No matter where you live in retirement, your federal taxes will be about the same if you take the standard deduction. Not so for state and local taxes.
Start with income tax. Seven states–Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming–have no state income tax whatsoever.
Next, consider taxes on Social Security.Thirteen states tax your retirement benefits to some degree: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia.
But just because a state taxes Social Security doesn’t mean it’s a bad place to retire. Overall, Colorado and West Virginia are actually tax-friendly places to live in retirement despite the tax on Social Security.
Then there’s sales tax. Some states exempt food and medicine, while others famously have no sales tax at all. Some states will tax every dime you spend. Most states allow cities and counties to assess sales taxes, too.
Finally, weigh property taxes. Rates vary from state to state and even among cities in the same state. Luckily, many places offer retirees breaks on property taxes. It pays to check.
Taxes are just one aspect of a happy retirement, but they can be a costly one.
Written by The Editors of Kiplinger
(Source: Kiplinger)
