Surprising fact: nearly one in five retirees sees their budget shift more from property and sales levies than from income rules.
I set the agenda: I will answer that core question and define what a low overall cost means in real dollars. I focus on income rules, Social Security treatment, property, sales, estate, and capital gains. I compare how each line item alters a typical retirement paycheck.
Quick snapshot: Wyoming pairs no state income levy with low property costs. Nebraska taxes full retirement income and often has high property bills. Only nine states still tax Social Security in 2025, and recent legal changes (Missouri, Kansas, Nebraska) shift outcomes this year.
I preview trade-offs: high sales rates can be offset by grocery and medicine exemptions; estate and inheritance thresholds vary widely. I’ll put similar contenders head-to-head so you can see which fits your income mix and lifestyle.
Key Takeaways
- I will translate rules into likely dollars to judge true cost.
- Wyoming often ranks best due to no income levy plus low property burdens.
- Nebraska can be costly: full retirement income taxation and high property bills.
- Social Security matters: only nine states tax benefits in 2025.
- Sales and property rules change real outcomes—look at exemptions and reliefs.
- Estate and inheritance rules can swing choices if you expect a large estate.
Search intent decoded: comparing states to minimize retirees’ total tax burden today
My goal is to translate search intent into a clear framework you can use to compare places by total retirement cost today.
I define five categories you should weigh: income rules on withdrawals and pensions, Social Security treatment, property taxes and senior relief, sales taxes and exemptions, and estate/inheritance rules.
Rankings differ because methodologies weigh those categories unequally. Some lists emphasize income levies while ignoring high property bills. Others miss sales hits that matter to active travelers.
Cost-of-living matters: a low state levy can be erased by high housing, insurance, or utilities. Conversely, modest taxes in an affordable place often net better outcomes.
- A vs. B approach: I’ll compare similar profiles (no-income-tax places, pension-friendly places) to show real trade-offs.
- Timing: I use current rules—recent 2025 shifts to capital gains and Social Security treatment alter comparisons now.
- Personal modeling: your mix of Social Security, pensions, and withdrawals will change which category dominates your overall bill.
“Local variation matters: county property rates and municipal sales add-ons can flip a winner into a loser.”
What state has the lowest tax burden for retirees? The quick answer and how we measure it
Here’s a quick verdict, followed by a clear method I use to turn rules into dollars.
Quick answer: for withdrawal-heavy retirement portfolios, Wyoming and South Dakota often deliver the lowest total bill today. They pair no income tax with modest property tax and reasonable sales tax exposure. Close contenders include Florida and Nevada: Florida’s homestead and limited property levies help, while Nevada offsets higher sales rates with low home taxes.
Methodology: weighing five pillars
I measure five pillars: income tax on withdrawals and pensions, social security treatment, effective property tax after reliefs, combined sales tax net of exemptions, and estate/inheritance exposure.
- Income tax: do retiree withdrawals face regular income rates or exemptions?
- Social security: is benefit income taxed now or phased out soon?
- Property tax: apply senior credits, freezes, and county variation.
- Sales tax: consider groceries, medicines, and travel spending patterns.
- Estate: note state-level estate or inheritance levies and 2025 federal exemption.
Present-day landscape: friendly profiles and notable outliers
Only nine states still tax social security in 2025 (CO, CT, MN, MT, NM, RI, UT, VT, WV), with WV phasing out by 2026. No-sales-tax states include DE, MT, NH, and OR. Louisiana and Tennessee top combined sales rates at about 9.56%.
Local variation matters: county property levies and senior programs can change your outcome more than a single state rule.
No state income tax face-off: Florida vs. Wyoming vs. Tennessee vs. Texas vs. Nevada
I compare five no-income-tax contenders so you can see how property and sales drive real retirement dollars.
Core point: each of these places exempts retirement withdrawals and pensions from state income levies, so differences show up in property and sales choices.
Florida
Florida levies no state income or estate taxes. Property tax averages about 0.79%. Combined sales rate sits near 6.948%.
Long-term residents can use homestead relief to lower effective bills.
Wyoming
Wyoming posts very low property costs (~0.58%) and mid-range sales (~5.441%). Its all-in burden is about 7.5%.
Tennessee
Tennessee pairs low property (~0.55%) with very high sales (~9.556%). If you travel or dine out often, taxes bite more.
Texas
Texas has higher property rates (~1.58%) but exempts groceries and prescriptions from sales collections. Local levies can push some areas above 2%.
Nevada
Nevada shows very low property (~0.49%) and higher sales (~8.236%), with grocery relief. Its estimated overall burden is near 9.6%.
