Dear Penny: Can My Criminal Ex-Husband Take My Social Security?

Dear Penny,

My spouse was in the Air Force National Guard on and off. He owned a private, profitable tree work, gutter cleaning, snow-plowing and roof-raking company. He hasn’t filed business or personal taxes since the mid-’90s. He NEVER paid into Social Security and has been involved in fraudulent activities. Is he still entitled to 50% of my Social Security?

I’ve been disabled since 2000. I’ve paid all the bills, while he has been stashing cash and trying to get me to return to work, all while working only on bending his right elbow and lying in court. 

His attorney told the court outright that he will NOT file taxes. Since he’s a hoarder, I believe he filled his friend’s dumpster and disposed of his paperwork in the friend’s outside furnace to impress his mistress.

-Hands Off My Social Security

Dear Hands Off,

Unfortunately, Social Security doesn’t have special rules for lying, cheating, no-good rotten scoundrel spouses. The rules that were meant to protect spouses who stayed at home for much of their marriage, often caring for a family, also apply to guys like your husband.

So yes, he’ll probably be able to collect up to 50% of your full retirement age benefit, whether you’re still married or you’re divorced.

You say your husband has been involved in fraudulent activities. Technically, if your husband were incarcerated for more than 30 days, any Social Security benefits would be suspended until his release. But this sounds like it’s a nasty divorce involving a deadbeat husband, rather than a criminal case.


That’s the bad news. The good news is that even if your ex gets Social Security based on your work record, it will never, EVER affect your benefit. If you remarry at some point, his benefit also wouldn’t have any impact on your current spouse.

Since your husband was in the National Guard off and on, I’m guessing he paid at least something into Social Security, even if it wasn’t much. What happens in this situation is that Social Security looks at whatever your husband qualifies for based on his own work record. Then they use his current or ex-spouse’s record to qualify him for extra benefits if applicable.

It sounds like this divorce is still underway. You’re probably not going to be able to prove how much cash he’s earned over the years or whether he torched his business records. Focus on what you can control. For example, anything you can do to prove you shouldn’t pay alimony or that any assets should go to you would be a far better use of your time and energy than worrying about his Social Security.

Hang on to any financial documentation you have, like bank statements and copies of bills you’ve paid, so that you can present them to an attorney. If you can’t afford an attorney, search the American Bar Association’s website to see if free legal assistance is available in your area.

Your ex’s Social Security benefit is out of your hands, and it doesn’t affect you. You can’t undo what sounds like a miserable couple of decades with this guy. But rather than getting angry about his Social Security, channel your energy toward building a life that he’s not part of.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].

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Source: thepennyhoarder.com

Dear Penny: I’m 74 and My 24-Year-Old Boyfriend Is Awful With Money

Dear Penny,

I am 74 and have fallen for a 24-year-old. He says he wants to get married, but he has only the house he inherited. 

I’m self-employed but have only a meager income. It makes me uneasy that I have to pay for everything. He may be able to work eventually, but for now all he finds are part-time jobs. Should I break off this relationship due to poor finances?

-Too Much in Love

Dear In Love,

I’m going to attempt the impossible, which is to put aside this glaring age difference for a minute.

Here’s what I would have told you if you hadn’t mentioned your ages: You’re pulling all the weight here, and you don’t feel good about it. Your boyfriend doesn’t sound very responsible. Nine times out of 10, when someone writes to me, a stranger, to ask whether they should end their relationship, the answer is: “Yes! End this relationship.”

Now, let’s talk about this gaping age discrepancy. There’s no way I can make myself not worry that your boyfriend is taking advantage of your generosity here. Yes, plenty of people fall in love with someone way older or younger than they’d ever imagined. So I don’t want to make any sweeping generalizations about what constitutes too young for someone of 74.


But I think an age difference becomes too much when you’re in vastly different places in life. Even if you’re both in love with perfectly pure intentions, surely this is one of those times.

Aside from the fact that he’s dating a 74-year-old, your boyfriend doesn’t sound that unusual for someone who’s only 24. Most twentysomethings haven’t acquired much in the way of assets. It’s not unusual for someone this age to have a string of part-time jobs and side hustles instead of a career.

Meanwhile, you’re 74 and don’t have much income, which certainly isn’t unusual for someone who’s retirement age. You deserve to retire at some point. I’m afraid you can’t afford to wait for your boyfriend. You say he may “eventually” be able to work. Somehow, I think “eventually” will happen a lot faster when he has no choice but to pay his own bills.

You say you’re paying for everything, so I’ll assume he’s living in your home. Since you say he inherited a house, hopefully he can move in there and you can make a clean break.

Whenever you end a relationship, you need to act quickly to unmingle your finances. That includes closing any joint bank accounts and removing your boyfriend if he’s an authorized user on any of your credit accounts. If you’ve listed him as a beneficiary on a retirement account or life insurance policy, or included him in your will, be sure to remove him as well.

And yet, untangling the heart can be even more complicated than separating your money. There’s nothing I can say to make that part easier.

Just know that it’s not too late for you to fall in love all over again. But make sure that anyone you’d consider dating in the future is at a similar place in life as you are. That doesn’t mean you need to be the same age. But that person needs to be a mature and independent adult, not someone who mooches off you. Anyone who’s not willing to be your equal partner doesn’t deserve your time.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].

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Source: thepennyhoarder.com

5 Self-Employment Retirement Plans for 2021

SIMPLE IRAs are often chosen by small business owners because they are easy to administer. Some employees choose not to open a SIMPLE IRA because of its required annual contribution to accounts.
There has not been a push to assist self-employed citizens. The motivation to set aside funds for retirement for self-employed people must come from workers themselves.
Many retirement accounts penalize the account holder for withdrawing the funds early, usually before 59½.
The way to look at Roth IRAs is to consider how they differ from traditional IRAs.
Ready to stop worrying about money?

Two Kinds of Retirement Accounts

But you are doing so as the owner of a small business with one employee (you!) or as a freelancer or contractor. Maybe you have two lucrative part-time jobs as part of the robust gig economy. The money is coming in, but you are living without the benefit of benefits.

  1. A defined benefit plan which promises a specified monthly benefit upon retirement. The pre-determined amount is set by the number of years of contribution and the salary of the employee. Pension plans, which are not available to self-employed people and are becoming more scarce especially in private industry, are an example of a defined benefit plan. This is effectively a savings plan.
  2. A defined contribution plan receives contributions for the employee and perhaps the employer, at a set percent of earnings. These funds are then invested in the employee’s name and the account balance can fluctuate based on the value of the investments. A 401(k) is an example of a defined contribution plan. It is actively related to the stock market or mutual fund investments. These plans can be started by self-employed workers who can contribute to them regularly.

SIMPLE stands for Savings Incentive Match Plan for Employees, and it really is simple. Employers can establish such a plan simply by filling out one federal form, and the IRA is set to go.
This is an advantage of investing in a brokerage account, in which income is taxed annually.

5 Retirement Savings Plans for Self-Employed Workers

A solo 401(k) allows a person to serve as both an employer and an employee, making contributions to the 401(k) account in both capacities, and allows the account holder to contribute up to ,000 in elective deferrals annually. This is true, however, only for those age 50 and older.
There are effectively two kinds of retirement accounts:

1. Individual Retirement Arrangement (IRA)

If there is a downside to the SEP-IRA, it is that when the employer contributes to the account, contributions must be equal to all employees. Also, employers can only contribute up to ,000 or 25 percent of the employee’s compensation annually, whichever is the lesser amount.
The negative aspect of the Roth IRA is that you cannot contribute to that kind of account if you make too much money. There is a formula involving your modified adjusted gross income and your tax filing status, but the more you make, the less likely you are to qualify to contribute to a Roth IRA.
Any money you make from investments made through that IRA are also untaxed until the money is withdrawn.
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Sounds sad, doesn’t it? But it’s not, really.
The federal government wants citizens to save for retirement. There are frequent attempts to induce retirement savings for employees working for private firms, and the retirement programs for those working for federal or state organizations are plentiful and well-run.

  •  It often comes with lower annual contribution limits (It would be nice to be self-employed and be in a situation where you want to contribute more to your retirement fund than you are allowed to.)
  • At the age of 70½, you must begin to take distributions from the account. Those distributions are then taxed (but at a rate lower than if they had been taxed as income).

2. Roth IRA

The retirement accounts differ in terms of how much an account holder can contribute to the account over a period of time, how much can be withdrawn over a period of time, and the age of the person withdrawing from the account.

  • You can make contributions at any age.
  • The funds you contribute are part of your taxable income, but your withdrawals during retirement are tax free, including any earnings from your retirement account investment, assuming you withdraw the funds after you turn 59½.
  • You can make contributions to a retirement plan from work and still get the full tax benefit of traditional IRA contributions.

You are making a living, and perhaps enjoying financial success like never before.

3. Solo (one participant) 401(k)

The most workable retirement plans for the self-employed are the Individual Retirement Arrangement (IRA), the Roth IRA, the Solo 401(k), the SEP-IRA and the Simple IRA.
Two other details of the traditional IRA are:
You are on your own in preparing for retirement. You are in a position to put money away for that eventuality, but you don’t know the best options. Perhaps you don’t know any of your options.
A SEP-IRA can only receive contributions from the employer; the employee cannot contribute their own funds. The benefit of a SEP-IRA is that the employer can choose to contribute to the account in years when the business is operating in the green and choose not to contribute when cash flow is low.

4. SEP-IRA

Traditional IRAS are available to anyone under the age of 70½ with earned income. However, if a person contributes to a workplace retirement plan such as a 401(k) or 403(b), their IRA contributions may not be tax deductible.
They differ in how much you can invest annually, the rules for eventually taking that money out, whether you actually work alone or with others, and whether you own your own business. There are qualification rules and age requirements and the next few paragraphs will explain all of that (or tell you where the details can be found).
Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.
But this is a look at the opportunities for people who are self-employed, so that situation may not come up.
The employer contributions can occur if the self-employed individual has created an S corporation or similar business arrangement. The business can then contribute up to 25 percent of the employee compensation to the 401(k) as long as the total contributions to the account do not exceed ,000.

5. SIMPLE IRA

The SIMPLE IRA forces employers to contribute to it annually, either up to 3 percent of employee annual compensation or a 2% nonelective contribution. Employees are allowed to contribute as well, and they are fully vested in the SIMPLE IRA, meaning they can take those funds with them if they leave the company.
As the name suggests, this type of retirement account is for individuals only. Contributions to an IRA are subtracted from your annual income, thus avoiding the annual income tax. Contributions are usually made regularly by automatic withdrawal set up by you.
Again, such limits are a nice thing to be in a position to complain about.
Employees are vested in a SEP-IRA, and can take their funds with them if they leave the company. <!–

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Can You Work and Collect Social Security? Yes, with Limits

As simple words go, “retirement’’ carries a lot of weight and a lot of baggage.

Now that retirement is bouncing around in your mind, and you entertain the thought of giving up your day job, you ask yourself:

  • Is my retirement income and Social Security going to be enough for my preferred lifestyle?
  • What am I going to do with myself every day?

One answer responds to both questions. You can “retire,’’ collect Social Security, still work and be productive. The trick is there’s a limit to how much you can make depending on your age.

If you are at what Social Security deems full retirement age, you can collect and keep your full Social Security benefits and make as much money as you want.

If you are not yet at full retirement age but are receiving Social Security benefits, you can make up to $18,960 a year without penalty. That’s $1,580 a month, or $364 a week. We get into more details later in this post of what happens when you go over that amount.

How You Can Work and Collect Social Security

So let’s dive into the particulars that allow you to work while you are retired and collecting Social Security. And then let’s consider some types of work you can do in retirement to bring in some extra income.

The Meaning of Retirement

There is no such thing as “officially retired.” There is no legal definition, nor is there a legal designation.

You just decide one day you don’t want to work at the job or in the field to which you dedicated the first 30 or 40 years of your professional life. Often this coincides with your 65th birthday because that’s when you qualify for Medicare.

However, you can start taking Social Security benefits before 65, beginning at 62.

Full Retirement Age

The Social Security Administration website is clear and precise about making money while accepting benefits, but here is what you need to know:

Your full retirement age: If you were born Jan. 2, 1959 through Jan. 1, 1960, your full retirement age for retirement insurance benefits is 66 years and 10 months.

Every year earlier reduces the full retirement age by two months. Born in 1958, 66 years and 8 months. Born in 1957, 66 years and 6 months, and so on.

If you were born after the 1959 date, your full retirement age is 67 years old. If you were born 1943 to 1952, your full retirement age is 66.

The government has changed the full retirement age stipulations because people are living longer.

THIS IS IMPORTANT!: If you have reached your full retirement age and you work, you may keep all of your Social Security benefits no matter how much you earn. 

Salary Restrictions

If you are not yet at full retirement age but are receiving Social Security benefits, you can make up to $18,960 a year without penalty. That’s $1,580 a month, or $364 a week.

If you make more than that, your benefits are reduced by $1 for every $2 you make over the $18,960.

But get this: once you reach full retirement age, the money that was subtracted from your Social Security benefits previously are refunded to you. You never really lose those funds, they are just held from you until you reach that magic age.

There are special rules depending on whether you receive a salary or are self-employed when you are working, but they differ based on when they are counted (when you earn the money versus when you get paid). The Social Security Administration website can address those particular items for you.

Suggestions for Work Even Before You Reach Full Retirement Age

Here are some suggestions of part-time jobs that can bring in some extra money. They may be more about what you want to do than what you have been doing. Check out these 13 ways to make money you might not have thought about. And more:

A senior citizen woman does book keeping from home.
Getty Images

1. Indoor work

According to the AARP, bookkeeping is the most popular part-time position for workers of a certain age. This makes some sense: it is not physical, requires patience, and is likely not a popular job among younger people.

And if you’re so inclined to start your own virtual bookkeeping business you could make up to $69 a hour.

2. Health Care

Perhaps knowing that you may someday require healthcare assistance, it becomes attractive to offer help to those already in need. Older people are encouraged to apply for jobs as assistants to nursing homes and hospitals.

Certainly, certifications will make you more attractive as an employee, but there are jobs specifically for those people who want to help but did not originally work in healthcare and don’t have licenses or certificates.

There may also be opportunity in a less structured way. If you have a friend, or a friend who has a friend, with an older family member or neighbor that needs assistance during the day, let them know you are looking for work. You can offer your services to dive them to medical appointments, make lunch or simply provide a few hours of companionship.

Pro Tip

The Penny Hoarder’s Work-From-Home Jobs Portal makes the remote-job hunt easy. Our journalists scour the web for the best gigs, vet the companies and aggregate the latest listings in one place.

3. Work with Children

Safety and care are uppermost in the minds of school administrations, and they offer several positions for older people interested in part-time work.

While “crossing guard’’ may be the first thing that comes to mind, schools, colleges and universities need staff that can provide some level of security for special events, and older people who may have grandchildren of their own have built-in radar for the well-being of children.

