taxes

3 Best States for Taxes on Retirees

No state income tax including no taxes on Social Security benefits help place Alaska, South Dakota and Wyoming among the best places to retire in the U.S. in 2018.

We analyzed tax policies in all 50 states to find the most tax-friendly states for retirees. The best places to retire exempt Social Security from state taxes, and most exempt at least a portion of other retirement income. Most also have relatively low property taxes. Here are the three best states for taxes on retirees.

#1: Wyoming

State income tax: None

Average state and local sales tax: 5.42%

Estate tax/Inheritance tax: No/No

Healthy revenues generated from oil and mineral rights keep taxes low for Wyoming residents, especially retirees. Sales taxes are manageable, and there is no state income tax. Property taxes are modest, and there’s a tax refund available to older residents who meet income requirements.

#2: Alaska

State income tax: None

Average state and local sales tax: 1.78%

Estate tax/Inheritance tax: No/No

Retirees in Alaska enjoy one of the tiniest tax bites in the nation. There’s no state income tax to nick at Social Security and other retirement benefits, and Alaska has no state sales tax. True, property taxes are above average, but residents receive an annual dividend check from the state ($1,100 in 2017).

#3: South Dakota

State income tax: None

Average state and local sales tax: 5.84%

Estate tax/Inheritance tax: No/No

Social Security benefits and other forms of retirement income get a free ride in The Mount Rushmore State, since there’s no state income tax. Sales taxes are relatively low, too, which helps offset the relatively high property taxes. The state doesn’t levy taxes on estates or inheritances.

Check out seven more of the most tax-friendly states for retirement.

SEE OUR TAX MAP: State-by-State Guide to Taxes on Retirees

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