In this article, we will look at 18 most tax-friendly states to retire in 2024. If you want to skip our detailed analysis, head straight to 5 Most Tax-Friendly States to Retire in 2024.
Retiring in Tax-Friendly States
The people who just retired or are about to retire would probably be thinking of the most tax-friendly states. Retirees expect to pay minimum taxes, especially taxes on income, property, and sales taxes. Does the average retiree appear to be increasingly fixated on cost of living concerns? As we mentioned earlier in our article about the best cities to retire for 2024, only a modest 3.2% increase was recorded in the Cost of Living Adjustment (COLA) in 2024 so far, considering the recent trends. However, retirees are worried about the fact that their living expenses have soared against the standardized measure. Almost 64% of baby boomers have reported facing moderate to high levels of stress concerning their retirement savings, as per a study by T. Rowe Price Group, Inc. (NASDAQ:TROW). With the beginning of 2024, the “Peak 65 zone” has also begun, a period that will witness record levels of US citizens reaching the age of 65. Moreover, social security funds are also set to decline by 2034 and the retirement scenario is set to face major shifts and challenges.
The majority of 66% of Peak 65ers are bothered about not having saved enough for retirement, as per a study by the Alliance for Lifetime Income (ALI). Whereas, 79% are more worried about the cost of healthcare. The healthcare cost is projected to increase nearly 7% in 2024, according to the forecasts of the International Foundation of Employee Benefit Health Plans (IFEBP). Healthcare costs will rise due to many factors including chronic health conditions, catastrophic health claims, and increasing prescription drug prices, among many reasons.
The US Federal government generates most of its revenue from personal income taxes followed by social security and medicare taxes and corporate income taxes. In the fiscal year 2024 so far, the US government has generated a total revenue of $1.58 trillion with personal income taxes accounting for 50.96% and corporate income taxes adding 10.70% to the total revenue. Social Security and Medicare taxes accounted for 33.68% of the total revenue in the fiscal year 2024.
For the tax year 2024, the minimum income tax rate is 10% while the maximum income tax rate is 37%, similar to tax year 2023. The minimum income tax rate of 10% is applicable on income of $11,600 or less. The maximum income tax rate of 37% is pertinent to incomes higher than $609,350 and $731,200 for individual taxpayers and married couples filing jointly, respectively.
Service Providers for Retirees
Retirees require financial planning for their future and are looking for the best financial and tax services. T. Rowe Price Group, Inc. (NASDAQ:TROW) and Principal Financial Group, Inc. (NASDAQ:PFG) are two of the leading companies that offer retirement planning services. Intuit Inc. (NASDAQ:INTU) is one of the top tax software services providers in the world.
T. Rowe Price Group, Inc. (NASDAQ:TROW) is one of the top firms that offer a wide range of services including retirement planning. T. Rowe Price Group, Inc. (NASDAQ:TROW) has some of the best retirement plans including essential choice, focus choice, tailored choice, and enterprise choice. Essential choice retirement plan offers up to $5 million in plan assets, while focus choice, tailored choice, and enterprise choice offer from up to $5 million to $50 million, $50 million to $150 million, and more than $150 million in plan assets, respectively. These plans are mainly business-oriented. On February 20, T. Rowe Price Group, Inc.’s (NASDAQ:TROW) Board of Directors announced that the firm’s non-executive chair, William J. Stromberg, and chair of the Nominating and Corporate Governance Committee, Dr. Freeman A. Hrabowski will retire from the Board on May 7, 2024. The new chair of the Board will be Robert W. Sharps, the current CEO and president. Sharps will continue to be the CEO after the new appointment.
Principal Financial Group, Inc. (NASDAQ:PFG) is a leading financial investment management and insurance company. Principal Financial Group, Inc. (NASDAQ:PFG) also offers various plans including insurance, investment, and retirement. The company helps you connect with a financial professional planner who guides you with your financial plans. A retired person can check their retirement readiness through the company's retirement wellness planner. On February 12, Principal Financial Group, Inc. (NASDAQ:PFG) announced its earnings for the fourth quarter of 2023. The company posted earnings per share of $1.83 in Q4 2023, beating consensus estimates by $0.14. The revenue came in at $4.24 billion, surpassing estimates by $671.28 million.
Intuit Inc. (NASDAQ:INTU) is a top tax service provider that owns software including Quickbooks, Credit Karma, and TurboTax, among others. The company through its tax service software makes it easy for individuals and businesses to track their tax records and prepare their tax statements for the upcoming tax season. On February 21, Intuit Inc. (NASDAQ:INTU) announced that it is launching QuickBooks Solopreneur, a new product that will fulfill the demands of one-person businesses. Through QuickBooks Solopreneur, the users will be able to manage books all in one place, make tax time less taxing, and utilize tools and insights to drive business decisions.
These were a few companies that offer different services to retirees and other individuals and businesses. Now, let’s take a look at the most tax-friendly states to retire in 2024.
