Places That Do Not Tax Retirement Income
These are states that do not have income tax and therefore, no tax on pension. Your state and local taxes will vary to a great extent depending on the place of residence. Check the tax rules for the states before you relocate. Sometimes, the states that do enact income taxes offer very generous retirement benefits. This might work out to be more beneficial than moving to a tax-free state.
Also, in view of the recent economic duress, some states have increased their sales and property taxes. So, try not to inadvertently relocate to those states. All is not as bad as it seems. People who wish to relocate can buy houses at a cheap rate as real estate has fallen badly, but keep your eye on that property tax.
While you might have to pay federal taxes, you will not be required to pay state income tax in the following places -- Florida, Alaska, South Dakota, Nevada, Wyoming, Texas and Washington.
Now for the list of states that do not tax pensions. These states are New York, Mississippi, Michigan, Kansas, Hawaii, Alabama, Illinois, Louisiana and Pennsylvania. However, Pennsylvania will tax wages. Louisiana, on the other hand, will tax certain types of pensions. If you have a federal pension, then you are safe in Louisiana.
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