A senior citizen poses for a portrait with an axe and tree behind him.
Getty Images

4. Outdoor Work

Your city or county leisure services or parks department may have work for you. If there’s a forestry department in your area, contact them.

From cleaning parks to walking through wooded areas looking for environmental concerns (downed trees, unexpected flooding, etc.), being paid to take a walk in nature is not a bad way to spend a day.

5. Helping Other Seniors

Many communities have Senior Centers that provide activities and services. Yes, there are people at Senior Centers playing bridge, canasta and chess.

But Senior Centers are also one of the first places employers turn when looking for people to fill paid positions that require attendance and attention. Consider your local Senior Center as a resource for finding a position that suits your interests.

Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.

Source: thepennyhoarder.com

What Is the Social Security COLA?

For 2021, Social Security benefits increased by 1.3%. That was the smallest cost-of-living adjustment (COLA) since 2017 — but consider that, initially, thanks to pandemic-induced price gyrations — retirees were looking at the prospect of no increase at all in 2021. 

The estimated average monthly Social Security benefit payable in January 2021 increased from $1,523 in 2020 to $1,543 — that’s one Andrew Jackson. The average monthly benefit for a couple who are both receiving benefits rose $33, from $2,563 to $2,596. And the maximum Social Security benefit for a worker retiring at full retirement age increased from $3,011 per month to $3,148, an additional $137.

Also, more of workers’ income is subject to the Social Security tax in 2021. The Social Security tax will apply to the first $142,800 of earnings, up $5,100 from $137,700 in 2020.

COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (similar to, but not exactly the same as, the urban dwellers’ consumer price index used in inflation reporting). If prices don’t increase and even fall, the COLA is zero. That happened in 2010 and 2011, as the economy struggled to recover from the Great Recession, and again in 2016, when plummeting oil prices swept away any chance of a COLA for that year.

As for 2022, seniors could get a significant increase in their benefits. In May, the Kiplinger Letter forecast that the annual COLA for Social Security benefits for 2022 would be 4.5%, the biggest jump since 2009, when benefits rose 5.8%. 

How Is the 2021 Social Security COLA Calculated?

As mentioned, any COLA adjustment is driven by changes in the wage earners’ consumer price index. National average prices are used, not regional. SSA also calculates the percent change between average prices in the third quarter of the current year with the third quarter of the previous year. The reason the fourth quarter isn’t used is because that number is typically not available from the U.S. Bureau of Labor Statistics until mid-January, and the SSA has to make its adjustment on January 1.

History of Social Security COLA Adjustments, 2009-2021

  • 2021: 1.3%
  • 2020: 1.6%
  • 2019: 2.8%
  • 2018: 2.0%
  • 2017: 0.3%
  • 2016: 0%
  • 2015: 1.7%
  • 2014: 1.5%
  • 2013: 1.7%
  • 2012: 3.6%
  • 2011: 0%
  • 2010: 0%
  • 2009: 5.8%

Source: kiplinger.com

Dear Penny: Do I Get More Social Security if I Get Married?

Dear Penny,
Claiming spousal benefits often makes sense when one spouse spent a significant part of their adult lives outside of the workforce. But you make ,000 a month. You probably didn’t just stumble into a job that pays you ,000 overnight. I’m guessing you have a decent work record of your own. So taking Social Security on your own earnings will almost certainly produce a higher benefit than the 0 maximum you could get based on your boyfriend’s record.

Does he have enough savings that he could afford to contribute a little more? Any extra money you could set aside for your own retirement so you don’t feel like you need to work into old age would be a big win for you. Even if his budget is stretched to the max, does he help you out with things like cooking and household chores? Or is he willing to talk about strategies like cutting back your budget or downsizing so that you can eventually scale back on work? There may not be any easy answers, but the pressure to take care of everything shouldn’t fall on you.
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-E. 

Unfortunately, there really are no easy ways to increase your Social Security benefits. Unless you marry someone who drastically outearned you, the solutions are basically: Work longer. Earn more money. Wait as long as possible.
Can he claim more Social Security benefits from me if we are married? Will marrying him help me with my Social Security? I am planning on working until I really can’t work anymore. 
Source: thepennyhoarder.com
My boyfriend wants me to marry him so that I can take advantage of his Social Security. I am 64, and he is 74. I make about ,000 a month right now. He gets ,700 in Social Security benefits. 
Marriage is unlikely to offer any quick fixes, but what I’m wondering is if there’s anything your boyfriend could do to make life any easier for you. It sounds like you’re under a lot of pressure between working and shouldering so many expenses.


Boosting your Social Security isn’t as simple as walking down the aisle. If that were the case, I suspect we’d be inundated with wedding invites from the 60- and 70-something people in our lives.
Ultimately, a lot of decisions surrounding love and marriage are inextricably tied to money. But it doesn’t sound like this is one of them. Marry him if you think it would make you happier. But if you’re only contemplating marriage because you want more Social Security, don’t bother sending out save-the-dates.
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All that said, getting married could result in more Social Security for the widowed spouse when one of you dies since survivor benefits pay up to 100% of the larger benefit. But it sounds like you’re more concerned about how to increase your retirement budget for the life you’ve built together.
But working forever and delaying Social Security until age 70 simply isn’t an option for a lot of people. You’re no doubt acutely aware of that fact, especially since you work a difficult job.
Should the two of you marry, your boyfriend would be able to switch to your benefit when you file after you’ve been married for a year. But remember: The most he could get is 50% of your benefit. Unless you’re expecting to receive at least double the ,700 a month he receives, he wouldn’t get an extra cent out of Social Security.
Double dipping isn’t allowed. So you can claim your own benefits, or you can claim up to 50% of your spouse’s benefits, provided you’ve been married for at least a year. You don’t get to claim your own benefit plus half of a spouse’s. (The 50% cap also applies when you’re claiming an ex-spouse’s Social Security benefit.)

Dear E.,

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14 States That Won’t Tax Your Pension

Congratulations if you’re one of the lucky few who still have a traditional pension (a.k.a., a defined benefit plan). But once you’ve retired, remember that Uncle Sam generally taxes payments from pensions as ordinary income.

Will your state tax your pension income, too? It depends on where you live. Most states tax at least a portion of income from private sector defined benefit plans. Your state might have a pension exclusion, but chances are it’s limited based on your age and/or income. However, a handful of states don’t tax pension income at all, no matter how old you are or how much money you have. Good for you if you retire in one of those states!

But, of course, just because a state doesn’t tax your pension doesn’t mean it won’t tax some other form of income you’re counting on in retirement. Alabama, for example, doesn’t tax pensions or Social Security benefits, but it will tax distributions from a 401(k) plan. Bottom line: Make sure you check out a state’s overall tax environment for retirees before relocating there for your golden years.

Take a look at the 14 states that don’t tax pension income (states are listed alphabetically). It could end up saving you thousands of dollars if you’re thinking of moving to a new state when you retire.

1 of 14

Alabama

picture of Alabama small townpicture of Alabama small town

Pensions: Retiring to Alabama can be a smart move if you’ll be relying heavily on a pension in your golden years. If you’re retiring from the private sector, Alabama won’t tax your pension income if it comes from a defined benefit retirement plan. The state also exempts military retirement pay and income from a long list of government pensions.

401(k)s and IRAs: While the Yellowhammer State is pretty good to retirees when it comes to taxes, it doesn’t exempt all retirement income. Distributions from traditional IRAs and 401(k) plans are taxed as ordinary income (although certain distributions may only be partially taxable).

Social Security Benefits: Alabama doesn’t tax Social Security benefits, though. That’s another big plus for retirees in the state.

Income Tax Range: For 401(k) funds, IRA distributions or any other ordinary income, the lowest Alabama tax rate is 2% (on up to $1,000 of taxable income for joint filers and up to $500 for all others), while the highest rate is 5% (on more than $6,000 of taxable income for joint filers and more than $3,000 of taxable income for all others).

For more information, see the Alabama State Tax Guide for Retirees.

2 of 14

Alaska

picture of Alaska dog sledpicture of Alaska dog sled

Pensions: Up in Alaska, you don’t have to pay income tax on your pension—or on any income, for that matter. It’s one of a handful of states with no income tax.

401(k)s and IRAs: Ditto for 401(k) and IRA distributions. Alaska doesn’t tax these funds.

Social Security Benefits: Like most states, Alaska doesn’t tax Social Security benefits.

Income Tax Range: Not applicable (no income tax).

For more information, see the Alaska State Tax Guide for Retirees.

3 of 14

Florida

picture of a path to a Florida beachpicture of a path to a Florida beach

Pensions: If you’re looking for a warmer climate, there’s always Florida. But there’s more to like as a retiree than just the palm trees and sandy beaches. It’s well known that the Sunshine State doesn’t have an income tax, so your pension won’t be taxed there.

401(k)s and IRAs: Florida is good to seniors when it comes to 401(k)s and IRAs, too. There are no state taxes on distributions from these retirement savings plans.

Social Security Benefits: As you may have guessed, the Sunshine State doesn’t tax Social Security benefits, either.

Income Tax Range: Not applicable (no income tax).

For more information, see the Florida State Tax Guide for Retirees.

4 of 14

Hawaii

picture of Hawaii jungle with waterfall and rainbowpicture of Hawaii jungle with waterfall and rainbow

Pensions: Feel like taking up surfing in your later years? If so, the Aloha State might be the place for you to retire. Want to avoid taxes on your pension? Hawaii can help you out with that, too. Retirement distributions from a private or public pension plan are tax-free in Hawaii—that is, as long as you didn’t make contributions to the plan. You will be taxed on any portion of your pension income attributable to employee contributions you made.

401(k)s and IRAs: Distributions from 401(k) plans and IRAs are generally treated the same for Hawaii tax purposes as they are for federal tax purposes. However, if your employer made matching contributions to your 401(k) plan, an additional state deduction may be available for the employer-funded portion of distributions from the plan. In addition, if a lump-sum distribution from an otherwise tax-free pension plan is rolled over into an IRA, distributions out of the rollover IRA are tax-free as well.

Social Security Benefits: Hawaii does not tax Social Security benefits.

Income Tax Range: For income that is taxed, the lowest Hawaii tax rate is 1.4% (on taxable income up to $4,800 for joint filers and up to $2,400 for single filers). The highest rate is 11% (on more than $400,000 of taxable income for joint filers and more than $200,000 for single filers).

For more information, see the Hawaii State Tax Guide for Retirees.

5 of 14

Illinois

picture of Chicago skylinepicture of Chicago skyline

Pensions: The Prairie State completely exempts private pension income from tax as long as it’s from a qualified employee benefit plan. You won’t pay tax on payments from government or military pensions, either.

401(k)s and IRAs: Illinois is very taxpayer-friendly when it comes to 401(k) plans and IRAs, too. Distributions from a 401(k) plan are tax-free if the plan is a qualified employee benefit plan. IRA distributions are not taxed, either.

Social Security Benefits: Illinois also doesn’t tax Social Security benefits.

Income Tax Range: The Illinois income tax rate is a flat 4.95%.

For more information, see the Illinois State Tax Guide for Retirees.

6 of 14

Mississippi

picture of cannons at Vicksburg, Mississippipicture of cannons at Vicksburg, Mississippi

Pensions: The Magnolia State is a fairly taxpayer-friendly state for retirees. One reason is that the state doesn’t tax private or government pension income — as long as it isn’t for early retirement (that is, before age 59½).

401(k)s and IRAs: The same goes for 401(k) plan and IRA distributions. Mississippi doesn’t tax them as long as they aren’t early distributions.

Social Security Benefits: Mississippi doesn’t tax Social Security benefits, either, so you can spend more of your retirement check on catfish and Mississippi mud pie.

Income Tax Range: Mississippi’s lowest tax rate is 3% (on taxable income from $4,001 to $5,000), and its top rate is 5% (on taxable income of more than $10,000).

(Note: Starting in 2022, the lowest rate will be 4%, which will be applied to taxable income from $5,001 to $10,000.)

For more information, see the Mississippi State Tax Guide for Retirees.

7 of 14

Nevada

picture of Las Vegas strippicture of Las Vegas strip

Pensions: Retirees in Nevada are always winners when it comes to state income taxes. The Silver State won’t tax your pension income—or any of your other income, for that matter, because it doesn’t have an income tax.

401(k)s and IRAs: With no income tax, there’s also no tax on 401(k) or IRA distributions.

Social Security Benefits: Social Security benefits are not taxed in Nevada, either. That means you’ll have more money for the slots or blackjack tables … if you’re into that sort of thing.

Income Tax Range: Not applicable (no income tax).

For more information, see the Nevada State Tax Guide for Retirees.

8 of 14

New Hampshire

picture of river in New Hampshire in the fallpicture of river in New Hampshire in the fall

Pensions: New Hampshire is the only New England state without a general income tax. The state imposes a tax on interest and dividends instead. That means no tax on your pension income if you retire to the Granite State.

401(k)s and IRAs: With no income tax, your 401(k) and IRA distributions are tax-free, too.

Social Security Benefits: Same goes for Social Security benefits … no New Hampshire tax on them.

Income Tax Range: A flat 5% tax on interest and dividends only.

For more information, see the New Hampshire State Tax Guide for Retirees.

9 of 14

Pennsylvania

picture of Pittsburgh, Pennsylvania from hill on other side of riverpicture of Pittsburgh, Pennsylvania from hill on other side of river

Pensions: There’s plenty of good news for retirees in Pennsylvania. For one thing, the Keystone State doesn’t tax pension income you receive from an eligible employer-sponsored retirement plan (except if you retire early).

401(k)s and IRAs: As with pension income, money you receive from a 401(k) plan or IRA after retiring (except in early retirement) is not taxed by Pennsylvania.

Social Security Benefits: Your Social Security benefits aren’t taxable in Pennsylvania, either.

Income Tax Range: Pennsylvania has a flat income tax rate of 3.07%. However, municipalities and school districts can tax your income, too.

For more information, see the Pennsylvania State Tax Guide for Retirees.

10 of 14

South Dakota

picture of Mount Rushmore in South Dakotapicture of Mount Rushmore in South Dakota

Pensions: South Dakota is a pretty good state for retirees. With no income tax, there’s no tax on your pension income.

401(k)s and IRAs: Making things even better, there’s also no South Dakota tax on withdrawals from your 401(k) or IRA.

Social Security Benefits: And, of course, no income tax means no tax on Social Security benefits, either.

Income Tax Range: Not applicable (no income tax).

For more information, see the South Dakota State Tax Guide for Retirees.

11 of 14

Tennessee

picture of Smoky Mountains in Tennesseepicture of Smoky Mountains in Tennessee

Pensions: Retirees in the Volunteer State don’t pay tax on their pension income, because there’s no income tax in Tennessee. There used to be a tax on interest and dividends, but 2020 was the last year for that tax.

401(k)s and IRAs: There’s also no Tennessee tax on money taken out of your 401(k) account or IRA.

