Georgia came in sixth on a new list of the most tax-friendly states for retirees, according to a report by Kiplinger’s Personal Finance magazine.
Wyoming was ranked No. 1 and Vermont came in last.
Social Security income is exempt in Georgia, and so is up to $35,000 of most types of retirement income if you’re at least 62, Kiplinger’s said in its report.
“Beginning in 2012, taxes on retirement income will be phased out” in Georgia, Kiplinger’s said. “The statewide sales tax is 4 percent, but local jurisdictions can add up to 4 percent of their own taxes. Full-time residents qualify for a homestead exemption, and residents 65 and older may qualify for additional deductions from property taxes.”
Most tax-friendly states for retirees
1. Wyoming – a tax haven for cowboys and retirees alike. There is no state income tax.
2. Mississippi – offers a sweet income-tax deal for retirees. It not only exempts Social Security benefits from state income taxes, but it also excludes all qualified retirement income from state income taxes.
3. Pennsylvania – one of the most generous states in the nation when it comes to offering income-tax exclusion on a wide variety of retirement income.
4. Kentucky – exempts Social Security benefits from state income taxes plus up to $41,110 per person of a wide variety of retirement income, including public and private pensions and annuities.
5. Alabama – most retirement income is exempt from state income taxes.
6. Georgia — no estate or inheritance tax, and income tax ranges from 1 percent to 6 percent.
7. Oklahoma – does not tax Social Security benefits or Civil Service Retirement system retirement benefits for those who receive a federal pension in lieu of Social Security.
8. South Carolina – a favorite destination for retirees. Social Security benefits are exempt from state income taxes as are in-state public pensions and military pensions.
9. Delaware – no sales tax. Its income-tax rates are modest. Social Security benefits are exempt.
10. Louisiana – offers many tax breaks to retirees. Social Security, military, civil-service, and state- and local-government pensions are exempt from state income taxes.
Ten least tax-friendly states for retirees
1. Vermont – doesn’t coddle retirees. Not only does it tax most retirement income, including Social Security, it has a steep top income tax rate.
2. Minnesota – offers cold comfort on the tax front to retirees. However, the state does offer some retirees a break on property taxes.
3. Nebraska – doesn’t offer any great tax breaks to retirees (unless you’re a former railroad employee, as Railroad Retirement benefits are exempt).
4. Oregon – along with Hawaii, shares the distinction of imposing the highest personal income-tax rate in the nation. Although Oregon does not tax Social Security benefits, that’s the extent of its income-tax breaks for retirees.
5. California – a retiree’s tax nightmare. Although Social Security benefits are exempt, all other forms of retirement income are fully taxed.
6. Maine – like the majority of states, exempts Social Security benefits from state income taxes. Maine residents pay a 5 percent sales tax statewide on everything except food and prescription drugs.
7. Iowa – allows single retirees to exclude up to $6,000 of retirement-plan distributions from state income taxes ($12,000 for married couples).
8. Wisconsin – exempts Social Security benefits from its state income taxes, but taxes the rest of your pension and annuity income the same way the federal government does.
9. New Jersey – tax policies are thorns for some retirees. Its median real estate taxes are the highest in the nation, according to the Tax Foundation.
10. Connecticut – a tax nightmare for many retirees. Its real estate taxes are among the highest in the nation.
- Henry Unger, The Biz Beat
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