State Tax on Retirement Income

Do you pay State Income Tax on your Retirement Income?

Here in Michigan, our Social Security payments, and public pension payments are tax exempt.... so if you retired from Federal, State, or local government, you pay no taxes on your Social Security and pension income.

In Florida and Nevada (think Las Vegas!), there is no state tax for income or retirement income.

In Arizona, public pensions are exempt but pensions from other states are taxable at 2.59 - 4.54% depending on your income... so if you move from Michigan to Arizona for your retirement years, you pay state taxes where you would have been exempt elsewhere. That won't change your retirement plans, but is one more factor to look at.

Many retirees move to a different location with no consideration given to taxes... but if you'd like to check this out first, you can think ahead and know what you are getting into. Even if you intend to remain in your home, check out your state so that there are no surprises at retirement time.

This website has a fantastic, state by state, comparison on State Taxes. If you are looking at moving, open a text file, cut and paste the few states you are thinking about into separate pages, print them.. then you can do a side by side comparison.

Do retirees really care about state income tax? You bet! The Wall Street Journal reported that United Van Lines found that the states without no income tax are having more new retirees moving in.

States with no State tax on retirement income are:

• Florida
• Alaska
• Nevada
• New Hampshire (there is an interest/dividends tax)
• South Dakota
• Tennessee (there is an interest/dividends tax)
• Texas
• Washington
• Wyoming