If you want to stretch your retirement savings as far as possible, don’t focus solely on the cheapest places to retire. Pay attention to taxes in the places you’re considering, too, because they can take a big bite out of your retirement income.
To help you pinpoint the best and worst states for retirees when it comes to taxes, We looked at income, sales and property tax rates in all 50 states and whether Social Security is taxed.
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Income tax: 5.01%
Property tax: 1.6%
State sales tax: 6.89%
State tax on Social Security: Taxpayer can subtract SS income included in federal adjusted gross income if AGI is less than or equal to $58,000 for married couples filing jointly or $43,000 for other filers.
Thanks to a low cost of living, Nebraska’s capital — Lincoln — is one of the cities where your retirement egg will stretch the furthest. But be prepared for taxes to take a big bite out of your income.
The sales and income tax rates are higher in Nebraska than in more than half of the states. It has the eighth-highest property tax rate. And higher-income taxpayers have to pay state taxes on Social Security income.
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Income tax: 7.05%
Property tax: 1.09%
State sales tax: 7.3%
State tax on Social Security: Taxed to the extent they are taxed at the federal level
Minnesota is one of the 13 states that tax Social Security benefits. It’s also one of the least tax-friendly states for retirees because it has the fifth-highest income tax rate in the U.S. And, Minnesota’s sales and property tax rates are higher than in more than half of the other states.