Social Security Benefits: Tennessee retirees also collect Social Security without paying a state tax on it.

Income Tax Range: As mentioned above, there was a tax on interest and dividend income before 2021. For 2020, it was a flat 1% tax. But the rate was reduced to 0% in 2021 and later.

For more information, see the Tennessee State Tax Guide for Retirees.

12 of 14

Texas

picture of river in Texas with mountains in the backgroundpicture of river in Texas with mountains in the background

Pensions: Everything’s bigger in Texas … except the tax bills. You can tip your ten-gallon hat to the Lone Star State, because it doesn’t have a personal income tax. That means the state will keep its hands off all your pension income.

401(k)s and IRAs: Texas won’t touch your 401(k) or IRA withdrawals, either. So spend some of that money on a nice pair of cowboy boots or some Texas barbeque instead of state taxes.

Social Security Benefits: Of course, because there’s no income tax, there’s no tax on your Social Security benefits in Texas, either.

Income Tax Range: Not applicable (no income tax).

For more information, see the Texas State Tax Guide for Retirees.

13 of 14

Washington

picture of Seattle skylinepicture of Seattle skyline

Pensions: In the great Northwest, Washington State is a terrific place to retire if you’re living off a pension. You can sit back, relax and enjoy your cup of coffee without having to worry about the state taking a bite out of your pension, because the Evergreen State doesn’t have an income tax.

401(k)s and IRAs: In fact, none of your income from retirement funds is going to take a state tax hit, including income from your 401(k)s and IRAs.

Social Security Benefits: Social Security benefits escape Washington taxes, too.

Income Tax Range: Not applicable (no income tax).

For more information, see the Washington State Tax Guide for Retirees.

14 of 14

Wyoming

picture of buffalo in Wyoming with mountains in backgroundpicture of buffalo in Wyoming with mountains in background

Pensions: Wyoming doesn’t have an income tax, so you don’t have to worry about a state tax hit on your pension. That makes retiring to a home on the range a pretty smart move.

401(k)s and IRAs: The Cowboy State is also very taxpayer-friendly when it comes your retirement savings plans—no taxes on withdrawals from 401(k) plans and IRAs.

Social Security Benefits: Like most other states, Wyoming doesn’t take a share of your Social Security benefits, either.

Income Tax Range: Not applicable (no income tax).

For more information, see the Wyoming State Tax Guide for Retirees.

Source: kiplinger.com

Taxes in Retirement: How All 50 States Tax Retirees

Relocating in retirement is a rite of passage for many Americans, especially those with warmer climes on their minds. 

But before you move for better weather, to be closer to the grandkids, or whatever, you should take the temperature of your budget — and how taxes and the cost of living will have a lasting impact in your golden years. Lower housing costs, for example, in a particular state could make your retirement savings last longer. 

You also need to factor in state and local taxes in your destination location. They will certainly play a role in your bottom line. 

So where does your current state and destination state fit in? We’ve ranked all 50 states, plus the District of Columbia, based on how they tax retirees.

States are listed alphabetically. Details on tax data sources and our ranking methodology can be found in the last slide.

1 of 52

Alabama

Fence line and rural road in foggy Alabama Fence line and rural road in foggy Alabama
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: 2% (on up to $1,000 of taxable income for married joint filers and up to $500 for all others) — 5% (on more than $6,000 of taxable income for married joint filers and more than $3,000 for all others). 
  • Average Combined State and Local Sales Tax Rate: 9.22%.
  • Median Property Tax Rate: $395 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

If you’re a college football fan, perhaps you’ve thought about retiring to Alabama, once fans can once again congregate past COVID restrictions. But there are also non-football reasons to spend your golden years in the Yellowhammer State — like relatively low taxes for retirees. While most people end up paying the highest income tax rate, it’s not too bad at only 5%. Plus, Social Security benefits and payments from traditional pension plans (i.e., defined benefit plans) are exempt.

Alabama also boasts the second-lowest median property tax rate in the country. Plus, all homeowners age 65 or older are exempt from state property taxes.

But Alabama fumbles when it comes to sales taxes. At 4%, the state rate is low, but some local governments tack on up to 7.5% in additional sales taxes. As a result, the state-wide average combined (state and local) sales tax rate is 9.22%, which is the fourth-highest in the nation.

For more information, see the Alabama State Tax Guide for Retirees.

2 of 52

Alaska

Senior couple watching bears gather across an Alaska riverSenior couple watching bears gather across an Alaska river
  • Our Ranking: Mixed.
  • State Income Tax Range: None.
  • Average Combined State and Local Sales Tax Rate: 1.76%.
  • Median Property Tax Rate: $1,182 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

Although the Last Frontier has no state income or sales tax, it isn’t necessarily a tax haven for retirees. High property taxes have a lot to do with the mixed tax picture for seniors. The state also has very high tax rates for beer and other alcoholic beverages. So don’t cry in your beer when you get your property tax bill in the mail.

There is, however, one unique perk if you live in Alaska — the state sends all permanent residents (who have lived there for at least one year) an annual dividend check from its oil wealth savings account. The 2020 payout was $992, which goes a long way in balancing out any bad tax news.

For more information, see the Alaska State Tax Guide for Retirees.

3 of 52

Arizona

Golfer on a course in Arizona with mountains behind himGolfer on a course in Arizona with mountains behind him
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: 2.59% (on up to $54,544 of taxable income for married filers and up to $27,272 for single filers) — 8% (on taxable income over $500,000 for married joint filers and over $250,000 for single filers).
  • Average Combined State and Local Sales Tax Rate: 8.4%.
  • Median Property Tax Rate: $617 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

Sunshine, sunshine, sunshine — and low taxes. The Grand Canyon State exempts Social Security benefits from state income taxes, plus up to $2,500 of income from federal and Arizona government retirement plans. Up to $3,500 of military retirement income is also tax-free in Arizona. While plenty of other states have more generous exemptions, Arizona’s low income tax rates for most people keep the net burden down. (Note that, starting in 2021, Arizona imposes a 3.5% surtax on taxable income over $500,000 for joint filers and over $250,000 for single taxpayers.).

Sales taxes are above average in the state—the average combined (state and local) rate is 8.4% (11th-highest in the nation). One retiree we spoke with mentioned how he would cross county lines to shop because of lower sales taxes. However, Arizona does not have an estate or inheritance tax, which makes it a more attractive retirement destination for wealthier seniors.

For more information, see the Arizona State Tax Guide for Retirees.

4 of 52

Arkansas

Senior man looks over a bridge on a rural road in ArkansasSenior man looks over a bridge on a rural road in Arkansas
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: 2% (on taxable income from $4,500 to $8,899 for taxpayers with net income less than $22,200), 0.75% (on first $4,499 of taxable income for taxpayers with net income from $22,200 to $79,300), or 2% (on on first $4,000 of taxable income for taxpayers with net income over $79,300) — 3.4% (on taxable income from $13,400 to $22,199 for taxpayers with net income less than $22,200), 5.9% (on taxable income from $37,200 to $79,300 for taxpayers with net income from $22,200 to $79,300), or 5.9% (on taxable income over $8,000 for taxpayers with net income over $79,300).
  • Average Combined State and Local Sales Tax Rate: 9.51%.
  • Median Property Tax Rate: $612 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

There are a lot of good things to say about the overall state and local tax burden in the Natural State. For instance, Arkansas exempts Social Security benefits and up to $6,000 of retirement income from its state income tax. And, as a plus for veterans, all military pension income is tax-exempt. Beginning in 2021, the top rate for taxpayers with net income over $79,300 also went from 6.6% to 5.9%. The state’s property taxes are among the lowest in the nation, too.

However, sales taxes in Arkansas — which are levied on both food and clothing — are rather high. According to the Tax Foundation, Arkansas has the third-highest average combined state and local sales tax rate in the nation. But, overall, Arkansas is a very tax-friendly state for retirees.

For more information, see the Arkansas State Tax Guide for Retirees.

5 of 52

California

Senior couple take a selfie on a beach in CaliforniaSenior couple take a selfie on a beach in California
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: 1% (on up to $17,864 of taxable income for married joint filers and up to $8,932 for those filing individually) —  13.3% (on more than $1,198,024 for married joint filers and $1 million for those filing individually).
  • Average Combined State and Local Sales Tax Rate: 8.68%.
  • Median Property Tax Rate: $729 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

California can be a difficult state to figure out when it comes to taxes on retirees. For instance, at 13.3%, the Golden State has the highest income tax rate in the country — but that rate is for millionaires. For middle- and lower-income folks, the rates are much lower. And while California doesn’t tax Social Security income, most other forms of retirement income are fair game. Sales taxes are relatively high, but the state’s median property tax rate is not. In the end, when you balance out all the pros and cons, California is actually a good state for most retirees when it comes to taxes, thanks mainly to the reasonable income tax rates for ordinary seniors.

For more information, see the California State Tax Guide for Retirees.

6 of 52

Colorado

Senior couple sit on a sled in the snow on a Colorado mountainSenior couple sit on a sled in the snow on a Colorado mountain
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: Flat 4.55% 
  • Average Combined State and Local Sales Tax Rate: 7.72%.
  • Median Property Tax Rate: $494 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

If you’d like to retire early in the mountains (or at their feet), the Centennial State is a promising place to do it. In Colorado, taxpayers 55 and older get a generous retirement-income exclusion from state taxes, and it gets better when they reach 65. And when it comes to property taxes, not only does Colorado have one of the lowest median tax rates in the country, but seniors may qualify for an exemption of up to 50% of the first $200,000 of property value.

The one downside for retirees is that Colorado’s sales taxes (which have a local component) are Rocky Mountain High: They can exceed 11% in some parts of the state. But, if you don’t plan on shopping too much in retirement, then you shouldn’t be hit too hard with the state’s sales tax.

For more information, see the Colorado State Tax Guide for Retirees.

7 of 52

Connecticut

Senior couple walking along the Connecticut coastlineSenior couple walking along the Connecticut coastline
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: 3% (on up to $20,000 of taxable income for married joint filers and up to $10,000 for those filing individually) —  6.99% (on the amount over $1 million for married joint filers and over $500,000 for those filing individually).
  • Average Combined State and Local Sales Tax Rate: 6.35%.
  • Median Property Tax Rate: $2,139 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

You don’t need a mystic to tell you the Constitution State is a tax nightmare for many retirees … but at least things are improving on the income tax front. For the 2020 tax year, only 28% of income from a pension or annuity is exempt for taxpayers with less than $75,000 of federal AGI (less than $100,000 for joint filers). But the exemption percentage will increase by 14% each year until it reaches 100% for the 2025 tax year.

Connecticut has the third-highest median property tax rate in the U.S., so the $10,000 cap on the federal tax deduction for state and local taxes stings a bit more here. The state offers property tax credits to homeowners who are at least 65 years old and meet income restrictions, though.

Connecticut also imposes an estate tax and a gift tax (it’s the only state with a gift tax).

For more information, see the Connecticut State Tax Guide for Retirees.

8 of 52

Delaware

Senior man piloting a boat off the Delaware coastSenior man piloting a boat off the Delaware coast
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: 2.2% (on taxable income from $2,001 to $5,000) —  6.6% (on taxable income above $60,000). 
  • Average Combined State and Local Sales Tax Rate: None.
  • Median Property Tax Rate: $562 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

No sales tax, low property taxes, and no death taxes make Delaware a tax haven for retirees. It’s easier to spoil the grandkids when you pay zero state or local sales tax on your in-state purchases (the First State is one of only a handful of states with no sales tax).

You’ll also have more disposable income to spend on the grandkids, since property taxes are so low. The median annual property tax rate in Delaware is the seventh-lowest rate in the nation. Plus, some Delaware seniors qualify for a school property tax credit of up to $400 (you might have to live in the state for 10 years to get it, though).

The only potential downside — and it really isn’t that bad — are middle-of-the-road income taxes if you have an above-average income. Overall, though, the income tax rates are comparatively reasonable, and residents age 60 and older can exclude up to $12,500 of pension and other retirement income (including dividends and interest, capital gains, IRA and 401(k) distributions, etc.).

For more information, see the Delaware State Tax Guide for Retirees.

9 of 52

District of Columbia

View of the Washington Monument from the World War II Monument in Washington, D.C.View of the Washington Monument from the World War II Monument in Washington, D.C.
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: 4% (on taxable income up to $10,000) —  8.95% (on taxable income over $1,000,000).  
  • Average Combined State and Local Sales Tax Rate: 6%.
  • Median Property Tax Rate: $564 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

From a tax standpoint, Washington, D.C., is a good place to retire (if you can stand all the political talk, that is). This is especially true for middle- and lower-income retirees. Although the District exempts Social Security income, most other forms of retirement income are taxed by the city. But many senior homeowners can get a substantial income tax credit based on the property taxes they pay.

And speaking of property taxes, the median property tax rate in D.C. are the eighth-lowest in the country. The city also offers property tax breaks designed just for seniors. Sales taxes in the Nation’s Capital are modest, too.

The District of Columbia does impose an estate tax, though.

For more information, see the District of Columbia Tax Guide for Retirees.

10 of 52

Florida

Hip senior couple riding in a convertible on a Florida roadwayHip senior couple riding in a convertible on a Florida roadway
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: None.  
  • Average Combined State and Local Sales Tax Rate: 7.08%.
  • Median Property Tax Rate: $830 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Sunshine State is the quintessential “retirement state.” There’s no getting around it’s very popular with retirees, not just because of its forgiving climate but also because it has no state income tax. Sales taxes, though, can go as high as 8.5%, depending on where you live. The average combined state and local sales tax rate is 7.05%, which is about average.

Property taxes are reasonable in Florida, and residents ages 65 and older who meet certain income, property-value and length-of-ownership restrictions can also receive an extra homestead exemption. Any widow or widower who is a Florida resident may claim an additional $500 exemption as well.

For more information, see the Florida State Tax Guide for Retirees.

11 of 52

Georgia

Senior men looking at a hot rod at a car show on a street in a small Georgia townSenior men looking at a hot rod at a car show on a street in a small Georgia town
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: 1% (on the first $1,000 of taxable net income for married couples filing jointly; on the first $750 for individual filers; and on the first $500 for married couples filing separately) —  5.75% (on the first $1,000 of taxable net income for married couples filing jointly; on the first $750 for individual filers; and on the first $500 for married couples filing separately).  
  • Average Combined State and Local Sales Tax Rate: 7.32%.
  • Median Property Tax Rate: $875 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

Ever wonder why so many retirees have Georgia on their minds? The Peach State’s low-tax climate may have something to do with it. Social Security income is exempt from state taxes, and so is up to $65,000 of most types of retirement income for those age 65 or older ($130,000 per couple). (For those age 62 to 64, the maximum exemption is $35,000.) Retirement income includes pensions and annuities, interest, dividends, net income from rental property, capital gains, royalties, and the first $4,000 of earned income, such as wages.

