Retirees have special concerns when they evaluate state tax policies. Your mortgage might be paid off, but how bad are the property taxes and how generous are the property tax breaks for seniors? Our Social Security benefits taxed? What about other forms of retirement income including IRAs and pensions? Does the state impose its own estate tax that might subtract from your legacy? The answers will determine which state border you decide to settle on in retirement. These 10 states impose the highest taxes on retirees, according to Kiplinger's exclusive 2016 analysis of state taxes. Three of them treat Social Security benefits just like Uncle Sam does, taxing as much as 85% of your benefits. Exemptions for other types of retirement income are limited or nonexistent. Property taxes are high also.
10. Utah - the Beehive State joins the list of the least tax friendly states replacing Rhode Island. Utah offers few tax breaks for retirees. Income from IRAs, 401(k)s, pensions and Social Security benefits is taxable at the 5% flat tax rate. The state offers a retirement income tax credit of 450 per person. The credit is phased out at 2.5 cents per dollar of modified adjusted gross income over $16,000 for married individuals filing separately, $25,000 for singles and $32,000 for married people filing jointly. The property taxes are modest and the median property tax of the states median home value is $223,000 and tax is $1480.
9. New York - state income tax is 4% and 8.82% greater than $1070 individual or $2140 joint. The average state and local sales tax 8.49% there is a state tax but no inheritance tax. New York doesn't tax Social Security benefits or public pensions. It also excludes, as much is $20,000 for private pensions out of state government pensions, IRAs and distributions from employer-sponsored retirement plans. New York allows localities to impose an additional income tax; the average local levy is 2.11% per the tax foundation. The Empire State has also some of the highest property and sales tax rates in the US. Food and prescription drugs are exempt from state sales tax as our greens fees, health club memberships and most arts and entertainment's tickets. The median property tax on the states median home value of $279,100 is $4703, the 10th highest rate in the US. New York has an estate tax, a law that took effect in 2015, which will make it less onerous. Estate succeeding $4,187,500 are subject to estate tax in fiscal year 2016 to 2017, with the top rate of 16%. The exemption will rise by $1,062,500 April 1 until it reaches $5,250,000 in 2017. Starting January 1, 2019 it'll be indexed to the federal exemption. If you're close to that threshold get a good estate lawyer because New York has what's known as a cliff tax. If the value of your estate is more than 15% of the current exemption, the entire estate will be subject to state estate tax.
8. New Jersey - state income taxes 1.4% on as much is $20,000 of taxable income and 8.97% on taxable income greater than $500,000. The average state and local sales tax is 6.97% and there is an estate and inheritance tax. The garden states property taxes are the highest in the US. The median property tax in the states median home value of $313,200 is $7452. Social Security benefits, military pensions and other retirement income is excluded from state taxes, other retirement income can be taxed as high as 8.97%. The New Jersey allows localities to impose their own income tax and the average local levy is 0.5% according to the tax foundation. Residents 62 or older may exclude as much as $15,000 of retirement income, including pensions, annuities and IRA withdrawals, if their gross income is hundred thousand dollars or less. Those amounts will gradually rise by 2020. Joint filers can exclude up to $100,000, single filers up to $75,000 and married filing separately up to $50,000. New Jersey is one of a couple of states that impose an inheritance and estate tax. Any estate taxes levied before the estate is distributed and inheritance taxes paid by the beneficiaries. In general, close relatives are excluded from the inheritance tax, others face tax rates ranging from 11% to 16% on inheritances of $500 or more. Estates valued at more than $675,000 are subject to estate taxes of up to 16%. Assess and go to a spouse or partner are exempt. The threshold will rise to $2 million on January 1, 2017 and the estate tax will disappear completely in 2018.
7. Nebraska - state income tax is 2.46% and 6.84% on taxable income greater than $29,590 individual or $59,180 joint. The average state and local tax 6.87% and there is no estate tax but there is inheritance tax. The Cornhusker state taxes Social Security benefits, but new rules that took effect in 2015 will exempt some of that income from state taxes. Residents can subtract Social Security income included in federal adjusted gross income if their adjusted gross income is $58,000 or less for married couples filing jointly or $43,000 for single residence. Nebraska taxes most other retirement income. The state's top income tax rate kicks in quickly. It applies to taxable income above $29,590 for single and $59,180 for married. Food and prescription drugs are exempt from local sales taxes. Local jurisdictions can add an additional 2% to state rate. The median property tax on the states median home value of $133,800 is $2474 the seventh highest property tax rate in the US. Nebraska's inheritance taxes a local tax, ranging from 1 to 18%.