“With no income levy, your spending pattern and county property rates decide whether you win or lose.”
| State | Income | Property Tax | Sales Tax | Note |
|---|---|---|---|---|
| Florida | No state income | ~0.79% | ~6.948% | No estate tax; homestead relief helps |
| Wyoming | No state income | ~0.58% | ~5.441% | Low all-in burden (~7.5%) |
| Tennessee | No state income | ~0.55% | ~9.556% | High sales hit for active spenders |
| Texas | No state income | ~1.58% | ~8.201% | Groceries/prescriptions exempt; local variance |
| Nevada | No state income | ~0.49% | ~8.236% | Low property, higher sales; est. burden ~9.6% |
Actionable tip: model your likely spending: heavy withdrawals benefit most from Wyoming or Florida; low-spend homebodies might still prefer Tennessee or Nevada depending on purchases and local rates.
Sales-tax advantage vs. property-tax trade-offs: New Hampshire, Alaska, and South Dakota
I compare sales-driven advantages against homeowner costs across three very different places. This helps you judge retail savings against long-term housing expense.
New Hampshire
New Hampshire offers no statewide sales tax and no general wage income levy. That makes retail spending simple and attractive for active shoppers.
Homeowners face high property taxes (~1.77% of value) and a total tax burden near 9.6%. Historically, interest and dividends drew attention here.
Alaska
Alaska levies no state sales tax, but local add-ons average about 1.821% and vary by municipality. Property taxes run ~1.14%.
Overall burden is low (~4.6%), yet cost of living is high (index ~123.8). I recommend city-level research before committing.
South Dakota
South Dakota combines no income, capital gains, or estate levies with moderate sales (~6.114%) and property around 1.09%.
Notably, an age-70 property deferral delays bills until sale — a useful cash-flow tool for many retirees.
“Zero sales taxes can favor frequent buyers; strong property relief and deferrals can still make a home cheaper over time.”
- Quick takeaway: a homebody gains from New Hampshire’s retail freedom; a homeowner may prefer South Dakota’s balanced profile.
- Action: compare county-level effective property rates and local sales add-ons before choosing.
Surprise winners with income taxes: Pennsylvania and Illinois’ retirement income breaks
You can still win with an income levy if that jurisdiction exempts most retirement payouts. I explain why some taxed places beat no-income-tax options when pensions dominate a plan.
Pennsylvania
In PA, most pension and retirement plan income receives broad exemption. That makes regular benefits and many withdrawals effectively untaxed at the state level.
Illinois
Illinois also exempts a wide range of retirement income and pension payments. Keep in mind: local property taxes can push total costs higher depending on county.
Missouri’s 2025 change
Missouri eliminated state capital gains for the 2025 tax year. That shift helps retirees planning large asset sales after a move.
- I note Social Security moves: MO, KS, and NE stopped taxing benefits in 2024, reshaping Midwest comparisons.
- Model outcomes: compare an IL homeowner with high local levies to a renter in a no-income-tax area.
Sequence withdrawals and Roth conversions around exemptions to minimize lifetime payments and protect assets for heirs.
How each tax type hits retirees differently
I break down how each levy hits common retirement income streams so you can see real dollar effects.
Social Security benefits: most states do not tax these payments. Only nine still do in 2025 (CO, CT, MN, MT, NM, RI, UT, VT, WV), and West Virginia phases out by 2026. When a state taxes benefits, income-based phase-outs often protect moderate earners.
Retirement income and withdrawals: most states treat 401(k) and IRA withdrawals as ordinary income. No-income-tax states avoid that hit entirely, while Illinois and Pennsylvania exempt much retirement income. If you plan large withdrawals, this rule matters most.
Property taxes and relief: homestead exemptions lower taxable value; freezes stop reassessments; circuit breakers refund when taxes exceed a share of income; deferrals delay payment until sale. At a 1.2% effective property tax on a $500,000 home, you pay $6,000 a year—often more than many state income levies.
Sales taxes and daily spending: essentials are often exempt—groceries, prescriptions, medical equipment—so your habits change the impact. Dining out, travel, and big-ticket purchases amplify sales tax exposure.
- Tailor impact: rely mostly on Social Security and you feel social security rules more.
- Withdrawals-heavy: large taxable distributions make income taxation the dominant cost.
- Homeowners: local property relief can swing total annual bills significantly.
“Sequence Roth conversions and use state property programs to reduce lifetime taxes.”
Estate, inheritance, and capital gains: the overlooked pieces of the puzzle
Estate and capital gains rules quietly reshape multi-million-dollar legacies and often dictate move timing.
Federal context: the federal estate exemption sits at $13.99M in 2025. That protects many estates, yet state-level estate rules still matter for high-net-worth plans.
Where estate and inheritance still apply
Twelve states plus DC levy estate taxes, and nine of those have exemptions at or below $5M. Oregon is notable with a $1M exemption.
