This article takes a look at the 5 states that don’t tax retirement pension payouts. If you wish to check out our detailed analysis on navigating retirement taxes, you may go to 15 States That Don’t Tax Retirement Pension Payouts.
5. Florida
Insider Monkey Score: 16
Cost of Living Index: 100.7
Tax Friendliness: Very Tax-Friendly
The state of Florida doesn’t tax pensions. In fact, all sorts of retirement income are untaxed in the state. This is because the state doesn’t have an income tax at all, a major reason why retirees are attracted to the Sunshine State besides its inviting climate. The cost of living is also quite favorable and is only 0.7% higher than the national average.
4. Alabama
Insider Monkey Score: 17
Cost of Living Index: 88.3
Tax Friendliness: Tax-Friendly
Next on our list of states that don’t tax retirement pension payouts is Alabama. Alabama is a tax-friendly state for retirees, and the cost of living is 11.7% lower than the national average. Public and private pension income is not taxed in the state. Social Security benefits aren’t taxed either. However, retirement account withdrawals are fully taxed in the state. Retirees who own a home in the state also benefit from the low property tax rates. However, sales tax is one of the highest in the country.
3. South Dakota
Insider Monkey Score: 19
Cost of Living Index: 92.4
Tax Friendliness: Very Tax-Friendly
The very tax-friendly state of South Dakota is next on our list of states that don’t tax retirement pension payouts. This means that social security benefits, income from 401(k)s and IRAs, and even pension income are not taxed in the state. The cost of living is another plus of retiring to this state, which is 7.6% lower than the national average.
2. Wyoming
Insider Monkey Score: 19
Cost of Living Index: 92.4
Tax Friendliness: Very Tax-Friendly
Taking the second spot on our list, Wyoming is another very tax-friendly state to retire to that doesn’t tax retirement pension payouts. Similar to states such as South Dakota, the state doesn’t have an income tax. The average effective property rate is 0.6% here, which is one of the lowest in the US. Moreover, sales taxes are low as well. The sales tax rate is 4%, and the combined rate of sales and local sales taxes is 5.36%.
1. Mississippi
Insider Monkey Score: 25
Cost of Living Index: 86.3
Tax Friendliness: Very Tax-Friendly
This isn’t the first time Mississippi is bagging the first place on our list. The state doesn’t tax retirement income or pension payouts, is very tax-friendly, and even has a low cost of living. The winters are warm here, making it an ideal destination to retire to. Moreover, property taxes are low and sales taxes are moderate as well.
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