18 Most Tax-Friendly States to Retire in 2024
18 Most Tax-Friendly States to Retire in 2024
Our Methodology
To compile our list of the most tax-friendly states to retire in 2024, we shortlisted the states with the lowest personal income tax, property tax, and sales tax in 2024. We have used personal income tax as the primary metric to rank the most tax-friendly states to retire in 2024. The list is ranked in the ascending order of personal income tax rate. For the states with the same personal income tax, we have used property tax as a tie-break, and for the states with similar property tax, we used sales tax as a tie-breaker. The property taxes are paid as a percentage of owner-occupied housing value. We have used the top individual income tax rates. The data for all the tax rates is collected from the Tax Foundation.
By the way, Insider Monkey is an investing website that tracks the movements of corporate insiders and hedge funds. By using different consensus approaches, we identify the best stock picks of more than 900 hedge funds investing in US stocks. The top 10 consensus stock picks of hedge funds outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). Whether you are a beginner investor or a professional one looking for the best stocks to buy, you can benefit from the wisdom of hedge funds and corporate insiders.
18 Most Tax-Friendly States to Retire in 2024
18. Oregon
Personal Income Tax Rate: 9.90%
Property Tax Rate: 0.93%
State Sales Tax Rate: 0%
Oregon has a top individual income tax rate of 9.90% and a 0.93% property tax paid as a percentage of owner-occupied housing value. Oregon is placed 18th among the most tax-friendly states to retire in 2024.
17. Montana
Personal Income Tax Rate: 6.75%
Property Tax Rate: 0.74%
State Sales Tax Rate: 0%
Montana has a top individual income tax rate of 6.75%. Montana charges a 0.74% property tax paid as a percentage of owner-occupied housing value.
16. Delaware
Personal Income Tax Rate: 6.60%
Property Tax Rate: 0.61%
State Sales Tax Rate: 0%
Delaware is one of the most tax-friendly states to retire in 2024 with zero sales tax and a top personal income tax rate of 6.60%.
15. Colorado
Personal Income Tax Rate: 4.40%
State Sales Tax Rate: 2.90%
Property Tax Rate: 0.55%
Colorado charges a sales tax rate of 2.90% and a 0.55% property tax paid as a percentage of owner-occupied housing value. With a top individual income tax rate of 4.40%, Colorado is one of the most tax-friendly states to retire in 2024.
14. New Hampshire
Personal Income Tax Rate: 4%
Property Tax Rate: 1.93%
State Sales Tax Rate: 0%
New Hampshire has zero sales tax and charges a 1.93% property tax paid as a percentage of owner-occupied housing value. With a top personal income tax rate of 4%, New Hampshire ranks 14th among the most tax-friendly states to retire in 2024.
13. Ohio
Personal Income Tax Rate: 3.99%
Property Tax Rate: 1.59%
State Sales Tax Rate: 5.75%
Ohio has a top individual income tax with a rate of 3.99% and a sales tax rate of 5.75%. Ohio ranks 13th among the most tax-friendly states to retire in 2024.
12. Indiana
Personal Income Tax Rate: 3.15%
Property Tax Rate: 0.84%
State Sales Tax Rate: 7%
Indiana charges a top individual income tax rate of 3.15%. Indiana has a sales tax of 7% and a 0.84% property tax paid as a percentage of owner-occupied housing value. Indiana ranks among the most tax-friendly states to retire in 2024.
11. Pennsylvania
Personal Income Tax Rate: 3.07%
Property Tax Rate: 1.49%
State Sales Tax Rate: 6%
Pennsylvania has a top individual income tax rate of 3.07%. Pennsylvania charges a sales tax rate of 6% and a 1.49% property tax paid as a percentage of owner-occupied housing value.
10. North Dakota
Personal Income Tax Rate: 2.90%
Property Tax Rate: 0.98%
State Sales Tax Rate: 5%
North Dakota has a top individual income tax rate of 2.90% and a sales tax rate of 5%. North Dakota ranks 10th among the most tax-friendly states to retire in 2024.
9. Arizona
Personal Income Tax Rate: 2.50%
Property Tax Rate: 0.63%
State Sales Tax Rate: 5.60%
Arizona has a top individual income tax rate of 2.50% and a sales tax rate of 5.60%. Arizona charges a 0.63% property tax paid as a percentage of owner-occupied housing value.
8. Texas
Personal Income Tax Rate: 0%
Property Tax Rate: 1.68%
State Sales Tax Rate: 6.25%
Texas has a sales tax rate of 6.25% and charges a 1.68% property tax paid as a percentage of owner-occupied housing value. Texas ranks eighth among the most tax-friendly states to retire in 2024.
7. South Dakota
Personal Income Tax Rate: 0%
Property Tax Rate: 1.17%
State Sales Tax Rate: 4.50%
South Dakota is one of the most tax-friendly states to retire in 2024 with zero personal income tax and a 4.50% sales tax rate.
6. Alaska
Personal Income Tax Rate: 0%
Property Tax Rate: 1.04%
State Sales Tax Rate: 0%
Alaska is one of the most tax-friendly states to retire in 2024 with zero personal income and sales tax. Alaska charges a 1.04% property tax paid as a percentage of owner-occupied housing value.
