for the best retirement tax savings.
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If you're thinking about retiring to a state that does not have state income tax, make sure to research sales and property taxes in the state before moving. Higher sales and property taxes may offset the savings you'll receive from low or no state income tax states. Alaska, Delaware, Montana, New Hampshire and Oregon have no state sales tax; however Oregon is considering charging sales tax. Some states exempt food and medicine from sales tax. While other states tax every penny you spend.
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Research tax consequences of your pension before retirement. Although most states exempt a portion of pension income, public and private pensions may be taxed differently. California, Rhode Island, Connecticut and Nebraska charge high taxes on pensions.
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Research states for income tax on Social Security benefits. Many states are moving away from taxing Social Security; however, some states require up to 85% of Social Security benefits to be taxable. Colorado, Connecticut, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia tax Social Security benefits to a certain extent. Some states like Kansas and Missouri are phasing out taxing Social Security income.
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To research tax retirement issues for each state, check out Kiplinger's web page for retirees. The link is located below in the resource section.
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