Tax Burden by State for Retirees and Seniors State-by-State Rankings and Statistics

· Updated: April 11, 2024

When older adults are considering a move, state taxes can and should be a consideration. State taxes can impact seniors’ finances quite a bit through income, sales, property, or even grocery taxes. Many seniors might be planning to make a move in 2024 due to retirement, downsizing, or other timely factors. To help older adults make an informed decision, this guide examines senior taxes by state.

Table of Contents

State-by-State Rankings

The 13 Least-Expensive States for Seniors Tax-Wise

  1. Alaska
  2. Delaware
  3. Tennessee
  4. Wyoming
  5. Florida
  6. New Hampshire
  7. Alabama
  8. South Carolina
  9. South Dakota
  10. Georgia
  11. Arizona
  12. Nevada
  13. Mississippi

The Other 7 Tax-Friendly States

  1. Virginia
  2. North Dakota
  3. Washington
  4. Colorado
  5. Arkansas
  6. Louisiana
  7. Hawaii

The 12 States with a Mixed Picture

  1. Missouri
  2. Idaho
  3. Indiana
  4. North Carolina
  5. Texas
  6. Kentucky
  7. West Virginia
  8. California
  9. Ohio
  10. Illinois
  11. New Jersey
  12. Maine
  13. Bonus: District of Columbia

The 9 Most-Expensive States for Seniors Tax-Wise

  1. New York
  2. Vermont
  3. Minnesota
  4. Connecticut
  5. Rhode Island
  6. Wisconsin
  7. Nebraska
  8. Kansas
  9. New Mexico

The Other 9 States that Are Not Tax-Friendly

  1. Iowa
  2. Maryland
  3. Massachusetts
  4. Utah
  5. Pennsylvania
  6. Oregon
  7. Michigan
  8. Montana
  9. Oklahoma

To compile these rankings, we assessed information from Tax Foundation, Kiplinger, WalletHub, Smart Asset, and individual states' tax pages.

Tax Burden and the State Taxes that Affect Seniors

A state's tax burden is the percentage of total income that residents pay on state and local taxes. For example, WalletHub considered property, income, and sales and excise taxes when assessing each state's tax burden in 2020.1

New York had the highest tax burden at 12.28%. Smack dab in the middle at number 25 was Pennsylvania at 8.53%. The state with the lowest tax burden was Alaska, where residents paid about 5.16% of their income on state and local taxes.

A state's tax burden tends to be more relevant to younger, working seniors. It might not reflect how tax-friendly a state is to retired seniors. Some states give older, lower-income, or retired seniors breaks on property tax or don't impose a tax on Social Security income.

Seniors are diverse, so it's good to consider both the general tax burden and how a state taxes retirees. Kiplinger has a nice breakdown on the latter with factors such as Social Security, estate, property, and sales taxes.2 Critical taxes to consider include these:

  • Property: The largest contributor to state and local coffers at 31.9 percent, according to the Tax Foundation.3 Most states have property tax relief programs for income- and age-eligible seniors.
  • Sales: Taxes on goods and services. These taxes, at 23.6 percent, are a significant source of revenue. Many municipalities have both a local and state sales tax. Alabama, Mississippi, and South Dakota apply the full sales tax rate on groceries, which can hurt seniors.4
  • Income: Based on earned wages, Social Security benefits, retirement plan withdrawals, and other types of income. At 23.3 percent of revenue, income taxes bring in just a little less money than state taxes do.
    • Seven states don’t have an income tax.
    • Two more collect it in very limited situations or are phasing it out.
    • Some states with income taxes don’t impose it on Social Security benefits.
    • Some states offer relief on public and private retirement income.
    • Many states have a progressive (graduated) income tax. The higher your income, the higher your tax rate.
    • Some states have a flat income tax, but some localities collect income taxes on top of the flat state rate.
  • Estate taxes: Taxes that a deceased person's estate pays based on its net value. The payment is done before the estate passes on to heirs. Twelve states and D.C. tax estates above a certain value (there's a federal tax, too).5 Estate planning attorneys can help seniors preserve as many assets as possible for their heirs.
  • Inheritance tax: Taxes that heirs must pay in six states. Spouses are exempt. So are many direct ascendants and descendants.