The statewide sales tax is 4%, but jurisdictions can add up to 4.9% of their own taxes. The average combined state and local sales tax rate is 7.31%, which is pretty average. The statewide median property tax rate in Georgia is middle-of-the-road, too.

For more information, see the Georgia State Guide for Taxes on Retirees.

12 of 52

Hawaii

Senior couple standing on a beach in HawaiiSenior couple standing on a beach in Hawaii
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: 1.4% (on taxable income up to $4,800 for married couples filing jointly; on up to $2,400 for married couples filing separately and individual filers) — 11% (on taxable income over $400,000 for married couples filing jointly and surviving spouses; on over $200,000 for married couples filing separately and individual filers). 
  • Average Combined State and Local Sales Tax Rate: 4.44%.
  • Median Property Tax Rate: $280 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

The Aloha State is known for its high cost of living, but it can be a tax paradise for retirees. It exempts Social Security benefits as well as most pension income from state income taxes. But if you have other sources of income, Hawaii will tax that income at rates up to 11%. That’s a lot of pineapples.

The property tax situation is unusual: The statewide median tax rate is the lowest in the country, and seniors can also get big-dollar exemptions from property taxes (these vary by county). But keep in mind that Hawaiian property values are sky-high.

Sales taxes are low in Hawaii, too. The average combined state and local rate is only 4.44%, which is the seventh-lowest in the U.S. (but purchases of groceries and clothing are taxed).

For more information, see the Hawaii State Guide for Taxes on Retirees.

13 of 52

Idaho

Senior man watching the sun set behind an Idaho mountainSenior man watching the sun set behind an Idaho mountain
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: 1% (on taxable income up to $2,000 for married joint filers and up to $1,000 for individual filers) —  6.5% (on taxable income of $10,000 or more for married joint filers and $5,000 or more for individual filers). (Note: Dollar amounts may still need to be adjusted for inflation for 2021.)
  • Average Combined State and Local Sales Tax Rate: 6.03%.
  • Median Property Tax Rate: $633 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

At first blush, the Gem State might not look like a tax-friendly state for retirees. Idaho taxes are no small potatoes: the state taxes all income, except Social Security and Railroad Retirement benefits, and its top tax rate of 6.5% kicks in at a relatively low level. While there is a generous retirement-benefits deduction, it’s only available to retirees with qualifying public pensions.

But, if you dig a little deeper, retirees will see some good news on taxes. Sales taxes aren’t too bad…and since groceries are taxable, the state offers a tax credit of $100 per person to offset these — and raises it to $120 if you’re over 65. The state’s median property tax rate is well below average, too. Plus, Idaho doesn’t have an estate tax or inheritance tax.

For more information, see the Idaho State Tax Guide for Retirees.

14 of 52

Illinois

Three seniors stoll on an overpass with the Chicago city skyline in front of themThree seniors stoll on an overpass with the Chicago city skyline in front of them
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: Flat 4.95%. 
  • Average Combined State and Local Sales Tax Rate: 8.82%.
  • Median Property Tax Rate: $2,165 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

There is some good tax news for retirees in Illinois: Social Security benefits and income from most retirement plans are exempt. Plus, the state’s 4.95% flat income tax rate is relatively low.

Now for the bad news from the Land of Lincoln: Property taxes hit retirees hard in Illinois. The statewide median property tax rate in Illinois is the second-highest in the nation. Fortunately, there is some relief for seniors in the form of a homestead exemption of up to $5,000 ($8,000 in Cook County), the ability to “freeze” a home’s assessed value (must have income of $65,000 or less), and a tax deferral program.

Sales tax rates are high in Illinois, too. The state has the seventh-highest average combined state and local sales tax rate at 8.82%. In some locations, the rate can be as high as 11%! Illinois also has an estate tax, which can be bad news for your heirs.

For more information, see the Illinois State Tax Guide for Retirees.

15 of 52

Indiana

Senior farmer standing in an Indiana cornfieldSenior farmer standing in an Indiana cornfield
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: Flat 3.23%.
  • Average Combined State and Local Sales Tax Rate: 7%.
  • Median Property Tax Rate: $810 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

High state income taxes on retirees are the driving force behind Indiana’s poor tax rating. While the Hoosier State exempts Social Security benefits and offers limited exemptions for military pensions and federal civil-service pensions, IRAs, 401(k) plans and private pensions are fully taxable. Keep in mind, too, that counties have the authority to levy their own income taxes on top of the state’s flat tax.

The state’s sales and property taxes don’t help the cause, either. They’re both middle-of-the-road when compared to other states. Not bad, but not enough to counter the state’s high income tax rates.

For more information, see the Indiana State Tax Guide for Retirees.

16 of 52

Iowa

Senior couple strolling in an Iowa cornfieldSenior couple strolling in an Iowa cornfield
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: 0.33% (on up to $1,676 of taxable income) —  8.53% (on taxable income over $75,420).  
  • Average Combined State and Local Sales Tax Rate: 6.94%.
  • Median Property Tax Rate: $1,529 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Inheritance tax.

Property taxes in Iowa are no Field of Dreams: they’re as high as the corn. That’s the main reason why the Hawkeye State gets a poor tax rating for retirees. The median property tax rate in Iowa is the 11th-highest in the nation. That certainly doesn’t help homeowners in Iowa.

Income taxes are on the high end in Iowa, too. That’s especially so for retirees with an above-average income. Plus, over 200 school districts and Appanoose County add their own income taxes on top of the state-level tax.

Iowa sales taxes are about average. There’s also an inheritance tax in Iowa, which your heirs might have to pay.

For more information, see the Iowa State Tax Guide for Retirees.

17 of 52

Kansas

Senior man stands in a field with his two hunting dogsSenior man stands in a field with his two hunting dogs
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: 3.1% (on taxable income from $2,501 to $15,000 for single filers and from $5,001 to $30,000 for joint filers) — 5.7% (on more than $30,000 of taxable income for single filers and more than $60,000 for joint filers). 
  • Average Combined State and Local Sales Tax Rate: 8.69%.
  • Median Property Tax Rate: $1,369 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

While there’s no place like home, maybe Dorothy should think about returning to Oz when she retires to avoid Kansas’ high taxes. It’s all there in black and white: Distributions from private retirement plans (including IRAs and 401(k) plans) and out-of-state public pensions are fully taxed. Kansas also taxes Social Security benefits received by residents with a federal adjusted gross income of $75,000 or more. Military, federal government and in-state public pensions are exempt from state income taxes, though.

Shopping in Kansas can be expensive, too. The Sunflower State’s average combined state and local sales tax rate is the ninth-highest in the U.S. at 8.69%.

Property taxes are above the national average as well, though some breaks are available for seniors.

For more information, see the Kansas State Tax Guide for Retirees.

18 of 52

Kentucky

Senior woman gives a race horse a snack at a Kentucky ranchSenior woman gives a race horse a snack at a Kentucky ranch
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: Flat 5%. 
  • Average Combined State and Local Sales Tax Rate: 6%.
  • Median Property Tax Rate: $829 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Inheritance tax.

The Bluegrass State isn’t horsin’ around: It exempts Social Security benefits from state income taxes, plus up to $31,110 per person of a wide variety of retirement income, including public and private pensions and annuities. A modest 6% sales tax is imposed at the state level, and localities can’t add to it. Kentucky’s median property tax rate is below the national average, too.

What’s not to like? Kentucky’s inheritance tax.

For more information, see the Kentucky State Tax Guide for Retirees.

19 of 52

Louisiana

A group of seniors stroll down a street in New Orleans, LouisianaA group of seniors stroll down a street in New Orleans, Louisiana
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: 2% (on $12,500 or less of taxable income for individuals, $25,000 for joint filers) —  6% (on more than $50,000 of taxable income; $100,000 for joint filers). 
  • Average Combined State and Local Sales Tax Rate: 9.52%.
  • Median Property Tax Rate: $534 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Pelican State offers a bayou full of tax breaks to retirees who won’t need to sing the blues. Social Security benefits aren’t taxed. Military, federal government, and state and local government pensions are exempt from state income taxes, too. Plus, up to $6,000 per person of private pension and annuity income are exempt from income taxes. And what income still gets taxed faces fairly low rates.

Property taxes are near the bottom for the U.S. But retirees will still face some of the country’s highest sales taxes on everything they buy, potentially including groceries, which are taxable in some localities.

For more information, see the Louisiana State Tax Guide for Retirees.

20 of 52

Maine

A man sits on a mountain top looking at the Maine coastlineA man sits on a mountain top looking at the Maine coastline
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: 5.8% (on taxable income less than $22,450 for single filers; less than $44,950 for joint filers) — 7.15% (on taxable income of $53,150 or more for single filers; $106,350 for joint filers). 
  • Average Combined State and Local Sales Tax Rate: 5.5%.
  • Median Property Tax Rate: $1,295 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

When it comes to taxes, retirees get more bad news than good news in Maine. Let’s start with property taxes that claw at your wallet: Maine’s median annual tax rate per $100,000 of home value is more than $200 above the national average. Ayuh.

The Pine Tree State, like the majority of states, exempts Social Security benefits from state income taxes. Plus, up to $10,000 per person of eligible pension income can be deducted. However, income above that threshold faces stiff income taxes.

Maine is one of a few states that do not allow cities and towns to impose their own local sales tax — only the state sales tax of 5.5% is due. That’s good news. But Maine also has an estate tax. That’s more bad news.

For more information, see the Maine State Tax Guide for Retirees.

21 of 52

Maryland

Senior man raises the U.S. flag and Maryland state flag at a Maryland beachfront homeSenior man raises the U.S. flag and Maryland state flag at a Maryland beachfront home
  • Our Ranking: Mixed.
  • State Income Tax Range: 2% (on less than $1,000 of taxable income) —  5.75% (on more than $250,000 of taxable income for single filers; more than $300,000 for joint filers).  
  • Average Combined State and Local Sales Tax Rate: 6%.
  • Median Property Tax Rate: $1,057 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Both.

There’s plenty to crab about regarding Maryland’s income taxes: They can be high for retirees. It’s true the state doesn’t tax Social Security benefits. If you’re 65 or older, you may qualify for a healthy exclusion on distributions from 401(k), 403(b) and 457 plans, along with income from public and private pensions. But here’s the hitch: Any income outside those exclusions will be heavily taxed in the Free State. Plus, Maryland’s 23 counties and Baltimore City levy their own income taxes.

The statewide median property tax rate is right around the national average, which helps. Sales taxes in Maryland are on the low end, too. (And there are no local sales taxes). These help balance out the state’s high income taxes.

For more information, see the Maryland State Tax Guide for Retirees.

22 of 52

Massachusetts

Senior woman stops her bike just over a footbridge in MassachusettsSenior woman stops her bike just over a footbridge in Massachusetts
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: Flat 5%.
  • Average Combined State and Local Sales Tax Rate: 6.25%.
  • Median Property Tax Rate: $1,170 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

The Bay State offers a couple of breaks for retirees, but it’s not a very tax-friendly place for seniors overall. When it comes to income taxes, Massachusetts doesn’t tax Social Security and most government employee pension income. But all other retirement income is taxed at a flat rate of 5%. (Note: On November 8, 2022, Massachusetts voters will decide whether to add an additional 4% tax on taxable income over $1 million starting in 2023.)

Property taxes run high with an above-average statewide median tax rate, although there is a refundable tax credit available to eligible homeowners 65 or older. Massachusetts also has its own estate tax.

On the plus side, sales taxes in Massachusetts are on the low end. The state rate is 6.25%, but there are no local taxes to tack on.

For more information, see the Massachusetts State Tax Guide for Retirees.

23 of 52

Michigan

Senior man sitting on a park bench overlooking Michigan's Mackinac BridgeSenior man sitting on a park bench overlooking Michigan's Mackinac Bridge
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: Flat 4.25%. 
  • Average Combined State and Local Sales Tax Rate: 6%.
  • Median Property Tax Rate: $1,448 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Great Lakes State tends to collect more state and local taxes from retirees than many other states, thanks in large part to above-average property taxes. Even though Michigan offers some property tax breaks for lower-income seniors (and others), the state’s median property tax rate is still the 14th-highest in the nation.

It’s a bit of a mixed bag when it comes to income taxes for retirees. If you were born before 1946, the tax breaks for retirement income are pretty good. However, if you were born later, the state isn’t quite as generous.

On the positive side, sales taxes in Michigan are below average. The state rate is 6%, which isn’t too bad. Plus, there are no additional local sales taxes to worry about.

For more information, see the Michigan State Tax Guide for Retirees.

24 of 52

Minnesota

Senior woman snowshoes along a Minnesota lakeSenior woman snowshoes along a Minnesota lake
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: 5.35% (on less than $27,230 of taxable income for single filers and on less than $39,810 for joint filers) — 9.85% (on more than $166,040 of taxable income for single filers and on more than $276,200 for joint filers).
  • Average Combined State and Local Sales Tax Rate: 7.46%.
  • Median Property Tax Rate: $1,082 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

The North Star State offers cold comfort on the tax front to retirees. Social Security benefits are taxable to the same extent as they are on your federal return, though taxpayers with taxable Social Security benefits can deduct some of their payments if their income is below a certain amount. There is also a special income tax deduction for certain senior citizens. But pensions are taxable, unless they’re from the military. Distributions from IRAs and 401(k) plans are taxed, too.

Property tax rates are slightly above average in Minnesota. But the state’s Senior Citizen Property Tax Deferral Program allows certain people age 65 or older to defer a portion of the property tax on their home.

Sales tax rates in Minnesota are above average, too. Plus, the state imposes an estate tax.

For more information, see the Minnesota State Tax Guide for Retirees.

25 of 52

Mississippi

Two senior women touring a Mississippi plantationTwo senior women touring a Mississippi plantation
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: 3% (on taxable income from $3,001 to $5,000) —  5% (on taxable income over $10,000).
  • Average Combined State and Local Sales Tax Rate: 7.07%.
  • Median Property Tax Rate: $787 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The tea is sweet in the Magnolia State, and so is the income tax environment for retirees. Mississippi not only exempts Social Security benefits from state income tax, but it also excludes withdrawals from IRAs and 401(k) plans, income from public and private pensions, and other types of qualified retirement income.

Mississippi sports a fairly hefty state sales tax rate of 7.07% (23rd in the nation), and Mississippi is one of a minority of states that charges sales tax on groceries. But localities add very little, if anything, on top of the state’s rate.

Property taxes on residential real estate aren’t too bad, either. Mississippi’s median annual property tax rate is well below the U.S. average.

For more information, see the Mississippi State Tax Guide for Retirees.

