When it comes to federal tax filing, there isn’t much you can do about the monies you’ll owe to Uncle Sam. From the Empire State to the Golden State, those taxes will be just the same. But for retirees looking to get the biggest bang for their buck, certain states stand out from the rest. Where you choose to settle down can make a huge impact on how far your retirement dollars stretch, and the story goes way beyond state income taxes. Counting down to the ultimate place to retire, here are the top five states that offer the best incentives:
Number 5: Alabama
The ideal retirement experience centers on peace of mind - especially when it comes to financial matters. Seniors residing in the Yellowhammer State enjoy many tax breaks, from exemptions on Social Security, as well as military and pension benefits. Watch out for sales taxes, though. Depending on the county, retirees can be subject to paying as much as 10%.
Number 4: Kentucky
Known for the Kentucky Derby, retirees living here don’t have to bet the farm to make ends meet. Not only do former wage earners have the privilege of receiving their Social Security benefits tax-free, elderly residents in the Bluegrass State can exclude up to $41,110 per person in retirement income from an array of sources. Personal income taxes are also rather low and range anywhere from 2-6%. As if this wasn’t enough, homeowners age 65 and older qualify for a homestead provision, lowering their property taxes.
Number 3: Pennsylvania
Although property taxes are rather high in the metropolitan section, the Keystone State’s tax-friendly system still attracts retirees from around the nation. Expenses like food, clothing and prescription drugs can be purchased tax-free, while distributions from retirement accounts are also exempt. Seniors receiving income from other sources can expect to pay a fixed rate of only 3.07%. Pennsylvania is one of the few states to impose both an inheritance tax and estate tax on wealthy retirees; however, this rule only applies to estates appraised at $5 million or more.
Number 2: Mississippi
Like all previous states mentioned, tax exemptions are available on prescription drugs, health care services and all qualifying retirement income in the Magnolia State. Some of the lowest property taxes can also be found here, allowing tax preparers to issue larger refunds to customers. Residential property is taxed at 10% of assessed value, and seniors qualify for a homestead exemption on the first $75,000 of value. All and all, Mississippi is a pretty good location for retirees to call home.
Number 1: Wyoming
Tax return preparation for retirees living in the Equality State will not get any sweeter than this. A tax utopia in its own right, Wyoming residents have one of the lowest tax burdens in the nation. According to the Tax Foundation, the state’s strong revenues from oil and mineral companies are the leading cause for its low rates. As a result, its senior residents can enjoy benefits like tax exemptions on food and medicine, in addition to supremely low tax implications on property taxes - to the tune of a mere 9.5%. Did we mention there are also no state income taxes here?
So where will you go? We’ve outlined the top destinations, but some of the stateshttp://www.kiplinger.com/tools/retiree_map/">states> that made the least-friendly tax list, in no particular order, include Nebraska, Oregon, California, Minnesota and Connecticut. While these locations may offer other perks, if you’re 65 or older, you may want to think twice about settling down here.