In addition to the climate, there are other considerations, and different people have different priorities. One reality that is shared is the matter of taxation, and we will look at this part of the retirement equation in this post.
The lists that rank the most tax friendly places for retirees revolve around one simple premise for the most part. These states are not trying to be kind to senior citizens per se. They simply do not have state income taxes for any type of personal income.
Florida is one of these states, so the weather is not the only draw. Nevada is in the group as well, and the winters are very mild in the southern part of the state.
Aside from Florida and Nevada, there are no incomes taxes in Alaska, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
In addition to these states with no state income taxes, Illinois, Mississippi, and Pennsylvania do not tax distributions from 401(k) or individual retirement accounts, and they don’t tax pensions.
When it comes to property taxes, Florida is in the middle of the pack, and there are just 10 states with lower property taxes than Nevada.
Hawaii would certainly be a great place to retire when you consider the weather and the overall vibe, and they have the lowest property taxes in the United States.
That’s the good news, but the bad news is that the price of real estate is the highest in the country. The median list price for a home in Hawaii is $644,500 at the time of this writing.
Estate taxes should certainly be taken to consideration when you are choosing a retirement destination.
There is a federal estate tax that is potentially applicable everywhere, but it is not a problem for most people because there is a high exclusion. This is the amount you can transfer before the tax would be applied on the remainder, and it stands at $11.58 million in 2020.
In addition to this tax, 12 states have state-level estate taxes, and they are joined by the District of Columbia. Washington is the only state with no income tax that has an estate tax.
We have an estate tax in Vermont, and the exclusion is $4.25 million. The rate is a graduated rate that maxes out at 16 percent.
There are six states that have inheritance taxes. An inheritance tax can potentially be levied on distributions to multiple inheritors when one estate is being administered.
These six states are New Jersey, Kentucky, Maryland, Iowa, Nebraska, and Pennsylvania.
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