26 of 52

Missouri

Senior man and two others fishing in a Missouri riverSenior man and two others fishing in a Missouri river
  • Our Ranking: Mixed.
  • State Income Tax Range: 1.5% (on taxable income of $107 or more) —  5.4% (on more than $8,584 of taxable income). 
  • Average Combined State and Local Sales Tax Rate: 8.25%.
  • Median Property Tax Rate: $930 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

It’s easy to see why the Show-Me State gets a “mixed” tax rating for retirees. For the three major taxes — income, sales and property taxes — state and local levies are neither very high nor very low. For income taxes, Missouri doesn’t tax Social Security benefits for many taxpayers. Taxpayers may also qualify for exemptions on public and private pensions, subject to income limits. But note that if you do have taxable income, the top rate kicks in quickly: 5.4% on income over $8,584 (for 2020).

Missouri’s state sales tax rate is rather low. However, local sales tax rates can be high. So, overall, sales tax levies in Missouri are a bit above average, but not by a lot.

On the other hand, the median property tax rate in Missouri is slightly below average. Plus, some seniors may qualify for a property-tax credit.

For more information, see the Missouri State Tax Guide for Retirees.

27 of 52

Montana

Two senior fly fisherman sit on the bank of a Montana riverTwo senior fly fisherman sit on the bank of a Montana river
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: 1% (on up to $3,100 of taxable income) —  6.9% (on taxable income over $18,700).
  • Average Combined State and Local Sales Tax Rate: None.
  • Median Property Tax Rate: $831 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

Sales taxes are at the root of Montana’s tax-friendly ranking. The Treasure State is one of five states that don’t impose a general state sales tax. That’s the good news.

The bad news is that Montana taxes virtually all forms of retirement income, including Social Security. The state allows a pension- and annuity-income exemption, but this tax break is subject to certain income limitations. So, for wealthier retirees, the state’s income tax hits hard. (Note: Beginning in 2024, the pension and annuity exemption is repealed, but taxpayers age 65 and older will be able to deduct up to $5,500 of income. In addition, the top income tax rate drops in 2022 to 6.75% on taxable income over $17,400, and the tax rate brackets are reorganized starting in 2024.)

On the property-tax front, rates are modest, on average, and any homeowner or renter 62 or older with total household income of less than $45,000 can apply for a refundable income tax credit worth up to $1,000.

For more information, see the Montana State Tax Guide for Retirees.

28 of 52

Nebraska

Senior couple in pick-up truck with dog, Keystone, NebraskaSenior couple in pick-up truck with dog, Keystone, Nebraska
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: 2.46% (on up to $3,290 of taxable income for single filers and $6,570 for married couples filing jointly) —  6.84% (on taxable income over $31,750 for single filers and $63,500 for married couples filing jointly).
  • Average Combined State and Local Sales Tax Rate: 6.94%.
  • Median Property Tax Rate: $831 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Inheritance tax.

Nebraska is one of the least tax-friendly states in the nation for retirees, primarily because of steep income and property taxes. The Cornhusker State taxes most Social Security benefits received by seniors with income over a threshold amount (although taxes on seniors with income over the threshold amount will be lowered over the next few years). Most other retirement income, including public and private pensions, IRA withdrawals and 401(k) funds are taxed, too. Plus, the top income tax rate kicks in pretty quickly.

Nebraska’s median property tax rate is also the ninth-highest in the country. Seniors can get an exemption for up to $40,000 of assessed value, but there are income thresholds for this tax break, too.

What helps: Moderate sales tax rates. But they’re not enough to offer much of a counter balance to the state’s lofty income and property taxes.

For more information, see the Nebraska State Tax Guide for Retirees.

29 of 52

Nevada

Seniors gambling on slot machines in Las Vegas, NevadaSeniors gambling on slot machines in Las Vegas, Nevada
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: None.
  • Average Combined State and Local Sales Tax Rate: 8.23%.
  • Median Property Tax Rate: $533 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

Retired in Nevada? You hit it big! The Silver State offers retirees a jackpot of tax savings. There is no state income tax, so you can cash in your retirement plans and collect your Social Security checks without worrying about a big state tax bill. There are no estate or inheritance taxes in Nevada, either.

Property taxes are considerably below the national average. That’s good, as the state offers no property tax breaks for seniors.

Sales tax is one area where Nevada could do better. The state imposes a 6.85% tax, and counties may tack on up to 1.53% more. As a result, the average combined state and local sales tax rate is 8.23% (that’s the 13th-highest combined rate in the country).

For more information, see the Nevada State Tax Guide for Retirees.

30 of 52

New Hampshire

Senior sitting by a babbling New Hampshire brookSenior sitting by a babbling New Hampshire brook
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: None. But there’s a 5% tax on dividends and interest in excess of $2,400 for individuals ($4,800 for joint filers).
  • Average Combined State and Local Sales Tax Rate: None.
  • Median Property Tax Rate: $2,050 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

Residents of the Granite State pay no taxes on Social Security benefits, pensions or distributions from their retirement plans — because there’s no general income tax. Though New Hampshire imposes a 5% tax on dividends and interest, the first $2,400 ($4,800 for joint filers) is exempt. There are also $1,200 personal exemptions available for residents 65 or older.

There’s no sales tax in New Hampshire, either. So, you can shop to your heart’s content without having to pay any tax (and you’ll likely run into a lot of out-of-state shoppers looking to score without paying tax).

Here’s the hitch: The median property tax rate in New Hampshire is the fourth-highest in the U.S. Some property tax relief is available for seniors, but the programs, run by towns and cities, are complex and not overly generous.

For more information, see the New Hampshire State Guide for Taxes on Retirees.

31 of 52

New Jersey

Smiling senior next to her bike on a New Jersey boardwalkSmiling senior next to her bike on a New Jersey boardwalk
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: 1.4% (on up to $20,000 of taxable income) — 10.75% (on taxable income over $1 million). 
  • Average Combined State and Local Sales Tax Rate: 6.6%.
  • Median Property Tax Rate: $2,417 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Inheritance tax.

Year in and year out, the Garden State ranks as one of the least tax-friendly states for retirees and others. But New Jersey has made some efforts to reduce the income tax burden on retirees, with a very generous exemption for retirement income and a complete exemption for Social Security benefits. Sales taxes are below average, too.

It’s not enough, though, to overcome New Jersey’s crushing property taxes — the highest (on average) in the country, with residents facing a median property tax rate of $2,417 in taxes per $100,000 of assessed home value. It’s why we’ve seen retirement-age friends fleeing the state for more tax-friendly environs.

Plus, even though New Jersey recently eliminated its estate tax, the state still imposes an inheritance tax.

For more information, see the New Jersey State Tax Guide for Retirees.

32 of 52

New Mexico

Two senior men sit on the front porch of a store in New MexicoTwo senior men sit on the front porch of a store in New Mexico
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: 1.7% (on up to $5,500 of taxable income for single filers and $8,000 for joint filers) — 5.9% (on taxable income over $210,000 for single filers and over $315,000 for joint filers).
  • Average Combined State and Local Sales Tax Rate: 7.83%.
  • Median Property Tax Rate: $776 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Land of Enchantment is not a magical place for well-off retirees. Social Security benefits, retirement accounts and pensions are all taxable. The state does offer a retirement-income exemption of up to $8,000, but you must meet certain income restrictions to qualify. Starting in 2021, the top income tax rate also jumped from 4.9% to 5.9% (although far fewer people are now subject to the highest New Mexico rate).

New Mexico’s sales tax has a broad reach, hitting most services in addition to goods. As a result, this tax tends to hit retirees fairly hard.

On the bright side, property taxes are on the low side, and there are property tax credit and deferral programs available to low-income seniors. Plus, if you live to be 100 years old, the state’s income tax is waived.

For more information, see the New Mexico State Tax Guide for Retirees.

33 of 52

New York

Senior couple walking down a New York City streetSenior couple walking down a New York City street
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: 4% (on up to $8,500 of taxable income for single filers and up to $17,150 for married couples filing jointly) — 10.9% (on taxable income over $25 million). 
  • Average Combined State and Local Sales Tax Rate: 8.52%.
  • Median Property Tax Rate: $1,692 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

The Empire State’s crushing tax burden carries over into retirement — especially when it comes to property taxes. New York’s median property tax rate is tied for the 7th-highest in the U.S. There are some property tax breaks for seniors, though. For instance, local governments and public-school districts can reduce the assessed value of their home by 50% for qualifying seniors.

Sales taxes are high in New York, too. The state’s average combined state and local tax rate is the 10th-highest in the nation.

When it comes to income taxes, New York’s tax bite is less severe for ordinary retirees when compared to other states. Social Security benefits, federal and New York government pensions, and military retirement pay are exempt. However, anything over $20,000 from a private retirement plan (including pensions, IRAs and 401(k) plans) or out-of-state government plan is taxed. For ultra-wealthy retirees, New York income tax rates were always steep, but they’re even higher now — starting in 2021, the highest rate jumps from 8.82% to 10.9%.

New York also has an estate tax with a special “cliff” feature that can result in a big tax bill when you die.

For more information, see the New York State Tax Guide for Retirees.

34 of 52

North Carolina

Seniors reading a brochure outside of Lexington Glassworks in North CarolinaSeniors reading a brochure outside of Lexington Glassworks in North Carolina
  • Our Ranking: Mixed.
  • State Income Tax Range: Flat 5.25%.
  • Average Combined State and Local Sales Tax Rate: 6.98%.
  • Median Property Tax Rate: $773 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Tar Heel State, a favorite for retirees relocating from other states, doesn’t tax Social Security benefits, but tax breaks for other common types of retirement income are scarce (although government pensions are exempt under certain circumstances). That’s certainly a big problem for many North Carolina retirees who dread high income taxes.

But things do get better for seniors in the state. Sales taxes in North Carolina  are close to the national average. But, while the state doesn’t tax groceries, localities do.

Property taxes are on the low end, too. Plus, homeowners 65 and older can choose between two property-tax relief programs.

There are no estate or inheritance taxes in North Carolina, either.

For more information, see the North Carolina State Tax Guide for Retirees.

35 of 52

North Dakota

Fisherman drilling a hole in the ice of a frozen North Dakota lakeFisherman drilling a hole in the ice of a frozen North Dakota lake
  • Our Ranking: Mixed.
  • State Income Tax Range: 1.1% (on up to $40,125 of taxable income for singles and up to $67,050 for married couples filing jointly) —  2.9% (on taxable income over $440,600).
  • Average Combined State and Local Sales Tax Rate: 6.96%.
  • Median Property Tax Rate: $986 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Peace Garden State could do better when it comes to keeping taxes low on retirees. North Dakota is one of only a handful of states that tax at least some portion of Social Security benefits. Other than an exemption for military retirement pay, it offers no tax breaks for other common forms of retirement income, such as private or public pensions, 401(k) funds and IRA distributions. Fortunately, the income tax rates are so low that most North Dakota retirees still don’t get outrageous income tax bills.

Sales taxes are right around the national average, while property taxes are a bit above. There are no estate or inheritance taxes to worry about, either. When it’s all added up, the typical tax burden for a North Dakota retiree is pretty much in the middle when compared to all the other states.

For more information, see the North Dakota State Tax Guide for Retirees.

36 of 52

Ohio

A boat docked on the Cuyahoga River in OhioA boat docked on the Cuyahoga River in Ohio
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: 2.85% (on taxable income from $22,150 to $44,250) —  4.797% (on taxable income over $221,300). 
  • Average Combined State and Local Sales Tax Rate: 7.23%.
  • Median Property Tax Rate: $1,478 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

As with many states, lower-income retirees in the Buckeye State don’t pay much in income taxes. But that isn’t always true with higher-income seniors. Ohio exempts Social Security benefits from state income taxes for everyone. However, the slate of tax credits for other types of retirement income don’t apply if your base income exceeds $100,000. Localities and some school districts may levy their own income taxes, too.

Property taxes are well above average in Ohio as well. Residents 65 and older may be able to exempt some of their home’s value from Ohio’s steep property taxes. However, there’s an income threshold for this property tax break, too.

Sales taxes in the state are relatively modest. That helps keep Ohio out of the “least tax-friendly” category. And there are no estate or inheritance taxes to worry about.

For more information, see the Ohio State Tax Guide for Retirees.

37 of 52

Oklahoma

Two senior men, one wearing Native American clothing, say the Pledge of AllegianceTwo senior men, one wearing Native American clothing, say the Pledge of Allegiance
  • Our Ranking: Mixed.
  • State Income Tax Range: 0.5% (on up to $1,000 of taxable income for single filers and up to $2,000 for married joint filers) — 5% (on taxable income over $7,200 for single filers and over $12,200 for married joint filers). Starting in 2022, the lowest rate will be 0.25% and the highest rate will be 4.75%.
  • Average Combined State and Local Sales Tax Rate: 8.95%.
  • Median Property Tax Rate: $869 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

Oklahoma, O.K. Just O.K. See, there’s good news and bad news for retirees living in the Sooner State. Oklahoma doesn’t tax Social Security benefits. Residents can also exclude up to $10,000 per person ($20,000 per couple) of other types of retirement income. That’s certainly helpful.

But Oklahoma has the 6th-highest combined state and local sales tax rates in the nation, at an average of 8.95%. Both groceries and clothing are subject to sales tax, too.

Oklahoma falls right in the middle when the median property tax rates for all 50 states are compared. Plus, elderly homeowners may qualify for a rebate or tax “freeze” if their income is below a certain amount.

For more information, see the Oklahoma State Tax Guide for Retirees.

38 of 52

Oregon

Senior couple hiking in the hills above the Oregon coastlineSenior couple hiking in the hills above the Oregon coastline
  • Our Ranking: Mixed.
  • State Income Tax Range: 4.75% (on up to $3,600 of taxable income for single filers and up to $7,200 for married couples filing jointly) —  9.9% (on taxable income over $125,000 for single filers and over $250,000 for married couples filing jointly).
  • Average Combined State and Local Sales Tax Rate: None.
  • Median Property Tax Rate: $903 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

Oregon doesn’t tax Social Security benefits, which certainly helps retirees lower their income tax bill. But, in most cases, other retirement income is subject to tax — and Oregon’s income tax rates can be as high as 9.9%. However, there is a retirement-income credit for seniors, but it comes with certain income restrictions.

One bright spot in Oregon’s tax picture is its absence of a sales tax. You can buy anything in the state and never pay a penny in sales taxes.

When it comes to property taxes, Oregon’s median property tax rate is a little below the national average. There’s also a property tax deferral program for senior citizens, but income limits do apply.

For more information, see the Oregon State Tax Guide for Retirees.

39 of 52

Pennsylvania

Senior couple sitting in a grassy Pennsylvania meadow holding pumpkinsSenior couple sitting in a grassy Pennsylvania meadow holding pumpkins
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: Flat 3.07%. 
  • Average Combined State and Local Sales Tax Rate: 6.34%.
  • Median Property Tax Rate: $1,499 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Inheritance tax.

Like neighboring New Jersey, Pennsylvania takes it very easy on Social Security benefits and other types of retirement income. Plus, the local income taxes generally don’t affect retirees either, as they’re levied on wages.

