Countries Poised to Pay the Most for Retirees in 2026
Editor’s Note: This story originally appeared on Boldin.
Looking for a great place to retire? Or, are you wondering if the state where you live is too expensive? Property values, cost of living, and lifestyle issues are all important considerations when looking for a place to live.
However, don’t forget to think about state taxes. Depending on your profile, some states are more tax-friendly in retirement than others.
Read on to explore more about retirement taxes, find the best tax states, and review income tax and sales tax rates.
Different Types of Taxes Imposed by States
Not only are income tax rates different from state to state, but different states have different types of taxes.
State taxes and all or a set of the following types of taxes:
- State Income Tax: Income tax is often the biggest concern.
- Interest and dividends: Some states charge less income tax, but more on interest and capital gains.
- Sales Taxes: Sales taxes are usually made up of a combination of state sales tax and local sales tax.
- Property Taxes: Property taxes — in addition to property values — can vary greatly depending on your location. You will need to consider the property tax rate and the cost of the property.
- Property taxes: Estate taxes also vary greatly from state to state, but most states do not tax your financial inheritance.
- Social Security and Pension Taxes: Very few states tax Social Security and pensions.
Should You Worry About State Taxes in Retirement?
Federal taxes can matter in retirement, but they’re rarely the be all and end all. Some say the tax revenue is high, while others have no tax at all. A few also tax Social Security, pensions, or withdrawals from retirement accounts separately.
This difference can affect your long-term spending power, especially if a large portion of your retirement income comes from taxable sources such as traditional IRA withdrawals or investment income.
For retirees with large assets or a steady income, choosing a tax-friendly country can make a significant difference in the long run.
However, taxes are only one part of the retirement equation. The cost of housing, access to health care, insurance, climate risk, and the overall cost of living often have a significant impact on your financial security and quality of life.
Many retirees find that moving for tax reasons alone does not yield the expected savings when these other factors are considered. The best way to evaluate taxes is as part of your overall financial plan – you look at how different areas affect your spending, income, and lifestyle together, not separately.
In addition, your ideal retirement tax situation will also depend on your financial situation and the services you expect to use.
Countries With the Highest and Lowest Tax Burdens
US News and World Report has calculated the tax burden in all 50 states. This measure shows total state and local tax revenue — from income taxes, sales taxes, and more — as a share of personal income, based on tax revenue data from the US Census Bureau’s Annual Survey of Federal and Local Government Finance and personal income data from the Bureau of Economic Analysis (BEA).
Note: Other analyzes find different conclusions about the lowest tax burden regions, indicating how difficult this analysis can be to calculate.
Countries With Low Total Tax Burden
- South Dakota
- In Florida
- New Hampshire
- Tennessee
- Wyoming
The Tax Foundation ranks the top 10 states (states with the lowest state taxes) as Wyoming, South Dakota, New Hampshire, Alaska, Florida, Montana, Texas, Tennessee, Idaho, and Indiana.
Countries with the Highest Total Tax Burden
- New York
- In Hawaii
- In New Mexico
- California
- Vermont
The Tax Foundation reports that the following states have the highest tax burden: Hawaii, Vermont, Massachusetts, Minnesota, Washington, Maryland, Connecticut, California, New Jersey, and New York.
Income Taxes by State
According to the Tax Foundation, by early 2026, seven states will have no income tax: Nevada, Wyoming, South Dakota, Texas, Florida, New Hampshire, and Tennessee. Also, the lowest rates can be found in Arizona (2.5%), North Dakota (2.5%), Ohio (2.75%), Indiana (2.95%), and Louisiana (3%).
California has the highest income tax rate at 13.3%.
Sales Taxes by State
The Tax Foundation also evaluates sales taxes by state. Forty-five states levy a state-level sales tax, and 38 states allow local sales taxes (including Alaska, which has no statewide sales tax).
The five states with the highest combined state and local sales tax are Louisiana (10.11%), Tennessee (9.61%), Washington (9.51%), Arkansas (9.46%), and Alabama (9.46%).
State Real Estate Taxes
Although many people are concerned about estate taxes, only 12 states and the District of Columbia impose an estate tax, and five state an inheritance tax. Maryland is the only state that imposes both estate and inheritance taxes.
Those with estate taxes include: Washington, Hawaii, Vermont, Minnesota, New York, Connecticut, Oregon, Illinois, Maine, Maryland, Rhode Island, and Massachusetts.
Inheritance taxes are collected in Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Federal Taxes for Social Security and Pensions
Social Security: Not all countries impose a Social Security tax, and for those that do, there are often exemptions or ways to reduce or eliminate the tax. You can find a complete list of state Social Security taxes here.
Pensions: According to Kiplinger, the following states do NOT tax pensions: Alabama, Alaska, Florida, Hawaii, Illinois, Michigan, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.
