Illinois
Ah, the Prairie State where you can rest assured because your private pension income will be exempt from taxes as long as it’s from a qualified employee benefit plan. Government or military pensions? Those aren’t taxed either.
You also won’t be taxed on your Social Security benefits and you only have to worry about your 401(k) plan if it’s not a qualified employee benefit plan. IRA distributions aren’t taxed either. So, as you can clearly see, Illinois is a very tax-friendly state.
Here, the income tax rate is also flat, sitting at 4.95%.
Mississippi
Retirees have a lot to look forward to if they choose to spend their golden years in Mississippi. Notably, they’ll have a lot more money to spend on whatever they wish because the Magnolia State is one of the most tax-friendly states in the U.S.
So long as you don’t plan to retire early, meaning before you turn 59½, your private or government pension will not be taxed. Guess what? The same goes for IRA and 401(k) distributions. Those who wish to retire early for one reason or another might want to keep this in mind.
Your Social Security benefits won’t be taxed no matter what, either.
As of 2020 a 3% tax rate applies to a taxable income of $3,000 or more compared to 2019’s $2,000. The plan is to apply a 3% rate to a taxable income of $4,000 or more in 2021, whereas in 2022 the lowest tax rate will be 4%, applicable to taxable income from $5,001 to $10,000. A little bit confusing, we know! Just keep in mind that the state is trying to gradually phase out the 3% rate.
As for the top rate of 5%, its applicable to taxable income of more than $10,000.
We want to hear from our readers that currently live or plan to live in Mississippi! What are your thoughts on the changes made to the lower tax rate?
