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Retirement Taxes by State 2022

Retirees continue to pay taxes in retirement. Taxes will be calculated much like how they are before retirement and it is important to estimate the amount one will pay in retirement so that finances can be planned accordingly. If a person is relocating to a different state for retirement, it is important to examine the state taxes on retirement benefits. Some states are friendlier for retirees tax-wise than others, and because retirees have special financial concerns, taxes can be a large factor when deciding where it is best to retire. Special financial concerns for retirees include whether Social Security benefits are taxable at the state level, property taxes, and how retirement account and pension withdrawals are taxed.

There are seven states with no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee impose income taxes only on dividends and interest (which Tennessee is getting rid of in 2020). These nine states are considered to be “tax-friendly” or “most-tax friendly” for retirees among others.

The ten most tax-friendly states for retirement (in no particular order) are Alaska, Flroida, Georgia, Kentucky, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, and Wyoming. Some states allow tax exemption for military personnel or emergency services personnel, or allow deductions up to a certain amount. Some states do not offer any retirement income tax benefits. These states are considered to be “not tax-friendly,” “least tax-friendly,” or “mixed.”

The ten least tax-friend states for retirement (in no particular order) are: Connecticut, Indiana, Kansas, Maryland, Minnestoa, Nebraska, New Mexico, Utah, Vermont, and Wisconsin. In addition to income tax, retirees must also consider sales, property, estate, and inheritance tax rates. Below is a table of each state’s tax friendliness for retirement categorized by most tax-friendly, tax-friendly, least tax-friendly, not tax-friendly, and mixed.

Retirement Taxes by State 2022

State Retirement Tax Friendliness 2022 Pop.
AlabamaTax-Friendly4,949,697
AlaskaMost Tax-Friendly720,763
ArizonaMixed7,640,796
ArkansasNot Tax-Friendly3,042,017
CaliforniaMixed39,664,128
ColoradoMixed5,961,083
ConnecticutLeast Tax-Friendly3,546,588
DelawareTax-Friendly998,619
FloridaMost Tax-Friendly22,177,997
GeorgiaMost Tax-Friendly10,936,299
HawaiiTax-Friendly1,401,709
IdahoMixed1,896,652
IllinoisMixed12,518,071
IndianaLeast Tax-Friendly6,842,385
IowaNot Tax-Friendly3,174,426
KansasLeast Tax-Friendly2,919,179
KentuckyMost Tax-Friendly4,487,233
LouisianaTax-Friendly4,616,106
MaineMixed1,359,677
MarylandLeast Tax-Friendly6,075,314
MassachusettsNot Tax-Friendly6,922,107
MichiganNot Tax-Friendly9,995,212
MinnesotaLeast Tax-Friendly5,739,781
MississippiMost Tax-Friendly2,961,536
MissouriMixed6,184,843
MontanaNot Tax-Friendly1,093,117
NebraskaLeast Tax-Friendly1,960,790
NevadaMost Tax-Friendly3,238,601
New HampshireMost Tax-Friendly1,378,449
New JerseyMixed8,870,685
New MexicoLeast Tax-Friendly2,109,093
New YorkNot Tax-Friendly19,223,191
North CarolinaNot Tax-Friendly10,807,491
North DakotaTax-Friendly774,008
OhioMixed11,727,377
OklahomaNot Tax-Friendly4,007,179
OregonNot Tax-Friendly4,325,290
PennsylvaniaMost Tax-Friendly12,805,190
Rhode IslandNot Tax-Friendly1,062,583
South CarolinaTax-Friendly5,342,388
South DakotaMost Tax-Friendly902,542
TennesseeTax-Friendly7,001,803
TexasTax-Friendly30,097,526
UtahLeast Tax-Friendly3,363,182
VermontLeast Tax-Friendly622,882
VirginiaTax-Friendly8,638,218
WashingtonTax-Friendly7,887,965
West VirginiaNot Tax-Friendly1,755,715
WisconsinLeast Tax-Friendly5,867,518
WyomingMost Tax-Friendly582,233

Retirement Taxes by State 2022

Sources