Top 10 Tax Friendly States in United State

As of 2024, several states in the U.S. are recognized for their tax-friendliness, particularly for retirees. Some of these states include:

  1. South Dakota: Offers no state income tax and has one of the lowest average state and local sales tax rates. The state also does not have an estate tax or inheritance tax, making it financially attractive​​.
  2. Pennsylvania: Features a flat state income tax rate and does not tax Social Security benefits, pensions, or 401(k)/IRA payments, which is beneficial for retirees. However, it has a higher than average median property tax rate​​.
  3. Alaska: Known for not having a state sales tax or individual income tax. The vast state also offers unique living experiences due to its natural beauty and remote locations​​.
  4. Wyoming: Like Alaska, Wyoming also does not have a state income tax. Its low population density and protected land areas offer a serene living environment​​​​.
  5. Montana: This state is notable for its low population density and scenic beauty, including areas like Yellowstone National Park. Montana’s tax policies are also favorable to residents​​.
  6. New Mexico: Although more populated than some of the other states on this list, New Mexico is known for its beauty and has tax policies that are generally friendly towards its residents​​.
  7. Idaho: Offers vast, peaceful landscapes and is relatively tax-friendly, making it a suitable choice for those seeking a quieter lifestyle​​.
  8. Nebraska: While Nebraska does tax retirement income, it has a special program for senior homeowners that lowers property tax, making it a viable option for retirees​​.
  9. Minnesota: Known for its long winters, Minnesota taxes all forms of retirement income but offers deductions for Social Security benefit income for those over 65 who meet certain income thresholds​​.
  10. Illinois: The state has a flat income tax rate and does not tax Social Security benefits or income from some retirement plans. However, it’s noted for having one of the highest property taxes in the country​​.

These states are chosen based on factors like the absence of state income tax, favorable sales tax rates, and exemptions on retirement income. When considering relocation for tax purposes, it’s essential to consider these factors alongside other quality of life aspects such as climate, cost of living, and available amenities.

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