5 States That Don’t Tax Retirement Income

3. South Dakota

Insider Monkey Score: 37

Cost of Living Index: 92.4    

Tax-Friendliness: Very Tax-Friendly          

Statewide Sales Tax Rate: 4.20%     

Average Local Tax Rate: 1.911%    

Average Property Tax Rate: 1.08%

South Dakota emerges as another retiree haven with its absence of income tax, ensuring all retirement income remains tax-free. Adding to its appeal, the state boasts low sales tax rates, although property taxes tend to be higher. However, this is balanced by a cost of living 7.6% below the national average. Seniors can further benefit from the Homestead Exemption Program, which allows delaying property tax payment until the property is sold, with accrued taxes subject to a 4% annual interest rate. Eligibility criteria include being at least 70 years old, residing in the state for a minimum of 5 years, or owning a house for at least 3 years.