Maximize Your Retirement Income
States with No or Low State Taxes
As retirees enter their post-work years understanding taxes can greatly affect their finances. While taxes are a fact of life retirees in some states can get a break on state taxes. Nine states—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming don’t charge any state income tax. This means retirees in these places can keep more of their retirement income, including Social Security without paying extra state taxes. But, it’s important to remember that federal tax rules still apply everywhere.
If you’re a retiree wanting to avoid state taxes on your retirement income, four states offer this benefit: Illinois, Iowa, Mississippi, and Pennsylvania. Each state has its own rules, often based on age. For instance, Iowa requires you to be at least 55 years old to get this break. Even with these state-level exemptions federal taxes on retirement income including Social Security will still apply, according to the report of The Motley Fool.
(photo: Bankrate)
Understanding State and Federal Taxes on Social Security Benefits
Some states still tax Social Security benefits, including Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Federal tax rules are the same for everyone across the U.S., deciding how much of your Social Security benefits could be taxed based on your total income. By knowing how both state and federal taxes work, retirees can plan better and take advantage of any state-specific tax relief to help make their retirement more secure.