Least-Expensive 13 States for Seniors Tax-Wise

Since seniors are a varied group, this guide considers both a state's general tax burden and its tax friendliness toward retirees. Here's a look at the least-expensive 13 states for retirees, arranged from the lowest tax burden to the highest. Alaska comes up number one.

1. Alaska Relative tax burden: 5.16%

Extremely low taxes may not be enough to offset potential disadvantages such as a high cost of living, isolation, and cold.

Pros

  • No state income tax
  • No property tax in some municipalities
  • No statewide sales tax; 2% to 5% sales tax in some municipalities
  • No sales tax in Anchorage; sales tax breaks for seniors in some other places
  • No estate or inheritance tax
  • Residents of at least one year receive a permanent fund dividend (it counts toward federal taxable income). In 2019, the amount per resident was $1,606

In the Middle

  • Take a close look at municipal taxes rather than state averages
  • Property taxable in some places, including Anchorage
  • Where property taxes do apply: Disabled veterans, homeowners 65 or older, or surviving spouses 60 or older, don't have to pay municipal taxes on the first $150,000 of assessed value (the average assessed value for these groups is $139,393)

2. Delaware Relative tax burden: 5.52%

Retiree-friendly plus a low tax burden

Pros

  • No sales tax
  • No estate or inheritance tax
  • Average property tax, $604 per $100,000 of assessed value2
  • Social Security benefits exempt
  • Seniors 60 and older can exempt $12,500 of qualified pension and investment income

In the Middle

  • Homeowners 65 and older can qualify for credits up to $500
  • Maximum 6.6% income tax rate on taxable incomes of $60,000 and higher

3. Tennessee Relative tax burden: 6.18%

The only thing not to like is the high sales tax

Pros

  • No state income tax
  • No estate or inheritance tax
  • Average property tax, $768 per $100,000 of assessed value2

In the Middle

Cons

  • 9.47% sales tax average2

4. WyomingRelative tax burden: 6.47%

Seniors, whether working or retired, don't have to worry much about taxes in Wyoming

Pros

  • No state income tax
  • No estate or inheritance tax
  • Average property tax, $635 per $100,000 of assessed value2
  • Average sales tax, 5.32%2

5. FloridaRelative tax burden: 6.82%

No income tax but relatively high sales tax

Pros

  • No income tax
  • No estate or inheritance tax
  • Cigars exempt from taxation

In the Middle

6. New HampshireRelative tax burden: 6.85%

No income or sales tax, but property taxes are high

Pros

  • No state income tax
  • No estate or inheritance tax
  • No sales tax

In the Middle

  • Seniors 65 and older get $1,500 exemption from 5% dividends, interest tax

Cons

  • Average property tax, $2,296 per $100,000 of assessed value2

7. AlabamaRelative tax burden: 7.36%

Tax-friendly except for high sales taxes

Pros

  • Average property tax, $432 per $100,000 of assessed value2
  • Homeowners 65 and older exempt from state property taxes
  • No taxes on federal government income and some state and local government income
  • No taxes on Social Security benefits, defined benefit plan payments, and military retirement plans
  • No estate or inheritance tax

In the Middle

  • Highest income tax rate is 5%, relatively low but kicks in early (at $3,000 taxable income unless married, then $6,000 for joint filers)

Cons

  • High average sales tax at 9.16%2
  • Full sales taxes on groceries

8. South CarolinaRelative tax burden: 7.48%

Retiree-friendly state with low tax burden and graduated income tax

Pros

  • No tax on Social Security benefits
  • Seniors 65 and older exempt from as much as $10,000 of retirement income
  • Seniors 65 and older can subtract $15,000/$30,000 from other taxable income
  • Average property tax, $601 per $100,000 of assessed value2
  • No estate or inheritance tax

