10 Most Tax-Friendly States For Retired Taxpayers

2nd Best: Hawaii

The downside: Hawaii residents, especially those in higher income brackets, paid more than double the national average in state taxes last year. For example, if your income exceeds $200,000 (or $400,000 for joint filers) it’s subject to a hefty 11% income tax.

Estate taxes start at 10% for properties with a value of $5.49 million and more. If you’re part of middle-income earners, Hawaii might not be suitable for you because of its exorbitant housing prices.

Why it’s still a good place to move: For starters, there’s nothing like spending your retirement years in a tropical paradise like Hawaii. Secondly, Hawaii boasts very low property taxes, with a median of just $280 per $100,000 in assessed home value.

What’s more, the sales tax in Hawaii does not exceed 4%, with the combined state and local average tax rate going as high as 4.5% in certain municipalities. Although groceries are taxed, Social Security benefits and employer contributions to pensions and 401(k) plans are exempt from taxes.

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