The 10 best tax-friendly states—and the 10 worst - KTVZ (2024)

FAQs

What are the top 5 tax-friendly states? ›

MoneyGeek's analysis found that Wyoming is the most tax-friendly state in America, followed by Nevada, Tennessee, Florida and Alaska. States that received a grade of A all share something in common: no state income tax. Washington and South Dakota — which both received a B — also have no state income tax.

In 2020, the average American contributed 8.9% percent of their income in state taxes. Alaska had the lowest average overall tax burden – measured as total individual taxes paid divided by total personal income – at 5.4%, followed by Tennessee (6.3%), New Hampshire (6.4%), Wyoming (6.6%) and Florida (6.7%).

Alaska is the most tax-friendly state for retirees because it has no state income tax or tax on Social Security.

1. Hawaii. Hawaii residents enjoy the lowest property tax rate in the U.S. However, the high cost of living and limited housing opportunities make it a very expensive place to live.

1. Florida. The Sunshine State's ranking as the best state to retire in the country should come as no surprise. For some, the weather alone is enticing enough.

As of 2023, eight states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming — do not levy a state income tax. A ninth state, New Hampshire, does not tax earned income, but it does impose a 4% tax on dividends and interest.

Fortunately, there are some states that don't charge taxes on retirement income of any kind: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.

What states tax Social Security? ›

For the 2022 tax year, 11 states tax Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah and Vermont. All other states and the District of Columbia do not tax the payments.

Though Texas has no state-level personal income tax, it does levy relatively high consumption and property taxes on residents to make up the difference. Ultimately, it has a higher effective state and local tax rate for a median U.S. household at 12.73% than California's 8.97%, according to a new report from WalletHub.

To acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.

Social Security benefits may or may not be taxed after 62, depending in large part on other income earned. Those only receiving Social Security benefits do not have to pay federal income taxes.

Kansas, Florida, Iowa, and Texas provide an unlimited dollar value homestead exemption. Florida and Texas, in fact, are well known as debtor-friendly states because of their homestead exemptions.

Honolulu had the lowest effective property tax rate in 2022.

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The United Arab Emirates claim the top spot for the happiest place to retire. The study reveals that the United Arab Emirates is the happiest place to retire with an overall score of 7.76. It comes as no surprise that with the average yearly temperature being 27 degrees and 3,508 hours of sunshine, they came out on top ...

What is the most cost effective state to retire in? ›

Rather, Alabama is the most affordable state to retire in, according to WalletHub's “2023 Best States to Retire.” The analysis compared all 50 states across three key categories: health care, quality of life and affordability.

Florida primarily makes up for its lack of an income tax with its sales tax, which generates around 80% of the state's revenue. Florida's sales tax is imposed on services and goods, and both the state and county levy a certain percentage.

The Texas Constitution forbids personal income taxes. Instead of collecting income taxes, Texas relies on high sales and use taxes. When paired with local taxes, total sales taxes in some jurisdictions are as high as 8.25%. Property tax rates in Texas are also high.

While you might not have to pay state income tax, your overall tax bill actually might end up being higher, depending on your lifestyle. If you don't own property and you use public transportation, for example, your tax bill likely will be significantly lower.

States without an income tax often make up for the lack of these revenues by raising various other taxes, including property taxes, sales taxes, and fuel taxes. These can add up so that you're paying more in overall taxation than you might have in a state that does tax your income at a reasonable rate.

There are seven tax brackets for most ordinary income for the 2022 tax year: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent.

A major reason Hawaii has low property taxes is that it offers generous exemptions on owner-occupied residences. Homeowners are eligible for exemptions ranging from $80,000 to $160,000, depending on their county of residence.

“Property taxes in Texas are so high because that's the price we pay for not having a personal income tax in this state,” Craymer said. State tax systems are usually looked at as a three-legged stool — one leg is property tax, the second leg is sales tax, and the third leg is the personal income tax.

Can you retire on $3,000 a month? ›

If you have a low living cost and can supplement your income with a part-time job or a generous pension, then retiring on $3,000 a month is certainly possible.

Most states don't tax Social Security benefits. Twelve states do tax some or all of their residents' Social Security benefits, however: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia.

