Personal Finance

States where you'll pay the most, least in retirement taxes

Key Points
  • New research looks at sales, property and income taxes, as well as levies on income from Social Security, to find out where you'll fare best in retirement.
  • States where you stand to benefit the most have two things in common: no tax on Social Security benefits and low income tax rates.

How much you will pay in taxes in retirement depends a lot on where you live.

New research from personal finance website GOBankingRates compiles data on sales, property and income taxes, as well as whether Social Security benefits are taxed, to identify the states where retirees face the smallest and biggest bills.

One thing that the states that landed at the top of the list have in common: no state taxes on Social Security benefits and mostly low, if any, income taxes.

"If you don't have income tax and you don't tax Social Security, you're going to be a great destination for retirees, even if you didn't make the top five," said Andrew DePietro, research and data analyst at GOBankingRates.

While Florida came in seventh, it is number one among the most populous states, DePietro noted.

"It's definitely going to stay a haven for retirees," DePietro said. "I don't really see that changing."

Most tax-friendly states

RankStateState sales taxState tax on Social Security benefitsProperty taxIncome tax
1Alaska1.76%None0.97%0.00%
2Wyoming5.41%None0.52%0.00%
3Delaware0.00%None0.57%5.55%
4New Hampshire0.00%None1.94%0.00%
5Washington6.29%None0.89%0.00%
6Nevada7.98%None0.65%0.00%
7Florida6.80%None0.90%0.00%
8South Dakota6.39%None1.19%0.00%
9Tennessee9.46%None0.71%0.00%
10Hawaii4.35%None0.29%7.20%

Source: Source: GOBankingRates

States that had high taxes in any of the categories GOBankingRates evaluated were pushed farther down the list.

"You don't have to be the worst tax in each category, but if they aggregate together, that's how you get a very bad ranking," DePietro said.

Least tax-friendly states

Click to editStateState Sales TaxState Tax on Social Security BenefitsProperty TaxIncome Tax
1Nebraska6.89%Taxpayer can subtract SS income included in federal AGI if AGI is less than or equal to $58K for married couples filing jointly or $43K for other filers1.60%5.01%
2Minnesota7.30%Taxed to the extent they are taxed at the federal level1.09%7.05%
3Connecticut6.35%Exempt for individual taxpayers w/ federal adjusted gross income less than $50K and married taxpayers filing jointly w/ federal AGI less than $60K1.66%5.00%
4Kansas8.62%Exempt from Kansas income tax for residents w/ federal AGI of $75K or less1.26%4.90%
5Missouri7.89%Not taxed for single taxpayers w/ AGI less than $85K and married couples w/ AGI less than $100K0.96%6.00%
6Vermont6.18%Taxed to the extent they are taxed at the federal level1.76%3.55%
7Rhode Island7.00%No tax for single filers w/ up to $80K in AGI and married filers w/ up to $100K in AGI1.51%3.75%
8New Mexico7.55%Taxed, but can be included as part of an overall retirement-income exemption of up to $8K per person0.65%4.90%
9West Virginia6.29%Taxed to the extent they are taxed at the federal level0.51%6.00%
10Utah6.76%Benefits taxed; may qualify for retirement-income tax credit0.62%5.00%

Source: Source: GOBankingRates