Georgia is No. 6 among tax-friendly states for retirees

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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22 comments Add your comment

Joseph Quinn

June 20th, 2011
2:24 pm

You failed to mention Texas, no state income tax at all! Much better than a discount.

Shell D

June 20th, 2011
2:55 pm

yeah… but it’s Texas… ugh…

David

June 20th, 2011
8:07 pm

Some AARP members may not be aware that the AARP Georgia Chapter lobbied the State Legislature earlier this year to substantially REDUCE that $35,000 exemption that Henry mentioned above.

Reebob

June 21st, 2011
7:23 am

Missed a little key point on the first $35K being tax exempt – it is IF YOU ARE OVER 62. Bottom line is it’s 6% state tax with virtually NO deductions. If Georgia is one of the best, sure would hate to see the worst.

Bill

June 21st, 2011
7:32 am

Quit whining. Paying taxes in this great country is a privilege.

President Barack Obama

June 21st, 2011
7:32 am

Don’t worry I have everything under control.

Buzz G

June 21st, 2011
7:53 am

AARP is the biggest fraud there ever was. They don’t represent old people. They are a marketing organization that uses old people. They do not do insurance. They sell their name to the insurance company who is the highest bidder for it. And in return for supporting Obamacare, the gov’t gives them a bid break. The people who run this thing live like kings on all the marketing money they are making.

pebblebeach

June 21st, 2011
9:12 am

Hey Bill..Tell that to the rich Repulicans and friends who pay the least amount of taxes…

jd

June 21st, 2011
9:18 am

Reebob — you don’t pay 6% until you gross over 92,000 — which is 127,000 with the $35 k deduction –

khc

June 21st, 2011
9:52 am

tell us why GA ranked big loser in usatoday story/chart. last decade GA economic growth is poor vs. other states. is it the repubs fault for poor performance….or was GA growth so much better under previous leadership?

JR

June 21st, 2011
10:52 am

pebblebeach, your comment and the facts are totally at odds.

And Bill, I don’t think the issue is simply the paying of taxes. We all know taxes are essential. The issues are the amount of taxes, and how those tax dollars are being spent.

dre

June 21st, 2011
10:54 am

Yeah, but it’s Georgia. Would you rather pay more taxes and live near the beaches in Florida and stare at the endless sunrises and sunsets, or retire in Georgia where you can stare at the enless strip shopping centers?

JR

June 21st, 2011
11:03 am

dre, endless sunrises and sunsets? How is that possible? I think I missed that the last time I was in Florida. Maybe the glare from those endless sunrises and sunsets blocked your view of all the strip shopping centers that Florida also has. As well as all the cheesy tourist attractions. Florida is like somebody took Myrtle Beach and made a state out of it.

george

June 21st, 2011
11:11 am

texas collects over 60 separate taxes including those for sales and usage and taxes for professional services.

Escapee from the liberal plantation

June 21st, 2011
11:40 am

Democrats don’t make enough money to pay taxes

rooster

June 21st, 2011
11:57 am

Georgia’s growth rate compares poorly to other states right now because for so many years it ran circles around other states. Remember, growth rates are expressed as percentages. It’s easier to show a higher percentage growth from a lower base.

Real Estate Report

June 21st, 2011
12:20 pm

dre

June 21st, 2011
12:20 pm

@JR Awwww Bro, you’re not going to right places! Yes, they have plenty of strip shopping…tackier too, but the beach, any beach, is the place to retire.

oldtimer

June 21st, 2011
12:22 pm

TN has no state income tax and in many areas low property taxes.

Escapee from the liberal plantation

June 21st, 2011
5:39 pm

Yeah, Tennessee has no state income tax, but has one of the highest sales tax rates in the country.

Not exactly senior friendly.

DuckDude

June 22nd, 2011
3:01 pm

Oregon has high personal income tax, but exempts SS benefits and NO sales tax, which elevates Delaware.

tracy

June 26th, 2011
4:13 pm

Will this 0% tax in 2012 include tax exempting military retirement?