In the Middle

9. South DakotaRelative tax burden: 7.86%

No income tax but groceries can get expensive

Pros

  • No state income tax
  • No estate or inheritance tax

In the Middle

  • Average property tax, $1,388 per $100,000 of assessed value2
  • Sales tax averages 6.4%
  • Property tax refunds for low-income South Dakotans 66 or older, or those with disabilities
  • Property tax homestead exemption delays taxes until home is sold; seniors must be 70 or older, or a surviving spouse
  • Sales tax refund in specific situations

Cons

  • Full sales tax on groceries
  • Low-income seniors must choose among property tax refund, homestead exemption, and sales tax refund

10. GeorgiaRelative tax burden: 7.98%

Lots of retirement income exempt from taxation

Pros

  • Social Security payments exempt
  • No estate or inheritance tax
  • For seniors 65 and older: Most retirement income tax-exempt up to $65,000, or $130,000 for couples

In the Middle

  • Average property tax, $1,000 per $100,000 of assessed value2
  • Average sales tax, 7.23%2
  • Sales tax applies fully or partially to groceries in many Ga. localities

11. ArizonaRelative tax burden: 8.25%

Mostly sunny tax picture except for sales tax rate

Pros

  • Low income tax rates, with 4.54% the highest rate
  • Average property tax, $754 per $100,000 of assessed value2
  • Social Security benefits exempt
  • Up to $2,500 of income from federal and state government retirement plans exempt
  • Up to $3,500 of military retirement income exempt
  • No estate or inheritance tax

Cons

  • Relatively high state and local sales taxes, 8.39%2

12. NevadaRelative tax burden: 8.39%

Taxes aren't much of a gamble

Pros

  • No state income tax
  • No estate or inheritance tax
  • Average property tax, $693 per $100,000 of assessed value2

In the Middle

  • Seniors don't get property tax exemptions, but the tax is low

Cons

  • Average sales tax, 8.14%; many localities add onto the state rate of 6.85%2

13. Mississippi Relative tax burden: 9.06%

Retirement income exemptions lower a high tax burden

Pros

  • Social Security payments exempt
  • Qualified retirement income exempt, includes 401(k) and IRA withdrawals, pension income
  • Average property tax, $862 per $100,000 of assessed value; seniors exempted from first $75,000 of value2
  • No estate or inheritance tax

In the Middle

  • Sales tax rate is 7%, some localities add a bit more

Cons

  • Sales tax applies to groceries
FYI:

FYI: Planning to move to another state for retirement? If you're in the market for a home, check out the best states for adults over 55. 

The Other 7 Tax-Friendly States

Arranged from the lowest tax burden to the highest

1. VirginiaRelative tax burden: 7.93%

Lower taxes include no Social Security tax

Pros

  • No Social Security benefits tax
  • Average property tax, $858 per $100,000 of assessed value2
  • Low average sales tax, 5.65%2
  • No estate or inheritance tax

In the Middle

2. North DakotaRelative tax burden: 8.06%

Tax friendly state, whether you're a senior or not 

Pros

  • Average property tax, $894 per $100,000 of assessed value2
  • 2.9% is the highest income tax rate
  • No estate or inheritance tax

In the Middle

  • Average sales tax, 6.83%2

3. WashingtonRelative tax burden: 8.32%

No income tax but high sales tax

Pros

  • No state income tax
  • No inheritance tax

In the Middle

Cons

4. ColoradoRelative tax burden: 8.4%

Senior-specific breaks reduce the tax burden

Pros

Cons

  • High average sales tax, 7.63%, can reach 11% in some municipalities2

5. ArkansasRelative tax burden: 8.98%

Seniors benefit from no Social Security tax

Pros

  • No tax on Social Security benefits
  • Military pensions tax-exempt
  • Up to $6,000 of retirement income exempt
  • Average property tax, $658 per $100,000 of assessed value2
  • No estate or inheritance tax

