7 States With the Lowest Taxes for Retirees

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For retirees living on fixed incomes, taxes can be burdensome and impact quality of life during retirement. Many financially savvy retirees move to states like Florida, not just for the sunshine, but to reap the economic benefits of low taxation. Florida is one of seven no-income tax states and makes the list of states with a marginal federal and state tax rate of under 25%.

Consider these seven states with the lowest retirement tax burden.

1. Alaska

Sure, Alaska is a little lacking in the sun and warm weather many retirees seem to favor, but the state's lenient tax policies might make you want to pick up and move there, anyhow. State residents are exempt from retirement income tax, and only 24 of its 164 municipalities levy a property tax. And it gets better: Those 65 years and older residing within one of these 24 communities are exempt from property taxes on the first $150,000 of their home's assessed value. To top it all off, there is either no or low sales tax. Of the 107 municipalities reporting sales tax, the rate ranges from a low 1%–7% (typically 2%–5%).

2. Florida

While Florida residents enjoy no tax on retirement income, they can't escape the burden of property taxes. Florida ranks 23 out of 50 of states with the highest property tax rates. Miami Dade County, with it's sprawling luxury oceanfront condos that attract wealthy foreign investors, ranks highest with an average 1.02% of median home value, while property taxes in densely populated Dixie County (population: 16,422) are the lowest at .51% of median home value. Residents 65 years and older qualify for a $50,000 property tax exemption on their properties. Sales taxes in Florida aren't astronomical — at 6% since 1988, but they can swing as high as 7.5%.

3. Nevada

Far removed in spirit from the glitz and glamor of the Las Vegas Strip, many retirees set their sights on the city's quieter suburbs. The state's tax burden ranks second-lowest in the nation. Nevada has no income or inheritance tax and the cost of living is relatively low compared to neighboring states. Plus, the Nevada housing market has not fully rebounded from the 2008 crisis, which means home buyers can still get a good deals.

4. South Dakota

The tax structure in the Midwestern state of South Dakota is one of the most favorable in the country. South Dakota does not levy a tax on retirement income, inheritances, and estates. Sales taxes are relatively low compared to other areas in the region at 4%, but it can swing as high as 6% in some municipalities. The median home price is roughly $126,000. The only downside to retiring in South Dakota is it's inclement winter weather, but it's great in the summer, especially if you love the outdoors.

5. Texas

Good ole' Texas, the Lone Star State — and my hometown state. Texas is a great place to live for a number of reasons. But the number one is that there's no tax on personal income. The sales and use tax is a bit on the high-end at roughly 8.25%. Property taxes vary by county and range from $0.24 to $0.50 per $100 valuation with median home prices at $160,000 in Dallas and $158,000 in Houston. Persons 65 and older qualify for a $10,000 homestead exemption for school taxes, in addition to a $15,000 exemption for all homeowners.

6. Washington

Washington, with its vast terrain and beautiful landscapes, has no income tax. The sales tax rate is 6.5% — as high as 9.5% in some areas. Property taxes vary by county with King County residents paying the most — around $4,507 per year and Lewis County residents paying the least —around $474 per year. The median home value is $270,400. If you decide to make Washington your primary residence, as a person 65 and up, you could qualify for additional property tax exemptions

7. Wyoming

Wyoming ranks first on the Tax Foundation's 2015 Business Tax Climate Index because of no tax on personal or corporate income, low sales tax of 4%, and low property tax. Median home prices are $103,000. And though the cost of living is already low, the state of Wyoming has no excise tax, which means you won't pay an additional levy on items like food and gasoline.

Two other states worth considering are New Hampshire and Tennessee. The state of New Hampshire has no income tax and 0% sales tax, but there's a 5% tax on dividend and interest income and property taxes are the third highest in the nation. Tennessee does not impose income tax but has what's called a "hall tax" of 6% on dividend and interest income. And its sales tax of 7%, as high as 9.75% in some municipalities, ranks highest in the nation due to the complexity of local and special purpose taxes that are levied in addition to the sales and use tax.

What low-tax retirement destinations are you considering?

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