21. Maryland
- State’s ranking: Not tax-friendly 🙁
- State income tax: between 2 percent (on less than $1,000 of taxable income) and 5.75 percent (on more than $250,000 of taxable income for those who file as individuals; more than $300,000 for those who file jointly)
- The average property tax: $1,125 in taxes per $100,000 of assessed home value
- State sales tax: 6 percent
- Estate tax/inheritance tax: Yes/Yes
As most of the states listed here, the Old Line State doesn’t tax Social Security benefits either. Also, in case you’re wondering who qualifies for an exclusion of up to $30,600 on distributions from 403(b), 457, and 401(k) plans, as well as the income sources that come from both private and public pensions, note that only those who are 65 or older or disabled persons can take advantage of this type of exclusion.
However, it’s not all milk and honey: if you have other income sources, they will be taxed at a much higher rate.
22. Massachusetts
- State’s ranking: Not tax-friendly 🙁
- State income tax: Flat 5.1 percent
- The average property tax: $1,294 in taxes per $100,000 of assessed home value
- State sales tax: 6.25 percent
- Estate tax/inheritance tax: Yes/No
Retired residents can benefit from some pretty awesome breaks. The Bay State doesn’t tax Social Security benefits, and government employee pensions aren’t taxed either; however, apart from those two, all other income sources are taxed at a 5.1 percent rate.
When referring to property taxes, Massachusetts is not joking: they are really high, but, fortunately, for those who own a home and are 65 or older, the Bay State offers the possibility of a refundable tax credit.
Its estate tax rates are between 0.8 percent and 16 percent, the latter applying to estates that exceed $10,040,000.
23. Michigan
- State’s ranking: Not tax-friendly 🙁
- State income tax: Flat 4.25 percent
- The average property tax: $1,729 in taxes per $100,000 of assessed home value
- State sales tax: 6 percent
- Estate tax/inheritance tax: No/No
In the last few years, Michigan has become a not-so-friendly state for those who want to retire there. From the beginning of 2012, seniors who are born after 1945 are facing the state income tax. And even if it is a flat income tax (4.25 percent), some cities have their own income taxes. Detroit, for example, has a rate income tax of 2.4 percent. Property taxes are also high in the Great Lakes State.
24. Minnesota
- State’s ranking: Least tax-friendly 🙁
- State income tax: between 5.35 percent (on less than $25,890 of taxable income for residents who file as individuals and on less than $37,850 for those who file jointly) and 9.85 percent (on more than $160,020 of taxable income for those who file individually and on more than $266,700 for joint filers)
- The average property tax: $1,224 in taxes per $100,000 of assessed home value
- The average state and local sales tax: 7.43 percent
- Estate tax/inheritance tax: Yes/No
Your Social Security income is taxable if you live in the North Star State, and it is actually taxed the same way as your federal return. Retirees with taxable Social Security income are able to deduct up to $5,150 if they file jointly; up to $4,020 if they file individually, and up to $2,575 for those who are married but file a different return.
In Minnesota, almost all pensions are taxable, except military ones. If you own an IRA or 401(k) account, your distributions from them are also taxable. However, some taxpayers are more fortunate than others: Those who are 65 and older are entitled to deduct up to $9,600 when they file individually and $12,000 when they file jointly.
But, you should keep in mind that this excellent tax break isn’t for those who make more than $33,700 as single filers and $42,000 as joint filers.
25. Mississippi
- State’s ranking: Most tax-friendly 🙂
- State income tax: between 3 percent (on taxable income of $1,000 or more) and 5 percent (on more than $10,000 of taxable income)
- The average property tax: $862 in taxes per $100,000 of assessed home value
- The average state and local sales tax: 7.07 percent
- Estate tax/inheritance tax: No/No
The tax picture in Mississippi is excellent for retirees. Here, Social Security benefits are exempt from state income tax and it’s not just that: all types of retirement income sources are exempt (withdrawals from 401(k) and IRAs plans, or both private and public pensions to name a few).
However, when it comes to its sales tax, the picture is foggy. The Magnolia State sales tax rate is at 7 percent, which represents the second-highest in the nation. However, property taxes and the sales tax on groceries are affordable, making Mississippi a popular state for seniors.
