Retirees should be careful which US state they want to live in so they don’t pay taxes on their income and pensions.
There are at least 14 states out of the 50 in the United States where you can tax your pension, Social Security benefits or retirement savings; although they have their specifications
Paying taxes is always painful, that’s for sure, but in retirement it feels more destructive. In the golden years of workers, expenses are reduced because the earning capacity is not the same. And still having to pay taxes, it becomes more unbearable. That is why we present to you the 14 states of the United States that do not charge taxes on your pension or retirement savings.
To start, we consider as a pension the payments received from Social Security during your retirement. Although those incomes are not usually taxed, they are when the total of your earnings exceeds a specific range. Also, regarding the money from your savings in one of your retirement accounts, the payment of taxes depends on whether you have a traditional or Roth account.
In this sense, if your sources of income during retirement are Social Security benefits or a savings account, you will want to live in one of the 14 states of the 50 that make up the American union that do not tax your earnings, regardless of age. you have or when you start receiving benefits.
A clarification should be made, of those 14 states:
• 8 do not have a state income tax that requires them to collect pension payments (distributions from retirement savings or Social Security, for that matter):
• 5 other states do not include pension income in their state taxes (although they do tax Social Security and retirement withdrawals)
• And an additional state “only taxes capital gains and dividend income,” according to AARP.
In this sense, the 8 states that do not tax retirement income, because they do not have a state income tax are:
1. Alaska
2. Florida
3.Snowfall
4.South Dakota
5.Tennessee
6.Texas
7.Washington
8.Wyoming
Among the 5 states that do not include pension income in state taxes are:
1.Alabama
2.Illinois
3.Hawaii
4.Mississippi
5. Pennsylvania
Only New Hampshire is the state that can tax capital gains. How is that? In the case of retirement accounts, only the interest earned at the time of your retirement will be taxed, just as it is with individual retirement accounts (IRAs) and traditional 401(k)s.
However, although not paying taxes on your pension or retirement income is an interesting fact, you should consider that many states make up for the lack of that income through other, even more expensive taxes. For example, although Texas does not charge an income tax, it does have high property and sales tax rates.
In addition, there are 27 states that, even when they tax pensions and retirement income, generally do so on a portion of that income and until the taxpayer exceeds an adjusted gross income threshold. For example, in Iowa, joint filers age 55 and older can take $12,000 out of their taxable income.