In the Middle

Cons

  • High average sales tax, 9.47%

6. LouisianaRelative tax burden: 9.15%

Noticeably friendlier to retired seniors than working seniors

Pros

  • No Social Security tax
  • No tax on many pensions (military, civil service, state and local government)
  • Low annuity and pension taxation rates, with exemptions up to $6,000 per person
  • Average property tax, $555 per $100,000 of assessed value2
  • Graduated income tax, highest rate 6%, kicks in after $50,000/$100,0002
  • No estate or inheritance tax

Cons

  • High sales tax averages 9.45%
  • Some places tax groceries

7. HawaiiRelative tax burden: 11.48%

Tax-friendly for seniors who mostly have Social Security, pension income; not as much for seniors with private retirement income

Pros

  • No tax on Social Security benefits
  • Most pension income not taxed
  • Average property tax, $304 per $100,000 of assessed value (do keep in mind that property values are high)2
  • No inheritance tax

In the Middle

  • 4.41% sales tax on average
  • 12 income tax brackets, ranging from 1.4% to 11%
  • Property tax breaks available; levied at county level

Cons

  • Some income, namely private retirement account withdrawals, may be taxed up to 11%, the top income tax rate after $200,000
  • Estate tax

The 12 States with a Mixed Picture

Arranged from the lowest tax burden to the highest

1. MissouriRelative tax burden: 7.9%

Expect to pay regular income taxes on IRAs and 401(k)s

Pros

  • No tax on Social Security in many cases
  • Some exemptions for private, public pensions
  • No estate or inheritance tax

In the Middle

Cons

  • Full tax on retirement account income
  • 8.03% average sales tax

2. IdahoRelative tax burden: 7.93%

Fairly tax-friendly but residents pay full tax on private retirement plans

Pros

  • No tax on Social Security
  • Deduction on some public pension income
  • Average property tax, $796 per $100,000 of assessed value2
  • No estate or inheritance tax

In the Middle

  • 6.03% average sales tax
  • Sales tax applies to groceries, but grocery credit is available

Cons

  • Private retirement plans fully taxed
  • Top income tax rate of 6.925% applies after $11,279/$22,558

3. IndianaRelative tax burden: 8.01%

Retirees pay taxes on 401(k)s, IRAs, and most accounts

Pros

  • No Social Security tax
  • Some exemptions on federal civil service and military pensions
  • No estate or inheritance tax
  • Average property tax, $907 per $100,000 of assessed value2

In the Middle

  • Flat 3.23% income tax rate, but localities can impose additional rates
  • 7% sales tax

Cons

  • Most retirement plans fully taxed at income tax rates

4. North CarolinaRelative tax burden: 8.17%

Seniors must pay taxes on retirement and pension plans

Pros

  • No Social Security tax
  • Average property tax, $894 per $100,000 of assessed value2
  • No estate or inheritance tax

In the Middle

  • 5.25% flat income tax rate
  • 6.95% sales tax on average
  • Seniors may qualify for some property tax breaks

Cons

  • Full income tax on retirement plans and pensions
  • Localities tax groceries at 2% rate

5. TexasRelative tax burden: 8.2%

Buckle up for high property and sales taxes, but enjoy no income taxes

Pros

  • No income tax
  • No estate or inheritance tax

In the Middle

Cons

  • Average property tax, $1,993 per $100,000 of assessed value2
  • 8.19% sales tax on average

6. KentuckyRelative tax burden: 8.8%

Mostly retiree-friendly, but the inheritance tax could sting heirs

Pros

  • No Social Security income tax
  • Exemptions up to $31,110 on most retirement income
  • Average property tax, $925 per $100,000 of assessed value2
  • No estate tax

