As you get closer to retirement, you may be thinking about relocating to your retirement dream home. As you consider where you'll end up, it is important to think about how the move may impact your nest egg.

For example, some states have more favorable tax rules when it comes to Social Security or pension income, and property and sales tax rates can also vary from state to state.

Taking these tax rules into consideration before you make a move can help you keep more of your retirement dollars in your own pocket.

Here are just a few of the more tax-favorable states for retirees who plan to rely on Social Security and/or pension income:

• Alabama doesn't tax Social Security benefits. Traditional pension payments are excluded from taxable state income, including private defined benefit plan payments and retirement income for teachers, law enforcement officers, firefighters, and government and military employees.
   
• Illinois has an income tax but exempts many types of retirement income. Retired residents can subtract their Social Security and pension income from their federal adjusted gross income, including income from employee-defined benefit plans, IRAs, SEPs, government retirement income, and military retirement income. 
   
• In Mississippi, pension and Social Security payments can be subtracted or excluded from state taxable income, including public and private pension payments and withdrawals from IRAs and 401(k) plans. Mississippi's property taxes are also generally low; however, the state sales tax rate of 7% is relatively high.
   
• There's no state income tax in Texas, which means retirees don't have to worry about paying state taxes on Social Security income, pension payments, 401(k), and IRA distributions. But property tax bills can be significant in many parts of the state.
   
• Washington state won't tax your income. No matter how much you bring in from Social Security, retirement account distributions, a pension, or a retirement job, you don't have to worry about a hefty state income tax bill. However, they'll tax your property, and there's also a 6.5% sales tax added to many purchases.
   
• Wyoming doesn't levy an income tax. So, there's no state tax bill for any type of retirement or earned income. Retirees won't encounter a significant tax burden when making purchases. The state sales tax is a relatively low 4%. You also won't pay high property taxes to own a home. 

For more tax-friendly states for retirees, see this article.

Perhaps you've already moved to your final state and are still looking for ways to keep your money secure? As financial professionals, we can provide ideas and guidance to help you achieve your retirement goals - no matter where you are located, so give us a call today at 614-300-9498, or fill out our contact form to request an appointment.

Sources:

https://money.usnews.com/money/retirement/baby-boomers/slideshows/the-most-tax-friendly-states-to-retire

Disclaimer:

This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.