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All Contents © 2019The Kiplinger Washington Editors
By Sandra Block, Senior Editor | March 19, 2018
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There are 45 states plus the District of Columbia that impose a state sales tax on retirees and other residents. In addition, local sales tax is collected in 38 states. The combined levy can be hefty. In Tennessee, for example, the average combined state and local sales tax is 9.46%.
That means there are just five states with no state sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. But if you're scouting out the best places to retire, don't judge a state on its sales tax alone. Tennessee ranks as one of the more tax-friendly states in the U.S., despite its high sales tax, largely because it doesn't impose a state income tax. Oregon, on the other hand, isn't tax-friendly for retirees. The Beaver State has a top income tax rate of 9.9% and taxes most retirement income. On the plus side, you can enjoy a nice glass of Willamette Valley pinot noir, tax-free.
Learn more about what you will really pay to live in the five states with no state sales tax.
Kiplinger's state-by-state guide to taxes on retirees is updated annually based on information from state tax departments, Wolters Kluwer Tax & Accounting and the Tax Foundation. All data are for the 2017 tax year unless otherwise noted. Combined state and local sales tax rates were calculated by the Tax Foundation.
Overall Rating for Taxes on Retirees: Most Tax-Friendly
State Sales Tax: Alaska is one of five states with no state sales tax. However, localities can levy sales taxes, which can go as high as 7.5%. But, according to the Tax Foundation, the statewide average is only 1.76%.
Income Tax Range: No state income tax.
Taxes on Social Security: Benefits are not taxed.
For details on property taxes, estate/inheritance taxes, taxes on retirement income and tax breaks for retirees see the complete guide to taxes on retirees in Alaska.
Overall Rating for Taxes on Retirees:: Tax-Friendly
State Sales Tax: Neither the state nor localities impose a sales tax. In response, New Jersey has halved the sales tax on many items in Salem County, which borders Delaware.
Income Tax Range: Low: 2.2% (on taxable income from $2,001 to $5,000); High: 6.6% (on taxable income above $60,000).
For details on property taxes, estate/inheritance taxes, taxes on retirement income and tax breaks for retirees see the complete guide to taxes on retirees in Delaware.
Overall Rating for Taxes on Retirees:: Not Tax-Friendly
State Sales Tax: No sales tax. Resort areas such as Big Sky, Red Lodge and West Yellowstone have local sales taxes.
Income Tax Range: Low: 1% (on up to $2,900 of taxable income); High: 6.9% (on taxable income over $17,400). Montana permits filers to deduct some of their federal income tax.
Taxes on Social Security: Social Security benefits are taxable. The taxable amount may be different from the federally taxable amount because Montana taxes some types of income that the federal government does not, and vice versa.
For details on property taxes, estate/inheritance taxes, taxes on retirement income and tax breaks for retirees see the complete guide to taxes on retirees in Montana.
State Sales Tax: No sales tax.
Income Tax Range: New Hampshire doesn't have an income tax. But there's a 5% tax on dividends and interest in excess of $2,400 for individuals ($4,800 for joint filers).
For details on property taxes, estate/inheritance taxes, taxes on retirement income and tax breaks for retirees see the complete guide to taxes on retirees in New Hampshire.
Overall Rating for Taxes on Retirees: Not Tax-Friendly
State Sales Tax: None.
Income Tax Range: Low: 5% (on up to $3,300 of taxable income for single filers and up to $6,600 for married couples filing jointly); High: 9.9% (on taxable income over $125,000 for single filers and over $250,000 for married couples filing jointly). Residents can deduct some of their federal income tax from state taxable income.
For details on property taxes, estate/inheritance taxes, taxes on retirement income and tax breaks for retirees see the complete guide to taxes on retirees in Oregon.
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