In the Middle

  • Flat 5% income tax rate
  • 6% flat sales tax

Cons

7. West VirginiaRelative tax burden: 9.06%

Picture brightens in 2022 with no Social Security benefits taxed

Pros

  • No Social Security taxes beginning in 2022; 35% of benefits exempt in 2020 and 65% in 2021
  • $8,000 retirement income deductions
  • Some state, federal, pension deductions up to $2,000
  • Average property tax, $615 per $100,000 of assessed value2
  • No estate or inheritance tax

In the Middle

  • 6.4% sales tax average
  • 3% income tax rate on taxable incomes less than $10,000; 6.5% on incomes after $60,000
  • Homestead exemption and tax credit programs for seniors

Cons

  • Full tax rates on retirement income above $8,000

8. CaliforniaRelative tax burden: 9.27%

High 13.3% rate for millionaires turns off some seniors, but there's no Social Security tax

Pros

  • No taxes on Social Security
  • Average property tax, $841 per $100,000 of assessed value2
  • Seniors 65 and older can claim $122/$244 Senior Exemption Credit, similar to federal tax credit
  • No estate or inheritance tax

In the Middle

  • Graduated income tax rates range from 1% to 13.3%, the latter for those earning more than $1 million

Cons

  • High sales tax averages 8.66%
  • Most retirement income taxed
  • Parcel taxes add to property tax bill

9. OhioRelative tax burden: 9.34%

Above-average property, sales taxes may burden working and retired seniors

Pros

  • No Social Security tax
  • Generally no tax on pensions
  • Tax credit up to $200 on retirement income
  • Income tax ranges from 2.85% to 4.979% after $221,300
  • No estate or inheritance tax

In the Middle

  • Average property tax, $1,641 per $100,000 of assessed value2
  • Some exemptions available to homeowner seniors

Cons

  • 7.15% sales tax on average

10. IllinoisRelative tax burden: 9.62%

Retiree-friendly but high property and sales taxes

Pros

  • No tax on Social Security
  • No tax on most retirement accounts and pensions
  • No inheritance tax

In the Middle

  • Homestead freeze, exemption, or tax deferral lessens the pain of property taxes for some
  • 4.95% flat income tax rate2
  • Groceries taxed mostly at 1% rate

Cons

  • Average property tax, $2,408 per $100,000 of assessed value
  • 8.78% sales tax average; tax gets as high as 11% in some municipalities
  • Estate tax for estates worth more than $4 million

11. New JerseyRelative tax burden: 9.88%

Retirees get tax breaks but must contend with high property taxes

Pros

  • No Social Security taxes
  • Generous exemptions on most retirement income up to $75,000/$150,000
  • No estate tax

In the Middle

  • Income tax rates range from 1.4% to 8.97% after $500,000
  • Some property tax breaks for seniors

Cons

  • High property tax averages $2,530 per $100,000 of assessed value2
  • Inheritance tax on property valued over $500, rates from 11% to 16%
  • 6.97% average sales tax

12. MaineRelative tax burden: 10.57%

No Social Security tax

Pros

  • No tax on Social Security benefits
  • $10,000 of some pension income deductible
  • No inheritance tax

In the Middle

  • Average property tax, $1,424 per $100,000 of assessed value2
  • 5.5% sales tax
  • 5.8% income tax on incomes less than $21,450/$42,900; 7.15% after $50,750/$101,550

Cons

Bonus: District of Columbia

Taxes on many retirement plans, but no Social Security tax

Pros

  • No tax on Social Security
  • Average property tax, $603 per $100,000 of assessed value2
  • No inheritance tax

In the Middle

  • 5.75% average sales tax2
  • Many homeowner seniors qualify for homestead deduction; household income must be under $154,750

Cons

The 9 Most-Expensive States for Seniors Tax-Wise

Arranged from the highest to lowest tax burden

1. New YorkRelative tax burden: 12.28%

High tax burden decreases after retirement

Pros

  • No Social Security income tax
  • No income tax on New York, federal, military pensions
  • No tax on private retirement plans if income from them is under $20,000
  • No inheritance tax

