Sunshine long has made Florida one of the most popular places to spend your golden years. A lack of taxes on retirement benefits and estates can make it a smart destination, too.
The amount of taxes retirees pay varies widely depending on where they choose to settle.
Following are four types of taxes you should consider when selecting a place to retire. All tax statistics come from the findings of the Federation of Tax Administrators (FTA).
1. State taxes on income
Some states have a relatively low income tax rate across all brackets.
For example, the rate is less than 5 percent for even the highest income bracket in North Dakota (3.22 percent), Arizona (4.54 percent), Kansas (4.6 percent) and New Mexico (4.9 percent).
Other states have a low flat income tax rate of 5 percent or less. They include Pennsylvania (3.07 percent), Indiana (3.3 percent), Illinois (3.75 percent), Michigan (4.25 percent), Colorado (4.63 percent) and Utah (5 percent).
Seven states don’t tax individual income at all:
- South Dakota
Two states — New Hampshire and Tennessee — tax only income from dividends and interest.
For more details on your state or the one you’d like to retire in, check out the state-by-state income tax breakdowns from the Federation of Tax Administrators.
2. Sales tax
Five states have no sales tax, according to the FTA: Alaska, Delaware, Montana, New Hampshire and Oregon.
In the other 45 states, rates vary from 2.9 percent (Colorado) to 7.5 percent (California).
The types of goods and services that are taxed also vary from state to state. Items taxed in some states — but not others — include barber services, landscaping, prescriptions, clothing and food.
For details, check out the FTA‘s state-by-state breakdown of sales tax rates, which also lists which states exempt food, prescriptions and over-the-counter medications.