Senior State Benefits

A number of states offer tax breaks to seniors. For example, 27 states exempt Social Security from state income taxes (source: CCH). Other states exempt part of these payments. Still other states provide property tax breaks for seniors.

States That Exempt All Social Security Payments from Taxes

Alabama	Kentucky	North Carolina
Arizona	Louisiana	Ohio
Arkansas	Maine	Oklahoma
California	Maryland	Oregon
Delaware	Massachusetts	Pennsylvania
Georgia	Michigan	South Carolina
Hawaii	Mississippi	Virginia
Illinois	New Jersey	Wisconsin
Indiana	New York	District of Columbia
Iowa

[1] No–Income Tax States

The number is really higher than 27 because the following seven states do not have an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. In New Hampshire and Tennessee, only dividends and interest are taxed.

[2] Partial Property Tax Relief

There are 40 states with homestead exemptions that reduce the assessed value of a home, thereby reducing the property tax. Most states include a special exemption for seniors over a certain age who meet income requirements. States with the lowest property taxes are Louisiana, Hawaii, Alabama, D.C., Delaware, and Mississippi. Florida ranked 24th (source: Tax Foundation).

[3] States with Lowest Sales Tax

There are five states without a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Alaska allows its cities and counties to have a sales tax, which ranges from 1–7%. Of the states that have a sales tax, the lowest rates are found in: Hawaii (4.4%), Maine (5.0%), Virginia (5.0%), Wyoming (5.4%), and Wisconsin (5.4%).

[4] Making a Decision: Sales vs. Property vs. Income Taxes

Deciding upon a state based solely on its overall taxation will depend upon the taxpayer’s type and amount of income, the value of the home, cash on hand, plus any special tax issues unique to the taxpayer. A Social Security recipient who continues to work may conclude income taxes are the biggest concern. Someone who receives Social Security benefits as their main source of income may discover property taxes are the biggest issue.

2013 Some States with Unique Tax Characteristics

State	Special Characteristic
Iowa	No more taxation of Social Security benefits as of 2014
Oregon	Estate tax of up to 16% for over $1 million estates
Colorado	Homestead exemption of up to $100,000 for some aged 65+
Kansas	If AGI < $75,000, Social Security not subject to state income tax
Hawaii	Estate tax up to 15.7% for portion > $5.25 million federal exemption
Wisconsin	Low incomes can exclude $5,000 of retirement income
Missouri	Phasing out income tax on military pensions by 2016
Illinois	Estate tax of up to 16% of estate > $4 million
Michigan	Certain retirement income may be exempt
Tennessee	Phasing out inheritance tax by 2016; no more gift tax
Ohio	Repealed estate tax effective January 1, 2013
Maine	First $10,000 of retirement income may be exempt from state tax
Connecticut	Reduced estate tax exemption to $2 million
Indiana	Phasing out inheritance tax over nine years, starting 2013
Georgia	Retirement income tax-free, first $65,000 ($130,000 if married)

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