In the Middle

Cons

  • 8.49% average sales tax2
  • Income tax rates start at 4%; highest rate 8.82% applies after $1,070,550/$2,155,350
  • Average property tax, $1,812 per $100,000 of assessed value
  • Tax on private retirement income and non-New York public pensions exceeding $20,000
  • Estate tax; basic exclusion amount is $6,940,000

2. VermontRelative tax burden: 10.73%

Cold winters, cold tax climate for many seniors

Pros

In the Middle

Cons

  • Taxes on most retirement income
  • Income tax rates range from 3.35% ($38,700/$64,600) to 8.75% ($195,450/$237,950)
  • Average property tax, $1,908 per $100,000 of assessed value2
  • Estate tax on estates over $4.25 million, 16% rate; includes taxable gifts from past two years; estate worth increases to $5 million in 2021

3. MinnesotaRelative tax burden: 10.19%

Includes tax on Social Security income

Pros

  • Not required to file tax return if Social Security is only income
  • No tax on military pensions
  • Income tax deduction for some seniors 65 and older
  • No inheritance tax

In the Middle

  • Social Security income tax deductions
  • Average property tax, $1,224 per $100,000 of assessed value2
  • Property tax breaks available for renters, homeowners, nursing home residents

Cons

  • Social Security income taxable
  • Federal pension income taxable
  • Tax on private retirement plan distributions
  • 7.43% average sales tax
  • 5.35% income tax bracket for lower-income filers, less than $25,890/$37,850
  • High top bracket for income tax, 9.85%, after $160,020/$266,700
  • Estate tax; includes taxable gifts made three years prior to death; kicks in after $3 million, rates from 13% to 16%

4. ConnecticutRelative tax burden: 9.99%

Higher-income retirees may not like the picture in Connecticut

Pros

  • Military pensions exempt
  • Social Security payments exempt for taxpayers below $75,000/$100,000 income levels
  • 28% of annuity or pension income in 2020 exempt for taxpayers below $75,000/$100,000 income levels; will rise progressively to 100% in 2025
  • No inheritance tax

In the Middle

  • 6.35% sales tax
  • Graduated income tax with highest rate 6.99% after $500,000/$1 million

Cons

  • Average property tax, $2,114 per $100,000 of assessed value2
  • Estate tax unified with gift tax; only state to do so; $5.1 million threshold in 2020

5. Rhode IslandRelative tax burden: 9.84%

Not friendly toward higher-income retirees

Pros

  • Income tax exemption up to $15,000 for government, military, private retirement plans
  • No Social Security tax if income is below certain levels
  • No inheritance tax

In the Middle

  • Tax credit for homeowners 65 and older earning $30,000 or less
  • Income tax rates range from 3.75% (up to $62,250) to 5.99% (after $149,150)

Cons

  • Social Security benefits taxed after $83,550/$104,450 federal AGI
  • Average property tax, $1,723 per $100,000 of assessed value2
  • 7% sales tax
  • Estate tax reaches 16% and applies to estates exceeding about $1.57 million (amounts adjusted for inflation every year)

6. WisconsinRelative tax burden: 9.12%

Homeowners pay a lot in property taxes

Pros

  • No Social Security tax
  • No estate or inheritance tax
  • Residents 65 and older can deduct up to $5,000 of retirement income if federal AGI is $15,000/$30,000

In the Middle

  • 5.44% average sales tax2
  • Homestead credit starting at age 62, income below $24,680 for 2019

Cons

  • High property taxes representing about 3.5% of personal income; Milwaukee residents pay $2,581 per $100,000 assessed value
  • Most retirement income taxed, including IRAs, 401(k)s, pensions, annuities
  • Income tax rates range from 4% ($11,450/$15,270) to 7.65% ($252,150/$336,200)