Also like New Jersey, property taxes in the Keystone State are on the high end (although they’re not as bad in Pennsylvania as they are in New Jersey). The state’s median property tax rate is the 12th-highest in the U.S. Although a property tax/rent rebate program is available, it comes with income limits.

Sales taxes are below average in Pennsylvania. That’s certainly some good news for retirees. However, the state also has an inheritance tax that can gum up your estate planning.

For more information, see the Pennsylvania State Tax Guide for Retirees.

40 of 52

Rhode Island

Senior couple walking their dogs on the Rhode Island beachSenior couple walking their dogs on the Rhode Island beach
  • Our Ranking: Not tax-friendly.
  • State Income Tax Range: 3.75% (on up to $65,250 of taxable income) — 5.99% (on taxable income over $148,350).
  • Average Combined State and Local Sales Tax Rate: 7%.
  • Median Property Tax Rate: $1,533 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

High-earners won’t find the Ocean State amenable for retirement. On the income tax front, seniors pay tax on their Social Security benefits if their federal adjusted gross is too high. Wealthier retirees also miss out on a state income tax exemption for payouts from private, government, or military retirement plans.

The property tax news isn’t any better. The statewide median property tax rate in Rhode Island is the 10th-highest in the U.S. Homeowners 65 and older who earn $30,000 or less can get a state tax credit, though. Local governments in Rhode Island can also offer a property tax exemption or similar property tax break for senior citizens.

Retirees will also want to know that sales taxes in the state are average and Rhode Island has an estate tax (it’s also one of only three states that tax estates worth less than $2 million).

For more information, see the Rhode Island State Tax Guide for Retirees.

41 of 52

South Carolina

Senior couple cuddle on a seawall along the South Carolina coastSenior couple cuddle on a seawall along the South Carolina coast
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: Low: 3% (on taxable income from $3,070 to $6,150) —  7% (on taxable income over $15,400).
  • Average Combined State and Local Sales Tax Rate: 7.46%.
  • Median Property Tax Rate: $545 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Palmetto State extends some real Southern hospitality to retirees by offering a charming collection of income tax breaks. To start, Social Security benefits are completely exempt. In addition, taxpayers age 65 or older can exclude up to $10,000 of retirement income. Seniors can also deduct $15,000 from other taxable income ($30,000 for joint filers).

Low property tax rates in South Carolina help retirees, too, as many transplants from New Jersey and New York quickly realize. The statewide median property tax rate is the sixth-lowest amount in the country. Plus, seniors can also claim a homestead exemption for the first $50,000 of their property’s fair market value.

The bad news: Sales taxes are on the high end in South Carolina, with an average combined state and local rate of 7.46%.

For more information, see the South Carolina State Tax Guide for Retirees.

42 of 52

South Dakota

Senior woman sits on a ledge while hiking in the South Dakota BadlandsSenior woman sits on a ledge while hiking in the South Dakota Badlands
  • Our Ranking: Mixed.
  • State Income Tax Range: None.
  • Average Combined State and Local Sales Tax Rate: 6.4%.
  • Median Property Tax Rate: $1,219 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Mount Rushmore State offers both good tax news and bad tax news for retirees. First some good news: South Dakota doesn’t impose an income tax, so Social Security benefits and other forms of retirement income get a free ride.

For some bad news, take a look at the state’s property tax rates, which are on the high side. Property tax relief programs are also limited to low-income residents.

The news is split between good and bad when it comes to sales taxes in South Dakota. On the one hand, rates are below average. However, the sales taxes have a broad reach here and include taxes on both groceries and clothing.

For more information, see the South Dakota State Tax Guide for Retirees.

43 of 52

Tennessee

Senior couple hiking the Tennessee mountainsSenior couple hiking the Tennessee mountains
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: None.
  • Average Combined State and Local Sales Tax Rate: 9.55%.
  • Median Property Tax Rate: $636 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

Retirees in the Volunteer State will be singing “Rocky Top” all the way to the bank, thanks to a low overall tax burden in the state. Tennessee has no income tax starting in 2021, though the state did levy a 1% tax on stock dividends and interest income from bonds and other investments in 2020 (that tax was phased out).

Property taxes are well below average, too. The state also offers some property tax relief programs for income-qualified senior citizens.

However, you’ll be singing the blues at the cash register: Be prepared to fork over some substantial sales taxes in Tennessee. It has the highest combined state and local sales-tax rate in the nation, at an average of 9.55%.

For more information, see the Tennessee State Tax Guide for Retirees.

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Texas

Texas senior holding a toddler, with both wearing cowboy hatsTexas senior holding a toddler, with both wearing cowboy hats
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: None.
  • Average Combined State and Local Sales Tax Rate: 8.19%.
  • Median Property Tax Rate: $1,692 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

How does a state with no income tax at all end up on the “least tax-friendly” list? It starts by having the seventh-highest median property tax rate in the country. The Lone Star State does offer seniors some breaks from the heavy property tax burden, with an additional homestead exemption, a valuation freeze program, and the ability to defer property taxes. However, these benefits are not enough to make Texas a tax-friendly state for retirees.

Sales taxes in Texas are also high. The average combined state and local tax rate in the state is 8.19%, which is the 14th-highest combined rate in the U.S.

For more information, see the Texas State Tax Guide for Retirees.

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Utah

Senior woman in riding attire next to her saddled horse in UtahSenior woman in riding attire next to her saddled horse in Utah
  • Our Ranking: Mixed.
  • State Income Tax Range: Flat 4.95%.
  • Average Combined State and Local Sales Tax Rate: 7.19%.
  • Median Property Tax Rate: $575 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Beehive State’s income tax system is rough on retirees — especially wealthier ones. Utah is one of only a handful of states that taxes Social Security benefits. Most other retirement income is exposed to the state’s flat 4.95% income tax, too. Utah provides a small retirement-income tax credit that may help offset the tax on Social Security, but it’s only available for certain income-eligible seniors.

Sales taxes in Utah are not quite as steep — but they’re certainly not what you’d call low. The state’s average combined state and local sales tax rate is 7.18%, which is well above average.

Retirees do get some relief when it comes to property taxes in the state. The median property tax rate in Utah is tied for the 10th-lowest in the nation. Property tax breaks are also available for seniors with income below certain levels.

For more information, see the Utah State Tax Guide for Retirees.

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Vermont

Senior man hiking in the hills of Vermont with autumn colors behind himSenior man hiking in the hills of Vermont with autumn colors behind him
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: 3.35% (on up to $40,350 of taxable income for singles and up to $67,450 for joint filers) — 8.75% (on taxable income over for $204,000 for singles and up to $248,350 for joint filers).
  • Average Combined State and Local Sales Tax Rate: 6.24%.
  • Median Property Tax Rate: $1,861 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

You’ll need plenty of firewood to make it through Vermont winters, and plenty of money for the tax bill, too. The Green Mountain State has a steep top income tax rate, and most retirement income is taxed. The state also taxes all or part of Social Security benefits for residents with federal adjusted gross income a certain amount.

Vermont’s median property tax rate is the fifth-highest in the U.S. Homeowners age 65 and older may qualify for a tax credit worth up to $8,000, but the credit is only available if their household income doesn’t exceed a certain level.

Vermont also taxes estates that exceed $4.25 million in value ($5 million starting in 2021).

At least Vermont’s sales tax is on the low end. The average combined state and local tax rate is only 6.24%, and food for home consumption and clothing are exempt, limiting the impact of this tax (remember, no-sales-tax New Hampshire is next door).

For more information, see the Vermont State Tax Guide for Retirees.

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Virginia

Senior man atop a Virginia mountain looking at the Shenandoah ValleySenior man atop a Virginia mountain looking at the Shenandoah Valley
  • Our Ranking: Tax-friendly.
  • State Income Tax Range: 2% (on up to $3,000 of taxable income) — 5.75% (on taxable income over $17,000).
  • Average Combined State and Local Sales Tax Rate: 5.73%.
  • Median Property Tax Rate: $804 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

For retirees, the Old Dominion offers a few tax breaks here and a few tax breaks there to create a friendly overall tax environment. For state income taxes, Virginia doesn’t tax Social Security benefits, and residents 65 and older can deduct up to $12,000 per person of other income, subject to income-eligibility limits.

Another break comes in the form of low sales tax rates. Virginia’s average combined state and local rate of 6.22% is the 11th-lowest in the nation. Clothing and groceries (reduced rate) are taxable, though.

Property taxes are below average, too. Local governments can provide additional tax breaks for seniors as well.

For more information, see the Virginia State Tax Guide for Retirees.

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Washington

Senior couple kayaking in Washington stateSenior couple kayaking in Washington state
  • Our Ranking: Mixed.
  • State Income Tax Range: None.
  • Average Combined State and Local Sales Tax Rate: 9.23%.
  • Median Property Tax Rate: $929 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: Estate tax.

The Evergreen State is one of seven states with no broad-based personal income tax. Therefore, retirees don’t have to worry about paying taxes on their pensions, Social Security benefits or other retirement income, period.

However, sales taxes in Washington are extremely high. At 9.23%, the state’s combined state and local sales tax rate is the 4th-highest in the nation.

Property taxes in Washington are more reasonable, though. The median property tax rate is very close to the national average. The state also offers two property tax relief programs just for seniors.

For more information, see the Washington State Tax Guide for Retirees.

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West Virginia

Senior hiking in the West Virginia mountains in the fallSenior hiking in the West Virginia mountains in the fall
  • Our Ranking: Mixed.
  • State Income Tax Range: 3% (on up to $10,000 of taxable income) —  6.5% (on taxable income of $60,000 or more). 
  • Average Combined State and Local Sales Tax Rate: 6.50%.
  • Median Property Tax Rate: $571 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

Not quite heaven, but almost: Right now, income taxes in the Mountain State can be quite high for Social Security recipients with income over a certain amount. But the tax situation in West Virginia is evolving, with the tax on Social Security income in the process of being phased out. By 2022, all Social Security benefits will be tax-free. With regard to other retirement income, there are some exemptions for government pensions and a limited general income deduction for seniors.

Sales taxes are reasonable in West Virginia. They’re above average, but not by much.

Property taxes are notably low. West Virginia’s median property tax rate is the ninth-lowest in the U.S. The state also offers a few property tax breaks for qualifying seniors.

For more information, see the West Virginia State Tax Guide for Retirees.

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Wisconsin

 Senior fisherman with his ATV on frozen Lake Monona in Madison, Wisconsin, with the city as backdrop Senior fisherman with his ATV on frozen Lake Monona in Madison, Wisconsin, with the city as backdrop
  • Our Ranking: Least tax-friendly.
  • State Income Tax Range: 3.54% (on up to $11,450 of taxable income for singles or up to $15,960 for married couples) — 7.65% (on taxable income over $263,480 for singles or over $351,310 for married couples).
  • Average Combined State and Local Sales Tax Rate: 5.43%.
  • Median Property Tax Rate: $1,684 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Badger State exempts Social Security benefits from state taxes, but income from pensions and annuities, along with distributions from IRAs and 401(k) plans, are generally taxable. However, retirees who are 65 and older can subtract up to $5,000 of retirement income (including distributions from IRAs) from Wisconsin taxable income if their federal adjusted gross income is less than $15,000 ($30,000 for a married couple filing jointly).

Property taxes are the eighth-highest in the U.S. Plus, there are limited property tax breaks for retirees.

There are some bright spots for retirees. For example, sales taxes are actually low in Wisconsin. It has the ninth-lowest average combined state and local tax rate in the nation. There are no estate or inheritance taxes, either.

For more information, see the Wisconsin State Tax Guide for Retirees.

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Wyoming

Senior hiker looking at the mountains of WyomingSenior hiker looking at the mountains of Wyoming
  • Our Ranking: Most tax-friendly.
  • State Income Tax Range: None.
  • Average Combined State and Local Sales Tax Rate: 5.33%.
  • Median Property Tax Rate: $575 per $100,000 of assessed home value.
  • Estate Tax or Inheritance Tax: None.

The Equality State is tax-friendly to all residents, including retirees. Thanks to abundant revenues that the state collects from oil and mineral rights, Wyoming retirees shoulder one of the lowest overall state and local tax burdens in the U.S. To start, there are no income, estate or inheritance taxes. But that’s not the only good news.

Sales taxes are low in Wyoming, too. The state imposes the eighth-lowest average combined state and local sales tax rate in the country.

You won’t pay high property taxes to own a home on the range, either. The statewide median property tax rate is tied for the 10th-lowest in the U.S. Seniors may also qualify for the deferral of property tax payments.

For more information, see the Wyoming State Tax Guide for Retirees.

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About Our Methodology

A magnifying glass sits atop computer printouts of dataA magnifying glass sits atop computer printouts of data

Our tax content include data and state tax-policy details from a wide range of sources. To create our rankings, we created a metric to compare the tax burden in all 50 states and the District of Columbia.

Data sources:

Income tax

Our income tax information comes from each state’s tax agency. Income tax forms and instructions were also used. See more about how we calculated the income tax for our hypothetical couples below under “Ranking method.”

Property Tax

The median property tax rate is based on the median property taxes paid and the median home value in each state for 2019 (the most recent year available). The data comes from the U.S. Census Bureau.

Sales tax

State sales tax rates are from each state’s tax agency. We also cite the Tax Foundation’s figure for average combined sales tax, which is a population-weighted average of state and local sales taxes. In states that let local governments add sales taxes, this gives an estimate of what most people in a given state actually pay, as those rates can vary widely.

Inheritance & gift taxes:

Data from each state tax agency was used for estate and inheritance tax information.

Ranking method

The “tax-friendliness” of a state depends on the sum of income, sales and property taxes paid by our two hypothetical retired couples.

To determine income taxes due, we prepared returns for both couples. The first couple had $15,000 of earned income (wages), $20,500 of Social Security benefits, $4,500 of 401(k) plan distributions, $4,000 of traditional IRA withdrawals, $3,000 of Roth IRA withdrawals, $200 of taxable interest, $1,000 of dividend income, and $1,800 of long-term capital gains for a total income of $50,000 for the year. They also had $10,000 of medical expenses, paid $2,500 in real estate taxes, paid $1,200 in mortgage interest, and donated $1,900 (cash and property) to charity.

The second couple had $37,500 of Social Security benefits, $26,100 of 401(k) plan distributions, $18,200 of private pension money, $4,000 of traditional IRA withdrawals, $2,000 of Roth IRA withdrawals, $2,000 of tax-exempt municipal bond interest (from the state of residence), $2,000 of taxable interest, $4,000 of dividend income, and $4,200 of long-term capital gains for a total income of $100,000 for the year. They also had $10,000 of medical expenses, paid $3,200 in real estate taxes, paid $1,500 in mortgage interest, and donated $4,300 (cash and property) to charity.

Since some states have local income taxes, we domiciled both our couples in each state’s capital, from Juneau to Cheyenne. We calculated their 2019 income tax returns using software from eFile.com.

How much they paid in sales taxes was calculated using the IRS’ Sales Tax Calculator, which is localized to zip code. To determine those, we used Zillow to determine zip codes with housing inventory close to our sample assessed value.

