It's the only state in the region without a general income tax. Instead, the state imposes a tax on interest and dividends although this tax is being phased-out and will be repealed in With no broad income tax , you can completely avoid state tax on payments from your k plan, IRA or pension if you retire to New Hampshire. Inheritance and Estate Taxes: New Hampshire doesn't collect inheritance or estate taxes.
Retirement Income: As Ben Franklin once said, "a penny saved is a penny earned. Payments from a k plan or IRA after retiring also avoid state taxation again, except in early retirement.
Income Tax Range: Pennsylvania has a low, flat income tax rate of 3. However, municipalities and school districts can tax your income, too. Inheritance and Estate Taxes: Pennsylvania does have an inheritance tax that ranges from 4. Retirement Income: If you like wide-open spaces, South Dakota might be the place for you.
With no income tax and no tax on k , IRA or pension income, it's also a great place to stretch your retirement savings. Inheritance and Estate Taxes: Like most states, South Dakota doesn't impose an inheritance or estate tax. Retirement Income: Tennessee's income tax is very limited; it only covers interest and dividends. Social Security Benefits: Tennessee retirees also collect Social Security benefits without paying state tax on them.
Plus, all your income is exempt from tax if you or your spouse for joint returns are at least years old. Inheritance and Estate Taxes: Tennessee doesn't have an inheritance or estate tax. Retirement Income: Don't mess with Texas … and Texas won't mess with your retirement income.
Because the Lone Star State doesn't have a personal income tax , it will keep its hands off your k , IRA and pension income, too. Social Security Benefits: Of course, because there's no income tax, there's no tax on your Social Security benefits in Texas, either.
So, feel free to spend some of that money on a ten-gallon hot or a set of spurs instead of state taxes. Inheritance and Estate Taxes: There are no inheritance or estate taxes in Texas. Retirement Income: If you like a good cup of coffee, consider retiring in Washington State.
If you're not sold on the coffee, maybe you'll think again when you learn that the Evergreen State doesn't have an income tax. That means none of your k , IRA or pension income is going to take a state tax hit. Income Tax Range: Not applicable no income tax. For more information on increasing withholding tax, making estimated tax payments , and the consequences of not withholding the proper amount of tax, refer to Publication , Tax Withholding and Estimated Tax.
Special rules apply to certain nonperiodic payments from qualified retirement plans. For information on the special tax treatment of lump-sum distributions, refer to Topic No.
You can avoid this withholding by choosing the direct rollover option. A distribution sent to you in the form of a check payable to the receiving plan or IRA isn't subject to withholding. For more information on rollovers, refer to Topic No. More In Help. Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no investment in the contract sometimes referred to as "cost" or "basis" due to any of the following situations: You didn't contribute anything or aren't considered to have contributed anything for your pension or annuity Your employer didn't withhold contributions from your salary, or You received all of your contributions your investment in the contract tax-free in prior years Partially Taxable Payments If you contributed after-tax dollars to your pension or annuity, your pension payments are partially taxable.
The additional tax generally doesn't apply to any part of a distribution that's tax-free or to any of the following types of distributions: Distributions made as a part of a series of substantially equal periodic payments that begins after your separation from service.
Distributions made because you're totally and permanently disabled. Distributions made on or after the death of the plan participant or contract holder. Alabama, for example, doesn't tax pensions or Social Security benefits, but it will tax distributions from a k plan. Bottom line: Make sure you check out a state's overall tax environment for retirees before relocating there for your golden years.
Take a look at the 14 states that don't tax pension income states are listed alphabetically. It could end up saving you thousands of dollars if you're thinking of moving to a new state when you retire.
Pensions: Retiring to Alabama can be a smart move if you'll be relying heavily on a pension in your golden years. If you're retiring from the private sector, Alabama won't tax your pension income if it comes from a defined benefit retirement plan.
The state also exempts military retirement pay and income from a long list of government pensions. Distributions from traditional IRAs and k plans are taxed as ordinary income although certain distributions may only be partially taxable. That's another big plus for retirees in the state. Pensions: Up in Alaska, you don't have to pay income tax on your pension—or on any income, for that matter. It's one of a handful of states with no income tax. Alaska doesn't tax these funds.
Pensions: If you're looking for a warmer climate, there's always Florida. But there's more to like as a retiree than just the palm trees and sandy beaches. It's well known that the Sunshine State doesn't have an income tax , so your pension won't be taxed there. There are no state taxes on distributions from these retirement savings plans. Pensions: Feel like taking up surfing in your later years? If so, the Aloha State might be the place for you to retire. Want to avoid taxes on your pension?
Hawaii can help you out with that, too. Retirement distributions from a private or public pension plan are tax-free in Hawaii—that is, as long as you didn't make contributions to the plan. You will be taxed on any portion of your pension income attributable to employee contributions you made. However, if your employer made matching contributions to your k plan, an additional state deduction may be available for the employer-funded portion of distributions from the plan.
In addition, if a lump-sum distribution from an otherwise tax-free pension plan is rolled over into an IRA, distributions out of the rollover IRA are tax-free as well. Income Tax Range: For income that is taxed, the lowest Hawaii tax rate is 1.
Pensions: The Prairie State completely exempts private pension income from tax as long as it's from a qualified employee benefit plan. You won't pay tax on payments from government or military pensions, either. Distributions from a k plan are tax-free if the plan is a qualified employee benefit plan.
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