Alaska had the lowest tax burden in the U.S. in 2021, though it was also one of the least affordable states to live in.

The Social Security Administration can only check your bank accounts if you have allowed them to do so. For those receiving Supplemental Security Income (SSI), the SSA can check your bank account because they were given permission.

If you earn $25,000 this year, $1,880 of your benefits would need to be withheld (i.e. ($25000 - $21240)/2). Therefore, if your monthly benefit amount is $1,886, Social Security would need to withhold roughly one full month of your benefits.

What State Is Like California But Cheaper? Texas is one of those states similar to California but significantly cheaper. Along with a lower cost of living, Texas also offers the benefits of no personal income tax. Its climate is similar to that of California's – warm summers and cool winters with hardly any snow.

Cost of Living in California vs. Texas. In Texas, you can get a lot more bang for your buck. A MyMove study evaluating the cost of living in the United States in 2022 shows that California has a cost index of 151.7, while Texas has a cost index of only 91.5.

Texas Property Taxes

Property taxes in Texas are the seventh-highest in the U.S., as the average effective property tax rate in the Lone Star State is 1.60%. Compare that to the national average, which currently stands at 0.99%. The typical Texas homeowner pays $3,797 annually in property taxes.

If you start receiving benefits at age 66 you get 100 percent of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase.

What is the Social Security 5 year rule? ›

You must have worked and paid Social Security taxes in five of the last 10 years. • If you also get a pension from a job where you didn't pay Social Security taxes (e.g., a civil service or teacher's pension), your Social Security benefit might be reduced.

State law provides property tax savings for those 55 years or older who sell their home and purchase another one of equal or lesser value. Additionally, there are State sponsored property tax relief programs available to help senior citizens on limited income, legally blind and disabled.

If you are over 65 years of age, or permanent and totally disabled (regardless of age), or blind (regardless of age), you are exempt from the state portion of property tax. County taxes may still be due. Please contact your local taxing official to claim your homestead exemption.

The City of Stafford holds the unique distinction of being the largest city in Texas to abolish city property taxes. This includes both commercial and residential properties. In addition to a lack of city property taxes, the State of Texas has no state property taxes.

Social Security recipients will get an 8.7% raise for 2023, compared with the 5.9% increase that beneficiaries received in 2022. Maximum earnings subject to the Social Security tax also went up, from $147,000 to $160,200.

For individuals who file as single, any amount up to $25,000 will not be taxed. For a sum that is between $25,000 and $34,000, up to 50% of the benefit can be taxable. For income totals that are above $34,000, 85% of the Social Security benefit could be taxable.

You can earn any amount and not be affected by the Social Security earnings test once you reach full retirement age, or FRA. That's 66 and 4 months if you were born in 1956, 66 and 6 months for people born in 1957, and gradually increasing to 67 for people born in 1960 and later.

Fortunately, there are some states that don't charge taxes on retirement income of any kind: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.

Washington

Washington is one of the states with the lowest taxes for retirees because it has no state income tax or a tax on Social Security. Plus, the property tax rate is lower than in half of the states. However, it's state sales tax is the fourth highest on the list.

Where is the best place to retire? ›

Countries Natixis ranked as secure retirement locations are mostly concentrated in Europe but also include New Zealand and Australia. The top three countries in the rankings are Norway, Switzerland and Iceland, all of which have life expectancies of 83 years, compared to 77 in the U.S. and the world average of 72.

1. New Jersey. New Jersey earns the top spot as highest property taxes not only in property tax rate, which is over the 2% mark, but in the actual dollars spent in property taxes; here the average home value is the highest on the list.

The highest-earning Americans pay the most in combined federal, state and local taxes, the Tax Foundation noted. As a group, the top quintile — those earning $130,001 or more annually — paid $3.23 trillion in taxes, compared with $142 billion for the bottom quintile, or those earning less than $25,000.

Some of the most popular countries that offer the financial benefit of having no income tax are Bermuda, Monaco, the Bahamas, and the United Arab Emirates (UAE). There are a number of countries without the burden of income taxes, and many of them are very pleasant countries in which to live.