This article takes a look at the 5 most tax-friendly states for retirees: some with no property tax. If you wish to check out our detailed analysis on You Earned It, You Keep It” Act, you may go to 10 Most Tax-Friendly States for Retirees: Some with No Property Tax.
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5. Mississippi
Insider Monkey Score: 46
Combined State Sales Tax Rate: 7.062%
Average Effective Property Tax Rate: 0.76%
Tax Friendliness: Very Tax Friendly
Cost of Living Index: 86.3
Mississippi has been the top contender in our list of best states to retire for taxes and cost of living. Offering living expenses that are 13.7% lower than the national average, and boasting zero taxes on retirement income, it surely is an affordable state to retire to for those with smaller nest eggs. Moreover, property taxes in the state are lower than the national average, making it one of the states with the lowest property taxes. According to Redfin, the median sale price of a home in the state is $243,700, which is well below the national median and probably the reason why property taxes are low as well. For seniors, in particular, there is even better news. According to the Mississippi Department of Revenue, seniors who are 65 years or older, who are otherwise eligible for homestead exemption, “are exempt from taxes on the first $75,000 of true value on their home”.
4. Delaware
Insider Monkey Score: 50
Combined State Sales Tax Rate: 0.000%
Average Effective Property Tax Rate: 0.55%
Tax Friendliness: Tax Friendly
Cost of Living Index: 101.1
Known for its peaceful and relaxed vibe, Delaware is another one of the tax-friendly states to retire to in the US. The state doesn’t tax Social Security retirement benefits and is also one of the states with no sales taxes at the state or local level. The average effective property tax rate is also below the national average, making it quite cost-effective for retirees to live in. Living expenses in the state are also only 1% higher than the national average. According to the Delaware Department of Finance, homeowners aged 65 and above are eligible for a tax credit against regular school taxes of 50% (up to $500). It is important to note that taxpayers “must pay their property tax bill in full by the end of each tax year to qualify for this credit for the subsequent property tax year”.
3. Alaska
Insider Monkey Score: 51
Combined State Sales Tax Rate: 1.821%
Average Effective Property Tax Rate: 1.16%
Tax Friendliness: Very Tax Friendly
Cost of Living Index: 125.2
Alaska is number three on our list of most tax-friendly states to retire to. The state doesn’t have an individual income tax, which means all retirement income isn’t taxed at the state level. There is no estate or inheritance tax either. A qualified homeowner in the state aged 65 or above can avail an exemption of up to $150,000 of the assessed value of an owner-occupied home. This incentive is offered to residents who choose to live here permanently. However, living in Alaska may not be an ideal choice for seniors because of the harsh climate and high costs of living.
2. Nevada
Insider Monkey Score: 53
Combined State Sales Tax Rate: 8.236%
Average Effective Property Tax Rate: 0.50%
Tax Friendliness: Very Tax Friendly
Cost of Living Index: 101
Number two on our list of most tax-friendly states is Nevada. The state of Nevada is considered “very tax-friendly” for retirees, considering there is no state income tax here. All retirement income goes tax-free at the state level. This is complemented by its affordable cost of living, which is only an estimated 1% higher than the national average. Sales taxes are higher than the national average, but property taxes are low. The state of Nevada doesn’t offer general property tax exemptions for seniors. However, there are other exemptions available such as a veteran’s exemption, and blind’s exemption, to name a few.
1. Wyoming
Insider Monkey Score: 62
Combined State Sales Tax Rate: 5.441%
Average Effective Property Tax Rate: 0.58%
Tax Friendliness: Very Tax Friendly
Cost of Living Index: 92.4
Wyoming is one of the best states to retire in the US financially. Retirees love it for its very tax-friendly status. The state has zero state income tax, which means all retirement income goes tax-free at the state level. The average effective property tax rate is also lower than the national average. The State of Wyoming has a property tax deferral program for seniors, whereby seniors over 62 years of age with limited income and who have purchased the property 10 years before applying for a deferral of taxes can defer up to ½ of property taxes on a qualifying residence. Currently, only Teton County authorizes the program for residents of Teton County.
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