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Retirement Taxes by State

Retirement Taxes by State
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Tax Implications for Retirement across the States

When it comes to retirement, the choice of state to settle in can have significant financial implications due to different tax structures across the United States. Many retirees assume the cessation of work means an end to tax woes, but the reality is different – taxes continue to apply on retirement incomes. These vary greatly from state to state, encompassing not only income tax but also sales, property, estate, and inheritance tax rates. Therefore, understanding the tax landscape in your chosen state is essential to ensuring a financially secure retirement.

The data illuminates a spectrum from states rated as 'Most Tax-Friendly,' implying that they impose the least tax burden on their retirees—through 'Tax-Friendly,’ ‘Mixed,’ ‘Not Tax-Friendly’ to ‘Least Tax-Friendly’ states, which place the highest taxation burden on the retirement income. 

  • The 'Most Tax-Friendly' states, aimed at providing a haven for retirees by keeping taxes on their income at the minimum, comprise ten states including Alaska, Florida, Georgia, Kentucky, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, and Wyoming.  
  • Conversely, states such as Connecticut, Indiana, Kansas, Maryland, Minnesota, Nebraska, New Mexico, Utah, Vermont, and Wisconsin, considered ‘Least Tax-Friendly,' impose the highest taxation on retirees.
  • Seven states have no income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming, suggesting that large aspects of a retiree's income could be tax-free.
  • States like California, Arizona, Illinois, and Ohio bear a ‘Mixed’ title, indicating varying tax norms that may or may not suit certain retirees.

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