retirement

Kiplinger's Tax Map for Retirees: About Our Methodology

Here's how we put together our Retiree Tax Map and related content.

Our Retiree Tax Map and related tax content includes data from a wide range of sources. To generate our rankings, we created a metric to compare the tax burden for two hypothetical married couples in all 50 states and the District of Columbia.

Kiplinger Tax Map

Data Sources:

Income Taxes – Our income tax information comes from each state's tax agency. Income tax forms and instructions were also used. See more about how we calculated the income tax for our hypothetical couples below under "Ranking method."

Property Taxes – The median property tax rate is based on the median property taxes paid and the median home value in each state for 2019 (the most recent year available). The data comes from the U.S. Census Bureau.

Sales Taxes – State sales tax rates are from each state's tax agency. We also cite the Tax Foundation's 2021 midyear average combined sales tax rate, which is a population-weighted average of state and local sales taxes. In states that let local governments add sales taxes, this gives an estimate of what most people in a given state actually pay, as those rates can vary widely.

Motor Fuel Taxes – The American Petroleum Institute prepares semi-annual reports of state motor fuel tax rates. We used July 2021 data but made several updates to reflect new rates effective since July 1, 2021. Values include excise taxes, sales taxes (when applicable) and a variety of fees that states impose.

Sin Taxes – Information about "sin taxes" on tobacco products, alcoholic beverages, and marijuana comes from a variety of sources, including state tax agencies, Federation of Tax Administrators, Campaign for Tobacco-Free Kids, and Distilled Spirits Council of the United States

Annual Car Taxes and Fees – We used information from state tax agencies and state motor vehicle departments for annual car taxes and fees.

Estate and Inheritance Taxes – Data from each state tax agency was used for estate and inheritance tax information.

Ranking Method:

The "tax-friendliness" of a state depends on the sum of income, sales and property taxes paid by two hypothetical retired couples.

To determine income taxes due, we prepared tax returns for each state and the District of Columbia for both couples. The first couple had $15,000 of earned income (wages), $20,500 of Social Security benefits, $4,500 of 401(k) plan distributions, $4,000 of traditional IRA withdrawals, $3,000 of Roth IRA withdrawals, $200 of taxable interest, $1,000 of dividend income, and $1,800 of long-term capital gains for a total income of $50,000 for the year. They also had $10,000 of medical expenses, paid $2,500 in real estate taxes, paid $1,200 in mortgage interest, and donated $1,900 (cash and property) to charity.

The second couple had $37,500 of Social Security benefits, $26,100 of 401(k) plan distributions, $18,200 of private pension money, $6,000 of traditional IRA withdrawals, $2,000 of Roth IRA withdrawals, $2,000 of taxable interest, $4,000 of dividend income, and $4,200 of long-term capital gains for a total income of $100,000 for the year. They also had $10,000 of medical expenses, paid $3,200 in real estate taxes, paid $1,500 in mortgage interest, and donated $4,300 (cash and property) to charity.

We calculated these 2020 returns using software from Credit Karma (some adjustments were made to account for certain 2021 tax law changes).

How much they paid in sales taxes was calculated using the sales tax deduction tables in the instructions for federal Schedule A (Form 1040) and the Tax Foundation's 2021 midyear average combined sales tax rates.

How much each hypothetical couple paid (and deducted on their income tax return, if allowed) in property taxes was calculated by assuming a residence with a $250,000 assessed value for the first couple and a $350,000 assessed value for the second couple. We then applied each state's median property tax rate to that appropriate amount.

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