Looking for a great place to retire? Or, wondering if the state where you live is too expensive? Property values, cost of living, and lifestyle issues are all important considerations when figuring out where to live.
However, don’t forget to think about state taxes. Depending on your profile, some states are more tax-friendly for retirement than others. Explore more about retirement taxes below, discover the best states for taxes, and review the income and sales tax rates in all 50 states.
What Are the Different Kinds of Taxes Imposed by States
Not only are income tax rates different in every state, but different locations have different kinds of taxes. Each state taxes with all or a subset of the following types of taxes:
- State Income Tax: Income tax is usually the biggest concern.
- Interest and Dividends: Some states charge little in income taxes, but more for interest and dividends on assets.
- Sales Taxes: Sales taxes are usually made up of a combination of state sales tax and local sales tax.
- Property Taxes: Property taxes – in addition to property values – can be dramatically different depending on your location. You will need to consider the property tax rate as well as the cost of the property.
- Estate Taxes: Estate taxes also vary greatly from state to state, but most states do not tax your financial legacy.
- Taxes on Social Security and Pensions: Very few states tax Social Security and pensions.
Should You Worry About State Taxes in Retirement?
State taxes can matter in retirement, but they’re rarely the whole story. Some states tax income heavily, while others have no income tax at all. A handful also tax Social Security, pensions, or withdrawals from retirement accounts differently.
These differences can affect your long-term spending power, especially if a large portion of your retirement income comes from taxable sources like traditional IRA withdrawals or investment income. For retirees with substantial assets or ongoing earnings, choosing a tax-friendly state can make a noticeable difference over time.
However, taxes are only one part of the retirement equation. Housing costs, healthcare access, insurance, climate risks, and overall cost of living often have a much larger impact on your financial security and quality of life. Many retirees find that moving solely for tax reasons doesn’t always deliver the expected savings once these other factors are considered. The best approach is to evaluate taxes as part of your overall financial plan—looking at how different locations affect your spending, income, and lifestyle together, not in isolation.
Furthermore, your ideal state for retirement taxes will also depend on your personal financial situation and the services you expect to use.
So, Which States Have the Highest and Lowest Overall Tax Burden?
U.S. News and World Report calculated the tax burden for all 50 states. This measure reflects total state and local tax revenues – from income taxes, sales taxes, and more – as a share of personal income, based on tax revenue data from the U.S. Census Bureau’s Annual Survey of State and Local Government Finances and personal income data from the Bureau of Economic Analysis (BEA).
NOTE: Other analyses draw different conclusions about the lowest tax burden states, pointing to just how hard this analysis can be to calculate.
States U.S. News Ranks with the Lowest Overall Tax Burden
- South Dakota
- Florida
- New Hampshire
- Tennessee
- Wyoming
The Tax Foundation ranks the 10 best states (states with the lowest state taxes) as Wyoming, South Dakota, New Hampshire, Alaska, Florida, Montana, Texas, Tennessee, Idaho, and Indiana.
States U.S. News Ranks with the Highest Overall Tax Burden
- New York
- Hawaii
- New Mexico
- California
- Vermont
The Tax Foundation reports that the following states have the highest overall tax burden: Hawaii, Vermont, Massachusetts, Minnesota, Washington, Maryland, Connecticut, California, New Jersey, and New York.
Income Taxes by State
According to the Tax Foundation, at the start of 2026, seven states have zero income tax: Nevada, Wyoming, South Dakota, Texas, Florida, New Hampshire, and Tennessee. And, low rates can be found in Arizona (2.5%), North Dakota (2.5%), Ohio (2.75%), Indiana (2.95%), and Louisiana (3%).
California has the highest income tax rate at 13.3%.
Find your state’s income tax rate on the map below:
Sales Taxes by State
The Tax Foundation also assesses sales taxes by state. Forty-five states levy a state-level sales tax, and 38 states allow local sales taxes (including Alaska, which has no statewide tax).
The five states with the highest average combined state and local sales tax rates are Louisiana (10.11%), Tennessee (9.61%), Washington (9.51%), Arkansas (9.46%), and Alabama (9.46%).
Find your state’s income tax rate on the map below:
Property Tax by State
The latest available data from the Tax Foundation was published in 2025 with 2023 data.
State Estate Taxes
While many people worry about estate taxes, only 12 states and the District of Columbia impose estate taxes, while five states levy inheritance taxes. Maryland is the only state that imposes both an estate and an inheritance tax.
Those that have estate taxes include: Washington, Hawaii, Vermont, Minnesota, New York, Connecticut, Oregon, Illinois, Maine, Maryland, Rhode Island, and Massachusetts.
Inheritance taxes are collected in Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
State Taxes on Social Security and Pensions
Social Security: Not all states tax Social Security, and for those that do, there are often exemptions or ways to reduce or eliminate the tax. You can get a complete rundown of Social Security state taxation here.
Pensions: According to Kiplinger, the following states do NOT tax pensions: Alabama, Alaska, Florida, Hawaii, Illinois, Michigan, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.
How to Estimate and Strategize Your Lifetime State and Federal Retirement Taxes
Filing your taxes for one year can feel overwhelming and unpleasant. Just thinking about tax planning for all of your lifetime might seem an impossible feat.
However, the Boldin Retirement Planner makes it easy to forecast taxes and optimize your retirement income, no matter where you live.
For users of the Basic Planner (the free version), income taxes are modeled using a blended state and federal rate.
For PlannerPlus subscribers, the income tax model is more accurate, detailed, and transparent. You can:
- See annual estimates for federal, state, and capital gains taxes
- Review annual taxable income and realized capital gains
- Specify itemized deductions and property taxes.
Log in to see your projected lifetime taxes and strategize how to reduce this burden.
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