How much each hypothetical couple paid (and deducted on their income tax return, if allowed) in property taxes was calculated by assuming a residence with a $250,000 assessed value for the first couple and a $350,000 assessed value for the second couple. We then applied each state’s median property tax rate to that appropriate amount.

Source: kiplinger.com

Situations When Couples Should Combine Finances — And When They Shouldn’t

Every partnership is unique, but one topic tends to introduce stress more often than others in a relationship: money. Specifically how we make it, how we spend it and how we talk about it.

Do we get joint bank accounts? Do we invest separately? How do we split the bills? Do we have to tell our partner about every dime we spend?

Finances can be a touchy subject — whether you’re married or not — but it’s an incredibly important one. What you do today can affect your future together (think: buying a home, going on vacations, retiring) and you need to be on the same page.

But “same page” doesn’t always mean sharing the same accounts. Here are the times you should combine your finances — and when you shouldn’t.

1. Combine: Car Insurance Payments

Did you know you could save money by combining your car insurance with your partner’s? Yep — by putting two cars on one insurance policy, you could be eligible for discounted rates. Some up to 20% per additional car.

That’s why this is one financial move you should make together, and one you should check out every six months or so — it could save you some serious money. Let’s be real, though. It’s probably not the first thing you think about when you wake up. But it doesn’t have to be.

A website called Insure.com makes it super easy to compare car insurance prices. All you have to do is enter your ZIP code and your age, and it’ll show you your options.

Using Insure.com, people have saved an average of $489 a year.

Yup. That could be $500 back in your pocket just for taking a few minutes to look at your options.

2. Combine: Emergency Funds

If you share a life together, you’ll likely share the emergencies, too. Sick kids, company-wide layoffs and natural disasters don’t pick and choose their victims.

So having an emergency fund together is a smart move to make sure everyone is protected and has access to it.

If you’re looking for a place to safely stash that money away — but still earn money — don’t waste your time with a typical savings account. The 0.04% national average interest rate is nothing these days.

But a debit card called Aspiration lets you earn up to 16 times the average interest on the money in your account.

Not too shabby!

Enter your email address here to get a free Aspiration Spend and Save account. After you confirm your email, securely link your bank account so they can start helping you get extra cash. Your money is FDIC insured and they use a military-grade encryption which is nerd talk for “this is totally safe.”

3. Combine: Homeowners Insurance

Did you know that even if your home’s mortgage isn’t in your name  — just your partner’s — you can still be on the homeowners insurance? In case something were to happen, you want to make sure you can access the benefits — so combine this, too!

If you’re a homeowner, you probably have homeowners insurance, but you hardly ever think about it. That’s good — it means you haven’t needed to use it. But it also means you don’t know if you’re being overcharged for it.

It’s easy to find out, though. To see if you’re overpaying for your policy, check out  a website called SmartFinancial. It’s a digital marketplace where you can get quotes and compare rates to make sure you’re getting the best price.

Homeowners can save hundreds of dollars when they switch home insurance companies this way. It takes just two minutes to get quotes from multiple insurers, so you can see all your options side-by-side. Get started here. 

4. Combine: Some of Your Credit Cards or Loans

You’ve got big plans. Maybe you’ve got your eye on a new car. Or you’re hoping to buy a house in the next few years. Or you’d even like to start your own business. But here’s the thing: No matter what your goals are, you might not realize how much your credit score is standing in your way.

But if you and your partner work together to pay off debts and keep low balances on credit cards, you can both benefit from any bumps in your credit score.

A free website called Credit Sesame makes it easy to put your credit score on track to reach your goals. We even talked to one guy, James Cooper, of Atlanta, who used Credit Sesame to raise his credit score nearly 300 points in six months.*** He says they showed him exactly what to do — he was even able to open his first credit card.

What could adding 300 points to your score mean for your goals? It could easily save you thousands of dollars over the life of a car loan or mortgage.

Within two minutes, Credit Sesame will give you access to your credit score, any debt-carrying accounts and a handful of personalized tips to improve your score. You’ll even be able to spot any errors holding you back (one in five reports have one).

Make sure your plans don’t get sidelined by bad credit. Sign up for free (it only takes about 90 seconds) and see how much you could improve your score.

5. Combine: Investments

When you invest in the stock market, you could earn an average of 7% year over year just by holding your investments.

And if you invest alongside your partner, you’ll also get an average of 7% — but 7% of a larger sum. That’s why it could be a smart move to combine your account with your spouse’s or open a new one together.

It’s easy to do with an app called Stash. Stash lets you be a part of something that’s normally exclusive to the richest of the rich — on Stash you can buy pieces of other companies for as little as $1.

That’s right — you can invest in pieces of well-known companies, such as Amazon, Google, Apple and more for as little as $1. The best part? If these companies profit, so can you. Some companies even send you a check every quarter for your share of the profits, called dividends.1

It takes two minutes to sign up, and it’s totally secure. With Stash, all your investments are protected by the Securities Investor Protection Corporation (SIPC) — that’s industry talk for, “Your money’s safe.”2

Plus, when you use the link above, Stash will give you a $5 sign-up bonus once you deposit $5 into your account.*

6. Combine: Tax Returns

This combined financial strategy might not work for everyone — it depends on how complicated your tax returns are or what your financial goals are.

But for most married couples, the tax credit you’d get on your yearly tax returns is enough to make it worthwhile. In 2020, a married couple filing jointly was able to take a $24,800 deduction, while filing solo only allowed for a $12,400 deduction.

7. Separate: Life Insurance

Ok, so you can’t combine life insurance policies even if you wanted to. But you should both have life insurance policies with each other as the beneficiaries.

Why? Because you need to think about how your family would manage without your income after you’re gone — Like how they’ll pay the bills or send the kids through school. Now’s a good time to start planning for the future by looking into a term life insurance policy.

You’re probably thinking: I don’t have the time or money for that. But you can get free quotes from a company called Policygenius in just a few minutes to help you find the right coverage for your needs.

Some policies start at less than $20 per month.* The peace of mind of knowing your family is taken care of is priceless.

Policygenius offers life insurance policies that don’t require the usual medical exam, so you don’t even have to get up from the couch. Click here to get a free quote from Policygenius.

8. Separate: Personal and Emergency Savings

Sharing an emergency fund is important — but so is having one all to yourself. Whether it’s for something fun like buying surprise gifts or having a financial layer of protection in case you break up, make sure you’re saving for yourself.

If you’re looking for ways to increase those savings, here are a few options:

  • An Aspiration bank account that will give you up to 5% cash back on debit card purchases and earn you up to 16x the average interest.
  • Cash back and gift card rewards for online shopping, like Capital One Shopping or Rakuten — both offer bonuses for signing up through these links.

9. Separate: 401(k) Retirement Investing

Setting aside money from your paycheck to put into your 401(k) is literally one of the smartest things you can do for your future. And if your employer matches each contribution, that could mean hundreds of thousands of extra dollars in your account when you retire.

It’s free money — and it’s only available to you. If your spouse’s employer offers them a match as well — double free money!

But if you can’t take advantage of this employer benefit because you need all of your paycheck every month, a company called Lendtable will give you the cash.

We know it sounds too good to be true. But if your employer has a 401(k) match program, this is money they already have earmarked for you. By using Lendtable, you’ll be able to unlock that free cash.

Let’s say you make $50k a year and your employer matches your 401(k) contribution up to 4%. If you put $0 in your retirement account this year, you get $0 from your boss. If Lendtable lends you the 4% of your salary your employer is willing to match, you get $2,000 from your boss, minus Lendtable’s fee. (This comes from the extra money you’ve earned, so there’s no sacrifice on your part.)

It takes three minutes to answer a few questions about your eligibility and sign up for an account.

Once you’ve gotten your full match amount from your employer, LendTable will take the money they lent you back, plus a small share of your profit. If there’s a penalty from your retirement account provider for taking money out, Lendtable will cover that, too.

The risk for you is basically nonexistent, so not taking advantage of your employer match with Lendtable’s offer would make Future Millionaire You bow your head in shame. Get started here.

Kari Faber is a staff writer at The Penny Hoarder. 

***Like Cooper, 60% of Credit Sesame members see an increase in their credit score; 50% see at least a 10-point increase, and 20% see at least a 50-point increase after 180 days.

Credit Sesame does not guarantee any of these results, and some may even see a decrease in their credit score. Any score improvement is the result of many factors, including paying bills on time, keeping credit balances low, avoiding unnecessary inquiries, appropriate financial planning and developing better credit habits.

1Not all stocks pay out dividends, and there is no guarantee that dividends will be paid each year.

2To note, SIPC coverage does not insure against the potential loss of market value.

For Securities priced over $1,000, purchase of fractional shares starts at $0.05.

*Offer is subject to Promotion Terms and Conditions. To be eligible to participate in this Promotion and receive the bonus, you must successfully open an individual brokerage account in good standing, link a funding account to your Invest account AND deposit $5.00 into your Invest account.

The Penny Hoarder is a Paid Affiliate/partner of Stash. 

Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk. 

*For a $500K policy, subject to eligibility. 

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Source: thepennyhoarder.com

10 Least Tax-Friendly States for Retirees

Whether you plan to retire at the beach, near the mountains, or to some other dream destination, make sure you check out the local tax situation before packing your bags and hiring a moving van. If you don’t, you might be unpleasantly surprised by a hefty state and local tax bill in your new hometown.

State and local taxes can vary greatly from one place to another. The difference can easily exceed $10,000 or more per year for some people, which is enough to break the bank for a lot of retirees. So, to avoid this kind of bombshell, make sure you do some research before settling on a new location. You can start with Kiplinger’s State-by-State Guide to Taxes on Retirees. This tool maps out the tax landscape for each state and the District of Columbia, and allows you to do a side-by-side comparison for up to five states at a time.

We also identified the 10 states that impose the highest taxes on retirees, which are listed below (we saved the worst state for last). Our results are based on the estimated state and local tax burden in each state for two hypothetical retired couples with a mixture of income from wages, Social Security, 401(k) plans, traditional and Roth IRAs, private pensions, interest, dividends, and capital gains. One couple had $50,000 in total income and a $250,000 home, while the other had $100,000 of income and a $350,000 home. Take a look to see if your state—or the state you’ve been dreaming about for retirement—made our “least tax-friendly” list for retirees (we hope it didn’t).

See the final slide for a complete description of our ranking methodology and sources of information.

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10. Texas

picture of Texas flag in coinspicture of Texas flag in coins
  • State Income Tax Range: None
  • Average Combined State and Local Sales Tax Rate: 8.19%
  • Median Property Tax Rate: $1,692 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: None

You might be surprised to see the Lone Star State on the list of least tax-friendly states for retirees. Afterall, isn’t Texas one of the handful of states with no income tax? Well, yes, it’s true that there are no income taxes in Texas…which means no taxes on Social Security benefits, pensions, 401(k)s, IRAs, or any other type of retirement income. But a lot of states don’t tax these types of retirement income anyway (or at least partially exempt them), so states without any income tax don’t necessarily have an advantage over other states when it comes to taxes on seniors.

Texas’ main problem is with its property taxes. The state’s median property tax rate is tied for the seventh-highest in the country (the tie is with New York). For our hypothetical retired couples, that means an estimated annual property tax bill of $4,230 for the couple with the $250,000 home and $5,922 for the couple with the $350,000 home. Seniors may be able to get a $10,000 property tax exemption, have their tax bill “frozen,” or delay payment of taxes.

Sales taxes are on the high end in Texas, too. The state imposes a 6.25% tax, but local governments can tack on up to 2% more. When combined, the average state and local sales tax rate in Texas is 8.19%, which is the 14th-highest combined rate in the country.

For more information, see the Texas State Tax Guide for Retirees.

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9. New York

picture of New York flag in coinspicture of New York flag in coins
  • State Income Tax Range: 4% (on taxable income up to $8,500 for single filers; up to $17,150 for joint filers) to 10.9% (on taxable income over $25 million)
  • Average Combined State and Local Sales Tax Rate: 8.52%
  • Median Property Tax Rate: $1,692 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: Estate tax

Unfortunately, the Empire State’s heavy tax burden for middle-class families carries over into retirement—especially when it comes to property taxes. Based on New York’s statewide median tax rate, our first hypothetical retired couple would pay about $4,230 each year in property taxes on their $250,000 home in New York. For our second couple, the annual estimated tax bill is $5,922 for their $350,000 home. Those figures are tied (with Texas) for the seventh-highest amounts in the country for those home values. There are some property tax breaks for seniors, though. Local governments and public-school districts can reduce the assessed value of their home by 50%. Under another program, part of a senior’s home value can be exempt from school property taxes.

New York has high sales taxes, too. There’s a 4% state tax, and localities can add as much as 4.875% in additional taxes on purchases in the state. At 8.52%, New York’s average combined (state and local) sales tax rate is the 10th-highest in the nation.

When it comes to income taxes, New York’s tax bite is less severe for ordinary retirees when compared to other states. Social Security benefits, federal and New York government pensions, and military retirement pay are exempt. However, anything over $20,000 from a private retirement plan (including pensions, IRAs and 401(k) plans) or an out-of-state government plan is taxed. Also, for ultra-wealthy retirees, New York income tax rates were always steep, but they’re even higher now — starting in 2021, the highest rate jumps from 8.82% to 10.9%.

New York also has an estate tax—with an unusual “cliff tax” kicker. Generally, the tax is only imposed on that portion of an estate over the $5.93 million (for 2021) exemption. However, if the value of the estate is more than 105% of the exemption amount, the exemption won’t be available and the entire estate will be subject to New York estate tax. Ouch!

For more information, see the New York State Tax Guide for Retirees.

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8. Iowa

picture of Iowa flag in coinspicture of Iowa flag in coins
  • State Income Tax Range: 0.33% (on taxable income up to $1,676) to 8.53% (on taxable income over $75,420)
  • Average Combined State and Local Sales Tax Rate: 6.94%
  • Median Property Tax Rate: $1,529 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: Inheritance tax

The Hawkeye State’s spot on our list of the least tax-friendly states for retirees is primarily based on high property taxes. The statewide median property tax rate in Iowa is the 11th-highest in the U.S. Our imaginary couple with a $250,000 home in the state would fork out about $3,823 per year in real property taxes. The couple with a $350,000 home can expect to pay about $5,352 annually. A property tax credit of up to $1,000 is available to lower-income seniors.

On the income tax front, Social Security benefits are tax-free. There’s also a $6,000 exclusion ($12,000 for joint filers) for most types of federally-taxed retirement income. However, when compared to some ot the tax breaks for retirement income available in other states, the Iowa exclusion doesn’t look all that generous. As a result, income taxes for retirees in the state can be a little on the high end, especially for wealthier residents.

Sales taxes in Iowa are middle-of-the-road. The state rate is 6%, and localities can add as much as 1%. The average combined state and local rate is 6.94%. That puts Iowa in the middle of the pack when it comes to overall sales tax rates.