7. NebraskaRelative tax burden: 9.1%

Kiplinger calls it the least-tax-friendly state for retirees

Pros

  • Social Security income tax breaks if AGI is $43,000/$58,000 or less
  • No estate tax

In the Middle

  • 6.89% sales tax
  • Property tax exemption up to $40,000 of assessed value for some seniors

Cons

  • Most retirement income taxed, includes some Social Security
  • Top income tax rate applies quickly, 6.84%, after $30,420/$60,480
  • Average property tax, $1,855 per $100,000 of assessed value2
  • Inheritance tax

8. KansasRelative tax burden: 8.83%

Lower-income seniors get some breaks but still contend with a high sales tax

Pros

  • No tax on Social Security benefits if adjusted gross income is $75,000 or lower
  • No tax on federal government, military, or Kansas public pensions
  • No estate or inheritance tax

In the Middle

  • Average property tax, $1,491 per $100,000 of assessed value2
  • Some seniors qualify for Homestead and SAFESR property tax breaks
  • Graduated income tax, highest rate 5.7% kicks in after $30,000/$60,000 of taxable income

Cons

  • Full tax on private retirement plans and non-Kansas public pension plan distributions
  • Social Security benefits taxed above $75,000
  • 8.68% average sales tax

9. New MexicoRelative tax burden: 8.74%

Seniors must live to 100 to skip income taxes

Pros

  • Average property tax, $830 per $100,000 of assessed value2
  • Income tax 100% waived for seniors age 100 and older, as long as they're not dependents
  • No estate or inheritance tax

In the Middle

  • $8,000 exempt from retirement income in specific situations
  • Property tax rebate for low-income seniors
  • Property value freeze for some seniors 65 and older, handled on county level
  • Breaks on medical expenses in certain circumstances
  • Highest income tax bracket is 4.9% after $16,000/$24,000

Cons

The Other 9 States that Are Not Tax-Friendly

Arranged from highest to lowest tax burden

1. IowaRelative tax burden: 9.53%

High property, income taxes weigh down working and retired seniors

Pros

In the Middle

  • Iowa has top 8.53% income tax rate until 2023; will become 6.5% then
  • Counties and school districts
  • can add to income tax rates
  • Property tax credit for lower-income seniors 65 and older

Cons

  • Average property tax, $1,678 per $100,000 of assessed value2
  • Sales tax averages 6.82%
  • Inheritance tax with exceptions for spouses and lineal ascendants, including stepchildren

2. MarylandRelative tax burden: 9.34%

Especially unfriendly to high-income, high-asset seniors

Pros

  • No Social Security tax
  • Deduction of $30,600 on public pensions, 401(k)s, and other retirement plans

In the Middle

 

Cons

  • Full tax on private retirement income after deduction
  • Highest income tax rate 5.75% plus municipalities tack on an average of 2.9%
  • Estate and inheritance tax, but $5 million estate tax exemption and many inheritance tax exceptions

3. MassachusettsRelative tax burden: 8.76%

Expect to pay full tax on your 401(k)

Pros

  • No Social Security tax
  • No tax on most public pensions
  • No inheritance tax

In the Middle

  • Flat 5.1% income tax rate
  • Property tax credit for seniors 65 and older
  • Average property tax, $1,294 per $100,000 of assessed value2

Cons

  • Full tax on most types of retirement accounts, including private accounts
  • 6.25% sales tax
  • Estate tax with low exemption of $2 million

4. Utah

Relative tax burden: 8.75%

Most retirement income, including Social Security, is taxed

Pros

  • Average property tax, $713 per $100,000 of assessed value2
  • No inheritance or estate tax

In the Middle

  • Flat 4.95% income tax
  • 6.78% sales tax average
  • $450 tax credit for seniors relative to income; must make less than $25,000/$32,000
  • Property tax breaks