6. California - state income tax is 1% on taxable income is much as $7850 individual or $15,700 joint. Taxes are 13.3% on taxable income greater than 1 million per individual and $1,052,886 joint. The average state and local sales tax is 8.48% and there is no estate tax and no inheritance tax. California exempts Social Security benefits but all other forms of retirement income are fully taxed. That's significant, because residents of the Golden State are the third-highest effective income tax rate in the US. Early retirees who take withdrawals from their retirement plans before age 59 1/2 pay at 2.5% state penalty on top of the 10% penalty imposed by the IRS. At 7.5% state sales taxes are the highest in the country and local taxes can push the combined rate as high as 10%. The median property tax in the states median home value of $412,700 is $3160.
5. Montana - state income taxes 1% on $2900 or 6.9% on taxable income greater than $17,400. There is no average state and local sales tax. There is no estate tax or inheritance tax. You won't pay sales tax to shop in the Treasure State but that may be small comfort when you get your state tax bill. Montana taxes most forms of retirement income including Social Security benefits and is 6.9% top rate kicks in once your taxable income exceeds a modest $17,400. Montana allows a pension and annuity income exemption of as much as $3980 per person if federal adjusted gross income is $35,180 or less. If both spouses are receiving retirement income, each spouse can take up to the maximum exemption if the couple falls under the income threshold. Montana also permits filers to deduct some of their federal income tax. The median property tax on the states median home value of $196,800 is $1650 below average for the US.
4. Oregon - state income taxes 5% on 3003 or $50 individual and $6700 joint. It is 9.9% on taxable income greater than $125,000 individual or $250,000 joint. There is no average state and local sales tax. There is estate tax but no inheritance tax. Oregon does attack Social Security benefits; most other retirement income is taxed at your top income tax rate. What makes matters worse the localities contact on an additional 2% of income taxes. The Beaver state allows residents to subtract as much a $6350 of their current year's federal income tax liability, after credits. There is also retirement income credit for seniors with certain income restrictions. The bright spot in Oregon's tax picture is there is no sales tax. You can buy anything in the state and never pay a penny in sales tax. The median property tax on the states median home value of $239,800 is $2570. Oregon's estate tax applies to estates valued at more than 1,000,001 of the lowest thresholds nationwide. The top rate is 16%.
3. Minnesota - state income taxes 5.35% on taxable income less than $25,180 and $36,820 joint. There is 9.85% on taxable income greater than $155,650 individual or $259,420 joint. The average date and local taxes 7.27% and there is estate tax but no inheritance tax. The North Star state offers cold comfort on the tax front to retirees. Social Security income is taxed to the same extent as it is on your federal return. Pensions are taxable regardless of whether they are military, government or private pensions. Income tax rates and sales tax rates are high. Food, clothing, and prescription drugs are exempt from state sales tax. The median property tax on the states median home value of $188,300 is $2148, average for the US. Minnesota's estate tax hit states valued at just 1.6 million or more. The maximum estate tax rate is 16%.
2. Connecticut - state income tax 3% on taxable income as much as $10,000 per individual and $20,000 joint. 6.99% tax taxable income greater than $500,000 per individual or $1 million joint. The average state and local sales tax is 6.35% for most items and 7% for certain luxury items. There is estate tax but no inheritance tax. The Constitution state is a tax nightmare for many retirees. The real estate taxes are the fourth highest in the nation. Median property tax in the states median home value of $267,200 is $5369. Most types of retirement income are taxed along with a portion of Social Security benefits for taxpayers above certain income thresholds. They are exempt for individuals with less than $50,000 retirement plans, pensions etc. are fully taxed. 50% of federally taxable military income is exempt. There are no local sales taxes in Connecticut, so you'll pay only the statewide rate of 6.35% on your purchases. The state faces massive pension liabilities that could force it to raise taxes even higher. Connecticut imposes an estate tax on estates valued at $2 million or more at a progressive rate starting at 7.2% the rate rises to a maximum of 12% for an estate valued above $10.1 million Connecticut is the only state with a gift tax that applies to real and tangible personal property in Connecticut and intangible personal property anywhere for permanent residents.
1. Vermont - state income tax is 3.55% on taxable income as much as $39,900 individual and $69,900 joint. There is an 8.95% on taxable income greater than $415,600 individual and $421,900 joint. The average state and local sales taxes 6.17% estate tax but no inheritance tax. The Green Mountain State doesn't coddle retirees. It has a steep top income tax rate, and most retirement income is taxed. Vermont treat Social Security benefits the same way the federal government does which means as much as 85% of Vermont limits deductions to $15,000 for single residents and $31,500 for married couples. If your income is $1 million that can cost you $5000 in additional state taxes every year. Local jurisdictions can add 1% to the state sales tax. Food, clothing common drugs are exempt. But you'll pay 9% tax on prepared foods, restaurant meals and lodging and 10% if you order wine or beer in a restaurant. The median property tax on the states median home value of $214,6 is, the eighth highest property tax rate in the U. Eligible Vermont residents can make a claim for rebate of school and municipal property taxes if their household income does not exceed a certain level. Like many of the states on this list, Vermont imposes its own estate tax on estates that exceed 2.75 million a relatively low threshold that ensnares more states in the federal death tax. The maximum estate tax rate is 16%.