We are not telling you to go to a tax haven or anything like that, it is not that we are recommending you go to a place where you are going to evade taxes, but where taxes do not actually exist for certain Social Security and retirement benefits. There are eight states in the United States where you can enjoy your retirement savings without Uncle Sam putting his hand in your pocket after so many years in which he was already hanging around your money with federal taxes.
In these states, almost like magic, your Social Security benefit and retirement savings will go much further because no taxes are paid on this income. After all, you’ve already paid taxes for many years, right?
Alaska: Tax-Free Paradise for Retirees
The state of Alaska, known as the final frontier, is one of the most tax-friendly states for retirees because it has no state income tax or social security tax. The average sales tax and local tax is 1.76%, while the effective property tax is 1.04%.
The income tax rate for people over 65 is 0% and the state social security tax does not exist. However, consider that it is one of the 10 states with the highest cost of living in the United States, ranking number 6. What you save in taxes may be used to pay for other items in your daily life.
Wyoming: Another No-Tax State
Wyoming is another state where there is no social security tax or income tax and property taxes are among the lowest, even lower than Alaska. The local average and sales tax is 5.36% and the effective property tax rate is 0.56%. There are no social security taxes or income tax for those over 65 years of age.
Delaware: No Sales Tax
There is also no local sales tax or social security tax in Delaware. However, there is a progressive income tax that could affect your income, and you should find out how it impacts your benefits or other income if you are a retiree who has some additional work.
New Hampshire: Quality of Life and Low Taxes
In the case of New Hampshire, it is one of the best states for retirees looking for a good quality of life with few taxes. The state average local tax and sales tax is 0%, while the state social security tax is also 0%. The effective property tax is 1.93% on average and the income tax rate for those over 65 is 4%, although it applies only to interest income and dividends, not social security benefits.
Nevada: The Paradise of Play and Fun
Moving to the state of Nevada, we find that the average local tax and state sales tax is 8.23%, slightly high compared to the other states we have mentioned above. However, it has the advantage that there is no state Social Security tax or income tax rate for people over 65 years of age. If you want to buy property there, you must pay an effective property tax of 0.59%.
Florida: Popular Destination for Retirees
In the state of Florida you will find that there are numerous retirees, millions in fact, who have moved from other states with higher tax burdens, since there is no social security tax or income tax rate for people over 65 years old.
The effective property tax is 0.91% and the average local and state sales tax is 7.002%, and that’s nice for your income to yield more and to have a larger purchasing power.
North Dakota: Low Taxes for Retirees
Let’s now look at the two Dakotas, starting with North Dakota. This state shows an average local tax and state sales tax of 6.97%, and an effective property tax of 0.98%. In North Dakota there is also no state social security tax and the income tax rate for those over 65 is just 1.10%.
In this last tax, it must be clarified that it does not tax social security payments, but rather those from a retirement account such as, for example, a 401(k) or an IRA. The amount depends on your income. However, that tax rate is still quite low.