Cons

  • Full tax on Social Security
  • Most retirement income taxed

5. PennsylvaniaRelative tax burden: 8.53%

State goes easy on retirement taxes, but beware of property taxes

Pros

  • No Social Security tax
  • No tax on most retirement accounts
  • No tax on pensions for seniors 60 and older
  • No estate tax

In the Middle

  • 6.34% sales tax on average
  • Flat 3.07% income tax, with some municipalities adding onto rates
  • Some property tax breaks

Cons

  • Average property tax, $1,674 per $100,000 of assessed value2
  • Inheritance tax

6. OregonRelative tax burden: 8.34%

Most retirement income fully taxed

Pros

  • No Social Security tax
  • No sales tax
  • Retirement income credit for some lower-income seniors
  • No inheritance tax

In the Middle

Cons

  • Full tax on some retirement income, including IRAs and 401(k) plans
  • Top income tax rate of 9.9% after $125,000/$250,000
  • Estate transfer tax

7. MichiganRelative tax burden: 8.27%

Younger retirees face higher income taxes

Pros

  • No Social Security, Michigan National Guard, military pensions tax
  • No estate or inheritance tax

In the Middle

Cons

  • Average property tax, $1,729 per $100,000 of assessed value2
  • Flat 4.25% income tax, plus municipalities tack on their own

8. MontanaRelative tax burden: 7.22%

Low tax burden, but most retirement income is taxed

Pros

  • Average property tax, $892 per $100,000 of assessed value2
  • No sales tax
  • No estate or inheritance tax

In the Middle

Cons

  • Social Security taxed
  • Huge majority of retirement income taxed
  • 6.9% income tax rate after $18,400

9. OklahomaRelative tax burden: 6.94%

Low tax burden but some retirement income tax, high sales tax

Pros

  • No Social Security or Civil Service tax
  • $10,000/$20,000 retirement income deduction
  • No estate or inheritance tax
  • Sales tax breaks in some cases

In the Middle

  • 5% income tax rate after $7,200/$12,200
  • Average property tax, $974 per $100,000 of assessed value2
  • Property tax breaks for some seniors

Cons

  • 8.94% sales tax average
  • Must pay tax after retirement income deduction taken

Check out our video below to learn more about states that don't have Social Security taxes.

Jeff Hoyt explains which states do not tax social security

Conclusion

As you see, senior taxes by state vary considerably. Even within the same state, they can diverge quite a bit based on factors such as income tax rates and whether Social Security payments are taxed. Hawaii is an example of a state friendlier toward lower-income retirees than their higher-income counterparts. Social Security and most pension income aren't taxed, but IRAs, 401(k)s and employer retirement plan withdrawals are. The highest Hawaii income tax rate is 11%.

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Additional Resources

References and Footnotes

  1. McCann, Adam. (2020, June 24). 2020's Tax Burden by State. WalletHub. Retrieved November 23, 2020, from https://wallethub.com/edu/states-with-highest-lowest-tax-burden/20494
  2. Mengle, Rocky, and Muhlbaum, David. (2019, Nov. 20). Taxes in Retirement: How All 50 States Tax Retirees. Kiplinger. Retrieved November 23, 2020, from https://www.kiplinger.com/slideshow/retirement/t054-s001-taxes-in-retirement-how-all-50-states-tax-retirees/index.html
  3. Cammenga, Janelle. (2020, May 13). To What Extent Does Your State Rely on Individual Income Taxes? Tax Foundation. Retrieved November 23, 2020, from https://taxfoundation.org/state-individual-income-tax-reliance-2020/#
  4. Cammenga, Janelle. (2019, Oct. 30). How Does Your State Treat Groceries, Candy, and Soda? Tax Foundation. Retrieved November 23, 2020, from https://taxfoundation.org/grocery-tax-candy-tax-soda-tax-2019/
  5. Cammenga, Janelle. (2020, September 20). Does Your State Have an Estate or Inheritance Tax? Tax Foundation. Retrieved November 23, 2020, from https://taxfoundation.org/state-estate-tax-state-inheritance-tax-2020/