Where you live when you retire matters — and not just because you want to be close to the beach or a golf course. State taxes can take a bite out of your retirement income, one reason why some retirees decide to pull up stakes when they stop working and search for a home with better tax breaks.
So if you’re looking to flee a high-tax state, where should you go? The obvious answer is to head to one of the seven states with no income tax (Alaska, Washington, Nevada, Texas, Florida, Wyoming, or South Dakota). But some of those states have high property or sales tax rates, which you also need to consider.
Ultimately, the best state for you — and your retirement money — depends on your personal situation. If you’re living off of a pension, you might be fine moving to a state with an income tax, provided it doesn’t tax pension income. If you’re a homeowner, you might be looking for assurances property taxes won’t be a huge burden.
To help you make your decision about where to live, we’ve highlighted some states that are traditionally seen as tax havens for retirees, as well as a few that have rolled out new tax breaks or have tax advantages for certain groups of people. These 12 states offer some pretty sweet tax breaks to retirees.
1. New Hampshire
For retirees without a lot of investment income, New Hampshire could be a tempting place to retire. The state has no general income tax, though it does impose a 5% tax on dividend and interest income above $2,400 (for individuals). Residents over 65 get an additional $1,200 exemption. Plus, there are no state and local sales taxes. But homeowners should watch out: The state’s effective property tax rate is 1.99%, the second-highest in the U.S.
Next: We head south to a state that offers tax breaks to retired military.