Several U.S. states have become attractive destinations for retirees, due to the fact that they don’t charge state income taxes. Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming fall into this thrifty category, and New Hampshire would except that the state does charge a flat 4% tax on interest and dividend income.
So those states are the cheapest places to live, from a tax standpoint, right? Actually, when you look at the bigger picture, there are thriftier places to live, taxwise. Why? Because you also have to consider property taxes and state sales and excise tax into the equation.
When you look at the percent of an average person’s income that is paid toward total state and local taxes, you discover that the least expensive state, from a tax standpoint, is Alaska, which assesses just 4.9% of the income of its average citizen. Florida and Tennessee are near the bottom (6.1%) but Texas (7.6%) and Washington (8.0%) might not be the thriftiest retirement destinations.
No reader will be surprised that New York (12.0%) is the overall state tax leader, followed by Hawai’i (11.8%), Vermont (11.1%), Maine (10.7%), California (10.4%) and Connecticut (10.1%). Retirees who want to live on the coast and still pay low taxes might consider Delaware, which assesses an overall 6.4% tax rate.