Tool | September 2014
State-by-State Guide to Taxes on Retirees
State Sales Tax
4.5% (prescription drugs are exempt). Cities, towns and counties may levy local sales taxes. The county tax cannot exceed 2%, but some cities have sales taxes that can reach an additional 6.5% (when combined with county tax).
Income Tax Range
Low: 0.5% (on up to $1,000 of taxable income for single filers and up to $2,000 for married joint filers)
High: 5.25% (on taxable income over $8,700 for single filers and over $15,000 for married joint filers)
Benefits are not taxed.
Exemptions for Other Retirement Income
There's an exclusion of up to $10,000 for qualified private pension income. Total public and private pension exemptions cannot exceed $10,000 per person. The retirement benefits must be received from an employee pension benefit plan, an eligible deferred compensation plan, an IRA, annuity or trust or simplified employee pension under IRC Section 408, an employee annuity, United States Retirement Bonds or lump-sum distributions from a retirement plan.
Civil-service retirees may exclude their retirement benefits received from the Civil Services Retirement System, including survivor benefits, paid in lieu of Social Security to the extent that such benefits are included in federal adjusted gross income. Oklahoma government pensions and civil-service pensions received from the Federal Employees Retirement System (FERS) are included in the $10,000-per-person limit. Military retirees may exclude the greater of 75% of their retirement benefits or $10,000 (but not to exceed the amount included in their federal adjusted gross income).
Property is assessed at 11% to 13.5% of its market value. Oklahoma offers a homestead exemption for homeowners, which reduces the property's assessed value by $1,000. In most cases, this will result in a tax savings of $80 to $120. If gross household income is $20,000 a year or less and you meet all of the homestead-exemption requirements, you may qualify for an additional $1,000 exemption. As of January 1, 2013, properties that qualify for a homestead exemption have a 3% limit on increases to their fair cash value in any given tax year.
Median property tax on the state's median home value of $107,700 is $796, according to the Tax Foundation.
Tax breaks for seniors: A property tax refund worth up to $200 is available if you are 65 or older and have an income of $12,000 or less. Senior citizens below certain income limits may qualify for a valuation freeze on their primary residence, meaning their property tax will not go up just because the value of other homes in the neighborhood go up.
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