The Iowa inheritance tax is another thing retirees need to worry about. Tax rates range from 5% to 15%, depending on the amount of the inheritance and the relationship of the recipient to the decedent.

For more information, see the Iowa State Tax Guide for Retirees.

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7. Wisconsin

picture of Wisconsin flag in coinspicture of Wisconsin flag in coins
  • State Income Tax Range: 3.54% (on taxable income up to $11,450 for single filers; up to $15,960 for joint filers) to 7.65% (on taxable income over $263,480 for single filers; over $351,310 for joint filers)
  • Average Combined State and Local Sales Tax Rate: 5.43%
  • Median Property Tax Rate: $1,684 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: None

The Badger State suffers from weak income tax breaks for retirement income and high property taxes. While Social Security benefits aren’t subject to Wisconsin’s income taxes, income from pensions and annuities, along with distributions from IRAs and 401(k) plans, are generally taxable. Seniors can subtract up to $5,000 of retirement income (including distributions from IRAs) from Wisconsin taxable income if their federal adjusted gross income is less than $15,000 ($30,000 for a married couple filing jointly). But that exclusion is comparatively small and is only available to retirees with a relatively low income.

Property taxes are the eighth-highest in the U.S. For our hypothetical couple with a $250,000 home in Wisconsin, estimated property taxes would be about $4,210 per year. The make-believe couple with a $350,000 home would have to cough up about $5,894 each year for taxes. Plus, there are limited property tax breaks for retirees. For instance, unlike younger taxpayers, residents age 62 or older don’t need earned income to claim an income tax credit for property taxes paid. Property tax deferral loans are also available for seniors with incomes under $20,000.

There are some bright spots for retirees, though. For example, sales taxes are actually low in Wisconsin. It has the ninth-lowest combined average state and local tax rate in the nation. There are no estate or inheritance taxes, either.

For more information, see the Wisconsin State Tax Guide for Retirees.

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6. Vermont

picture of Vermont flag in coinspicture of Vermont flag in coins
  • State Income Tax Range: 3.35% (on taxable income up to $40,350 for single filers; up to $67,450 for joint filers) to 8.75% (on taxable income over $204,000 for single filers; over $248,350 for joint filers)
  • Average Combined State and Local Sales Tax Rate: 6.24%
  • Median Property Tax Rate: $1,861 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: Estate tax

The Green Mountain State offers cold comfort on the tax front to retirees. It has a steep top income tax rate, and most retirement income is taxed. Vermont also taxes all or part of Social Security benefits for single residents with federal adjusted gross income over $45,000 (over $60,000 for married couples filing a joint return).

Vermonters also pay a lot in property taxes. If our first made-up couple owned a $250,000 home in Vermont, they’d pay about $4,653 in property taxes each year. Our second couple, with a $350,000 home, would pay around $6,514 annually. These property tax amounts are the fifth-highest in the U.S. for those home values. Homeowners age 65 and older may qualify for a tax credit worth up to $8,000 if their household income does not exceed a certain level.

Vermont also taxes estates that exceed $5 million in value (for 2021). The tax is imposed at a flat 16% rate.

Sales taxes aren’t too bad in Vermont, though. Local jurisdictions can add 1% to the state’s 6% sales tax, which results in an average combined state and local sales tax rate of 6.24%. That’s below the national average.

For more information, see the Vermont State Tax Guide for Retirees.

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5. Nebraska

picture of Nebraska flag in coinspicture of Nebraska flag in coins
  • State Income Tax Range: 2.46% (on taxable income up to $3,290 for single filers; up to $6,570 for joint filers) to 6.84% (on taxable income over $31,750 for single filers; over $63,500 for joint filers)
  • Average Combined State and Local Sales Tax Rate: 6.94%
  • Median Property Tax Rate: $1,614 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: Inheritance tax

Nebraska is one of the least tax-friendly state in the nation for retirees primarily because of steep income and property taxes. With regard to the state’s income tax system, the Cornhusker State taxes some Social Security benefits and most other retirement income, including IRA withdrawals, 401(k) funds, and public and private pensions. Plus, the top income tax rate kicks in pretty quickly: It applies to taxable income above $31,750 for single filers and $63,500 for married couples filing jointly. (Note that the state is reducing taxes on Social Security benefits starting in 2021 and eliminating taxes on military retirement pay beginning in 2022.)

Nebraska’s inheritance tax ranges from 1% to 18%. The tax on heirs who are immediate relatives is only 1% and does not apply to property that is worth less than $40,000. For remote relatives, the tax rate is 13% and the exemption amount is $15,000. For all other heirs, the tax is imposed at an 18% rate on property worth $10,000 or more.

The median property tax rate in Nebraska is pretty high. For a $250,000 home, the statewide average tax in the state is $4,035 per year. It’s $5,649 for a $350,000 residence. Those totals are the ninth-highest property tax amounts in country for homes at those price points. People over age 65 with income less than a certain amount may qualify for a homestead exemption that exempts all or a portion of their property’s value from taxation.

The state sales tax rate is 5.5%, but local jurisdictions can add an additional 2.5% to the state rate. The average combined state and local sales tax rate is 6.94%, which is in the middle of the pack when compared to other states.

For more information, see the Nebraska State Tax Guide for Retirees.

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4. Kansas

picture of Kansas flag in coinspicture of Kansas flag in coins
  • State Income Tax Range: 3.1% (on taxable income from $2,501 to $15,000 for single filers; from $5,001 to $30,000 for joint filers) to 5.7% (on taxable income over $30,000 for single filers; over $60,000 for joint filers)
  • Average Combined State and Local Sales Tax Rate: 8.69%
  • Median Property Tax Rate: $1,369 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: None

While there’s no place like home, I wouldn’t be surprised to hear that Dorothy (and ToTo, too) fled Kansas when she retired to avoid the state’s high taxes. Looking at the state’s income tax system, distributions from private retirement plans (including IRAs and 401(k) plans) and out-of-state public pensions are fully taxed. Kansas also taxes Social Security benefits received by residents with a federal adjusted gross income of $75,000 or more. Military, federal government and in-state public pensions are exempt from state income taxes, though.

Shopping in Kansas can be expensive, too. The Sunflower State’s average combined state and local sales tax rate is the ninth-highest in the U.S. at 8.69%. Groceries, clothing, and even prescription drugs are subject to state and local sales taxes in Kansas, too.

Property taxes are above the national average as well. The statewide average property tax bill for our first hypothetical retired couple with a $250,000 home in Kansas comes to about $3,423. The bill for our second imaginary couple, with a $350,000 home, is estimated to be $4,792. Those amounts are the 15th-highest in the U.S. Homeowners who satisfy certain age and income requirements may qualify for a property tax refund, though.

The good news is that Kansas does not impose estate or inheritance taxes.

For more information, see the Kansas State Tax Guide for Retirees.

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3. Connecticut

picture of Connecticut flag in coinspicture of Connecticut flag in coins
  • State Income Tax Range: 3% (on taxable income up to $10,000 for single filers; up to $20,000 for joint filers) to 6.99% (on taxable income over $500,000 for single filers; over $1 million for joint filers)
  • Average Combined State and Local Sales Tax Rate: 6.35%
  • Median Property Tax Rate: $2,139 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: Estate tax

The Constitution State is a tax nightmare for many retirees…but at least things are improving on the income tax front. For residents with federal adjusted gross income over $75,000 ($100,000 for joint filers), 25% of Social Security benefits taxed at the federal level are taxed by Connecticut. (Social Security payments are exempt for taxpayers below those income levels.) Plus, for 2020, only 28% of income from a pension or annuity is exempt for taxpayers with less than $75,000 of federal AGI (less than $100,000 for joint filers). But the exemption percentage will increase by 14% each year until it reaches 100% for the 2025 tax year. Military pensions are also excluded from state taxes.

Connecticut has the third-highest property taxes in the U.S., so the $10,000 cap on the federal tax deduction for state and local taxes stings a bit more here. For our two make-believe retired couples, the statewide estimated property tax for a $250,000 home in Connecticut is $5,348 per year, and the estimated annual tax for a $350,000 home in the state is $7,487. The state des offers property tax credits to homeowners who are at least 65 years old and meet income restrictions. Income ceilings are $45,100 for married couples (with a maximum benefit of $1,250) and $37,000 for singles (with a maximum benefit of $1,000).

Connecticut imposes an estate tax on estates valued at $7.1 million or more (for 2021) at progressive rates ranging from 10.8% to 12%. Connecticut is also the only state with a gift tax, which applies to real and tangible personal property in Connecticut and intangible personal property anywhere for permanent residents. Only the amount given since 2005 and over $7.1 million is taxed. Gift tax rates start at 10.8% and go up to 12%.

There are no local sales taxes in Connecticut, so you’ll pay only the statewide sales tax rate of 6.35% on your purchases (slightly below average). Clothing, footwear and accessories priced at more than $1,000; jewelry worth more than $5,000; and most motor vehicles costing $50,000 or more are taxed at 7.75%.

For more information, see the Connecticut State Tax Guide for Retirees.

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2. Illinois

picture of Illinois flag in coinspicture of Illinois flag in coins
  • State Income Tax Range:4.95% (flat rate)
  • Average Combined State and Local Sales Tax Rate: 8.82%
  • Median Property Tax Rate: $2,165 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: Estate tax

There’s a bit of good tax news for retirees in Illinois: Social Security benefits and income from most retirement plans are exempt. Plus, the state’s 4.95% flat income tax rate is relatively low.

Now for the bad news: Property taxes hit retirees hard in Illinois. The statewide median property tax rate in Illinois is the second-highest in the nation—a staggering $5,413 per year on a $250,000 home and a whopping $7,578 on a $350,000 home. Fortunately, there is some relief for qualifying seniors in the form of a homestead exemption of up to $5,000 ($8,000 in Cook County), the ability to “freeze” a home’s assessed value, and a tax deferral program.

Sales tax rates are high in Illinois, too. The state has the seventh-highest average combined state and local sales tax rate at 8.82%. In some locations, the rate can be as high as 11%! And groceries (1% state rate; additional local taxes may apply) and clothing are taxable.

Illinois also has an estate tax that applies to estates worth $4 million or more. That can be bad news for your heirs.

For more information, see the Illinois State Tax Guide for Retirees.

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1. New Jersey

picture of New Jersey flag in coinspicture of New Jersey flag in coins
  • State Income Tax Range: 1.4% (on taxable income up to $20,000) to 10.75% (on taxable income over $1 million)
  • Average Combined State and Local Sales Tax Rate: 6.6%
  • Median Property Tax Rate: $2,417 per $100,000 of assessed home value
  • Estate Tax or Inheritance Tax: Inheritance tax

Sorry, New Jersey, but you’re the least tax-friendly state in the country for retirees. And, once again, it’s the property taxes that are crushing retirees. The Garden State has the highest median property tax rate in the country. If our first make-believe couple bought a $250,000 home in the state, they would pay an eye-popping $6,043 in property taxes each year based on our estimates. Our second couple would pay a sky-high $8,460 on their $350,000 New Jersey home. The state does offer some property tax relief for seniors, though. Homeowners age 65 or older may qualify for a property tax credit of up to $1,000. There’s also a program (the “senior freeze”) that reimburses eligible seniors for property tax increases. And a $250 property tax deduction is available for senior citizens with an annual household income of $10,000 or less.

Income taxes are comparatively low for retirees in New Jersey, thanks in large part to a generous exemption for retirement income. For example, married seniors filing a joint return can exclude up to $100,000 of income from a pension, annuity, IRA, or other retirement plan if their New Jersey income is $100,000 or less. Single taxpayers and married taxpayers filing a separate return can exclude up to $75,000 and $50,000, respectively. We should also point out that Social Security benefits are not taxed in New Jersey, either.

Sales taxes are reasonable in New Jersey, too. The state sales tax rate is 6.625%, but because some areas charge only half the state rate on certain sales, New Jersey’s average state and local combined sales tax rate is only 6.6%, which is a little below average.

Although New Jersey recently eliminated its estate tax, the state still imposes an inheritance tax. The tax rates range from 11% to 16% on inherited property with a value of $500 or more. The amount of tax due is based on who specifically receives the property and how much the property is worth.

For more information, see the New Jersey State Tax Guide for Retirees.

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About Our Methodology

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Our tax maps and related tax content include data from a wide range of sources. To generate our rankings, we created a metric to compare the tax burden in all 50 states and the District of Columbia.

Data Sources:

Income tax – Our income tax information comes from each state’s tax agency. Income tax forms and instructions were also used. See more about how we calculated the income tax for our hypothetical retired couples below under “Ranking method.”

Property tax – The median property tax rate is based on the median property taxes paid and the median home value in each state for 2019 (the most recent year available). The data comes from the U.S. Census Bureau.

Sales tax – State sales tax rates are from each state’s tax agency. We also cite the Tax Foundation’s figure for average combined sales tax, which is a population-weighted average of state and local sales taxes. In states that let local governments add sales taxes, this gives an estimate of what most people in a given state actually pay, as those rates can vary widely.

Ranking Method:

The “tax-friendliness” of a state depends on the sum of income, sales and property tax paid by our two hypothetical retired couples.

To determine income taxes due, we prepared returns for both couples. The first couple had $15,000 of earned income (wages), $20,500 of Social Security benefits, $4,500 of 401(k) plan distributions, $4,000 of traditional IRA withdrawals, $3,000 of Roth IRA withdrawals, $200 of taxable interest, $1,000 of dividend income, and $1,800 of long-term capital gains for a total income of $50,000 for the year. They also had $10,000 of medical expenses, paid $2,500 in real estate taxes, paid $1,200 in mortgage interest, and donated $1,900 (cash and property) to charity.

The second couple had $37,500 of Social Security benefits, $26,100 of 401(k) plan distributions, $18,200 of private pension money, $4,000 of traditional IRA withdrawals, $2,000 of Roth IRA withdrawals, $2,000 of tax-exempt municipal bond interest (from the state of residence), $2,000 of taxable interest, $4,000 of dividend income, and $4,200 of long-term capital gains for a total income of $100,000 for the year. They also had $10,000 of medical expenses, paid $3,200 in real estate taxes, paid $1,500 in mortgage interest, and donated $4,300 (cash and property) to charity.

Since some states have local income taxes, we domiciled both our couples in each state’s capital, from Juneau to Cheyenne. We calculated their 2019 income tax returns using software from eFile.com.

How much they paid in sales taxes was calculated using the IRS’ Sales Tax Calculator, which is localized to zip code. To determine those, we used Zillow to determine zip codes with housing inventory close to our sample assessed value.

How much each hypothetical family paid (and deducted on their income tax return, if allowed) in property taxes was calculated by assuming a residence with a $250,000 assessed value for the first couple and a $350,000 assessed value for the second couple. We then applied each state’s median property tax rate to that appropriate amount.

Source: kiplinger.com