Six states impose inheritance taxes. Only Maryland levies both an estate and an inheritance charge.
Capital gains treatment and recent shifts
Most places treat capital gains as ordinary income at the state level. Eight states (AR, AZ, HI, MT, NM, ND, SC, WI) offer lower specific rates. Missouri eliminated its state capital gains tax starting in 2025.
Legacy planning implications
If you plan a large sale, moving before the transaction can cut lifetime taxes materially. Align domicile proof: primary residence, voter registration, and physical days in a new jurisdiction.
Use charitable moves: donor-advised funds or qualified charitable distributions work well with low-gain states to preserve value for heirs.
“Confirm current-year exemptions and situs rules: thresholds change, and multi-state assets complicate apportionment.”
| Item | Coverage | Typical exemption | Notes |
|---|---|---|---|
| Federal estate | Applies nationwide | $13.99M (2025) | Protects many estates from federal levy |
| State estate | 12 states + DC | Many ≤ $5M; OR = $1M | Can bite high-net-worth estates despite federal exemption |
| Inheritance | 6 states | Varies by heir | Recipients may face preferential rates or exemptions for family |
| Capital gains | Most states | Often taxed as income; 8 states use lower rates | Missouri removed its gain tax in 2025; plan sale timing accordingly |
Actionable tip: coordinate domicile, sales timing, and charitable strategies. If you keep property across places, review situs rules and how each state apportions income and estate value.
Build your personal A vs. B comparison: a mini-framework
I’ll walk you through a tight, repeatable process to compare two places and see which suits your retirement income mix.
Map your income mix: Social Security, pensions, withdrawals, and work
I start by listing income sources: social security, pension, 401(k)/IRA withdrawals, Roth, dividends, part-time income, and rental streams.
Tag each item as fixed or flexible. Flexible pieces—Roth and timed conversions—let you steer annual taxable income.
Model two spending profiles: homebody vs. go-and-do
Run two scenarios: a “homebody” who buys essentials and a “go-and-do” retiree who travels, dines out, and makes big purchases.
Apply local rules: groceries, prescriptions, and medical equipment are often exempt from sales taxes, while dining and travel amplify them.
Housing-first lens: county-level property rates and senior relief programs
Pull county effective property tax rates and test homestead, circuit breaker, and deferral options.
Circuit breakers cap property bills as a share of income; deferrals delay payment until sale. These tools often change the winner between two states.
| Step | Action | Key outputs |
|---|---|---|
| Income map | List sources and flexibility | Annual taxable income ranges; conversion windows |
| State rules | Mark Social Security treatment, pension exclusions, income tax presence | Net taxable income by place; immediate tax differences |
| Spending profile | Model homebody vs. go-and-do | Sales exposure; annual sales taxes |
| Property impact | Use county rates, homestead, circuit breaker, deferral | 10-year property cost and cash-flow effects |
“Compare annual and lifetime projections side-by-side, then update them yearly as tax rates and your withdrawals change.”
So, which state truly has the lowest retiree tax burden right now?
I’ll cut to the chase: your best pick depends on whether withdrawals, pensions, or daily spending dominate your plan.
Best for withdrawal-heavy retirees
I favor no-income-tax places when large taxable distributions drive your annual income. Wyoming and South Dakota usually win: no income levy, low effective property rates, and manageable sales exposure. Florida and Nevada are close if county property tax and spending patterns align with your plan.
Best for pension-heavy retirees
If pension and annuity payouts make up most of your retirement income, look at states that exempt these streams. Pennsylvania and Illinois often beat no-income-tax rivals once local property costs are added. Verify county rates before you commit.
Best for low spenders and homeowners
Low-spend homebodies can benefit from places with deep senior relief. New Hampshire removes sales hits, but high property tax may offset gains. Also note Tennessee’s very high sales rate can erode savings for active shoppers.
“Run your numbers: senior relief, grocery exemptions, and one-time capital gains rules often decide a close call.”
- Tip: model your likely withdrawals and purchases with the mini-framework to confirm which place wins for you.
- One-time event: Missouri’s 2025 capital gains change matters if you plan a sale soon.
Conclusion
, I boil this down: the answer depends on your mix of withdrawals, pensions, spending, housing, and legacy goals. No single metric wins; you must match rules to dollars.
Quick summary: Wyoming and South Dakota often lead for withdrawal-heavy retirees. Florida and Nevada follow. Pennsylvania and Illinois can top the list when pensions dominate. Check estate and capital gains rules and note Missouri’s 2025 change.
Focus on effective property rates and relief programs, and watch sales exemptions for groceries and prescriptions. Factor in cost of living, healthcare, climate, and proximity to family.
Action: shortlist two or three places, pull county data, model your income and spending, and revisit each year with an advisor to lock a confident move.
