5 States That Don’t Tax Social Security Or Pensions

In this article, we take a look at the 5 states that don’t tax social security or pensions. If you want to check out more states that don’t tax social security, go directly to the 15 States That Don’t Tax Social Security Or Pensions.

5. Wyoming

Cost of Living Index:92.5

Another tax-friendly state that does not tax social security incomes is Wyoming. Withdrawals from retirement accounts are not taxed either. Retirees can expect to have a very small bill considering the property and sales taxes are low too. The effective property tax rate in Wyoming is 0.55%, while the sales tax is 4%. Filled with beautiful scenery, Wyoming boasts the world’s oldest national park called, Yellowstone.

4. Tennessee

Cost of Living Index: 90.2

There are no income taxes in the state of Tennessee. Warm climates, recreational activities, and an overall tax-friendly climate makes this state a desirable option for retirees. While sales tax is at a highest at 7%, property taxes are low (0.56%). Overall, Tennessee is one of the most affordable options for retirement. Cost of living is 10% lower than the national average at $42, 469 per year. Housing costs are 20% lower, while utilities are 6% lower than the national average.

3. Iowa

Cost of Living Index: 89.2

The state of Iowa has exempted all social security income from taxes. Moreover, deductions are provided on other types of retirement incomes for the year 2022. These deductions will be filed in the next year. Residents in Iowa aged 55 or older are going to be exempt from retirement income state taxes for the tax year 2023 (filed in 2024). Property taxes are higher on average at 1.50%. Overall, the cost of living is 9% lower than the national average.

2. Alabama

Cost of Living Index:88.1

While Alabama is tax-friendly since it has no taxes on social security retirement benefits, it does fully tax withdrawals made from retirement accounts. Homeowners who are 65 and older are also exempt from paying property taxes. However, the state does levy sales tax ranging from 4%-11%. On average, the cost of living in Alabama is $39,657 per year.

1. Mississippi

Cost of Living Index:85

Tax-friendly state, low cost of living, and warm winters make Mississippi worth considering for retirement. The state exempts all kinds of retirement income from taxation. State’s property taxes are low at 0.75%, while sales tax is moderately high at 7%.  Moreover, residents of this state are provided with a homestead exemption. Elders over age 65 can also avail a bonus exemption where the first $7500 is fully exempt in home value.

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