Florida is themost popular state for retirees who move, and sun-kissed beaches aren’t the only reason. The Sunshine State has no income tax, which can be a powerful draw for people in states with high taxes (and cold winters).
If you’re looking for a place to retire, low income taxes are good, but no individual income taxes may be even better. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — have no income taxes. New Hampshire, however, taxes interest and dividends, according to the Tax Foundation.Washington state taxes some long-term capital gains, but not income or dividends. (To find the maximum income tax in your state, simply mouse over your state on the map above.)
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Other state taxes often fill the revenue void
“If you live in a state that has no income tax, usually you’re going to see a lighter [overall] tax burden — but that really depends on how much your state spends,” says Janelle Fritts, policy analyst for the Tax Foundation.
Alaska has very low taxes overall, relying heavily on taxes on oil and mining companies. New York state residents have a high burden because of combined income tax, sales tax and property taxes.
You should take into account all the types of taxes you may pay: on income, property and sales.A 2023 WalletHubanalysis rates New York state as having the highest total tax burden, equal to about 12.5 percent of income, followed by Hawaii, at 12.3 percent. Alaska has the lowest tax burden, at about 5.1 percent, with Delaware in second place, at 6.1 percent.
Taxes aren’t everything
The five states where retirees are moving to most are Florida, North Carolina, Michigan, Arizona and Georgia, indicating that the weather is as much a factor as the tax burden on retirees. “There is some overlap with very sunny states and good tax states,” Fritts says.
Is it worth considering taxes when deciding where to live in retirement? “Absolutely,” Fritts says. “The different tax burden is definitely going to make a big difference in your daily life.”
Estimate Your 2023 Taxes
AARP’stax calculatorcan help you predict what you’re likely to pay for the 2023 tax year.
You may haveother reasons to movethat don’t hinge on your tax bill. For example, you may need medical care in an area that has higher taxes. Or you may wish to live close to your children or grandchildren. Or you may simply like the view out your back window. Some priorities are hard to work out on a spreadsheet.
