Tool | September 2014
State-by-State Guide to Taxes on Retirees
State Sales Tax
The state sales tax increased to 7.5%, from 7.25%, as of January 2013. (The rate hike is temporary and is set to expire at the end of 2016.) Rates are higher in cities and counties with special taxing districts; with the addition of local taxes, the total can reach 10% in some cities. (Food and prescription drugs are exempt.)
Income Tax Range
Low: 1% (on up to $14,910 of taxable income for married joint filers and up to $7,455 for those filing individually)
High: 13.3% (on more than $1 million for married joint filers and for those filing individually)
Benefits are not taxed.
Exemptions for Other Retirement Income
Railroad Retirement benefits are exempt. All private, local, state and federal pensions are fully taxed. There is a 2.5% state penalty on early distributions from retirement plans, annuities and IRAs.
Property is assessed at 100% of market value. The maximum amount of tax on real estate is limited to 1% of assessed value. Note, though, that property is generally only reappraised when it changes ownership or has new construction (a property’s assessed value is typically equal to its purchase price adjusted upward each year by 2%). Under the homestead program, the first $7,000 of the full value of a homeowner's dwelling is exempt.
Median property tax on the state's median home value of $384,200 is $2,839, according to the Tax Foundation.
Tax breaks for seniors: The property tax postponement program, which provided property-tax relief to senior citizens, has been suspended. But as of 2012, each county is now allowed to implement a property tax postponement program of its own if it elects to do so.
There is no inheritance tax or estate tax.
Editor's Picks From Kiplinger
- 6 Tax Factors to Consider When Picking a Retirement Destination
- Retirees, Watch Out for the State Tax Bite
- SLIDE SHOW: 10 Most Tax-Friendly States for Retirees
- SLIDE SHOW: 10 Least Tax-Friendly States for Retirees
- SLIDE SHOW: 10 Things You Must Know About Social Security
- SLIDE SHOW: 10 Things You Must Know About Traditional IRAs
- SLIDE SHOW: 5 Costly Retirement Surprises
- SPECIAL REPORT: Maximize Your Social Security Benefits
- ORDER: Kiplinger's Social Security Solutions
- TOOL: Kiplinger's State-by-State Guide to Taxes
- TOOL: Find the Best, Latest Mortgage Rates in Any State