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States with No Estate Taxes or Inheritance Taxes

by | Feb 24, 2021 | Taxes | 0 comments

New Mexico

Heavy wooden gates open at the pilgrimage site of El Santuario de Chimayo, a National Historic Landmark in Chimayo, New Mexico

Getty Images

Overall Rating for Taxes on Retirees: Not tax-friendly.

Sales Tax: 5.125% state levy. Localities can add as much as 4.313%, and the average combined rate is 7.83%, according to the Tax Foundation. New Mexico’s tax is a gross receipts tax that covers most services.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 4% excise tax
  • Prescription Drugs: Exempt

Income Tax Range: Low: 1.7% (on up to $5,500 of taxable income for single filers and $8,000 for joint filers). High: 4.9% (on taxable income over $16,000 for single filers and over $24,000 for married couples filing jointly).

Beginning with the 2021 tax year, the top rate will be 5.9% on taxable income over $210,000 for single filers and over $315,000 for joint filers.

Taxes on Social Security: Social Security benefits are taxed to the same extent they are taxed at the federal level.

Property Taxes: In New Mexico, the median property tax rate is $776 per $100,000 of assessed home value.

For more information on these and other New Mexico state taxes, see the New Mexico State Tax Guide for Retirees.

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North Carolina

A North Carolina lake with a lone boater seen at sunset

Getty Images

Overall Rating for Taxes on Retirees: Mixed tax picture.

Sales Tax: 4.75% state levy. Localities can add as much as 2.75%, and the average combined rate is 6.98%, according to the Tax Foundation.

  • Groceries: Exempt from state tax, but 2% local tax may apply
  • Clothing: Taxable
  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 3% highway-use tax
  • Prescription Drugs: Exempt

Income Tax Range: Low: 1.1% (on up to $40,125 of taxable income for singles and up to $67,050 for married couples filing jointly). High: 2.9% (on taxable income over $440,600).

Taxes on Social Security: Social Security benefits are not taxed by the state.

Property Taxes: In North Carolina, the median property tax rate is $773 per $100,000 of assessed home value.

For more information on these and other North Carolina state taxes, see the North Carolina State Tax Guide for Retirees.

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North Dakota

American Bison grazing on the prairie

Overall Rating for Taxes on Retirees: Mixed tax picture.

Sales Tax: 5% state levy. Localities can add as much as 3.5%, and the average combined rate is 6.96%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 5% excise tax
  • Prescription Drugs: Exempt

Income Tax Range: Low: 1.1% (on up to $40,125 of taxable income for singles and up to $67,050 for married couples filing jointly). High: 2.9% (on taxable income over $440,600).

Taxes on Social Security: Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $100,000 or less and other taxpayers with a federal AGI of $50,000 or less. For taxpayers exceeding these thresholds, Social Security benefits are taxed by North Dakota to the same extent they are taxed at the federal level.

Property Taxes: In North Dakota, the median property tax rate is $986 per $100,000 of assessed home value.

For more information on these and other North Dakota state taxes, see the North Dakota State Tax Guide for Retirees.

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Ohio

A farm in Ohio as seen at sunset

Overall Rating for Taxes on Retirees: Not tax-friendly.

Sales Tax: 5.75% state levy. Localities can add as much as 2.25%, and the average combined rate is 7.23%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Income Tax Range: Low: 2.85% (on taxable income from $22,150 to $44,250). High: 4.797% (on taxable income over $221,300).

Cities and school districts in Ohio can also impose local income taxes.

Taxes on Social Security: Social Security benefits are not taxed by the state.

Property Taxes: In Ohio, the median property tax rate is $1,478 per $100,000 of assessed home value.

For more information on these and other Ohio state taxes, see the Ohio State Tax Guide for Retirees.

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Oklahoma

Renovated building in downtown Guthrie, Oklahoma

Overall Rating for Taxes on Retirees: Mixed tax picture.

Sales Tax: 4.5% state levy. Localities can add as much as 7%, and the average combined rate is 8.95%, according to the Tax Foundation.

  • Groceries: Taxable
  • Clothing: Taxable
  • Motor Vehicles: Taxable (1.25%), and 3.25% excise tax applies
  • Prescription Drugs: Exempt

Income Tax Range: Low: 0.5% (on up to $1,000 of taxable income for single filers and up to $2,000 for married joint filers). High: 5% (on taxable income over $7,200 for single filers and over $12,200 for married joint filers).

Taxes on Social Security: Social Security benefits are not taxed by the state.

Property Taxes: In Oklahoma, the median property tax rate is $869 per $100,000 of assessed home value.

For more information on these and other Oklahoma state taxes, see the Oklahoma State Tax Guide for Retirees.

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South Carolina

The pineapple fountain in Charleston, South Carolina at historic Waterfront Park

Overall Rating for Taxes on Retirees: Most tax-friendly.

Sales Tax: 6% state levy. Localities can add as much as 3%, and the average combined rate is 7.46%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 5% (up to $500) infrastructure maintenance fee
  • Prescription Drugs: Exempt

Income Tax Range: Low: 3% (on taxable income over $3,070). High: 7% (on taxable income over $15,400).

Taxes on Social Security: Social Security benefits are not taxed by the state.

Property Taxes: In South Carolina, the median property tax rate is $545 per $100,000 of assessed home value.

For more information on these and other South Carolina state taxes, see the South Carolina State Tax Guide for Retirees.

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South Dakota

The 19th century historic downtown of Deadwood, South Dakota

Overall Rating for Taxes on Retirees: Mixed tax picture.

Sales Tax: 6% state levy. Localities can add as much as 3%, and the average combined rate is 7.46%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 5% (up to $500) infrastructure maintenance fee
  • Prescription Drugs: Exempt

Taxes on Social Security: Social Security benefits are not taxed by the state.

Income Tax Range: South Dakota has no state income tax.

Property Taxes: In South Dakota, the median property tax rate is $1,219 per $100,000 of assessed home value.

For more information on these and other South Dakota state taxes, see the South Dakota State Tax Guide for Retirees.

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Tennessee

Neon signs on Lower Broadway at night in vibrant downtown Nashville, Tennessee

Overall Rating for Taxes on Retirees: Most tax-friendly.

Sales Tax: 7% state levy. There’s also an additional state tax of 2.75% on sales of single items that applies to the portion of the sales price from $1,600 to $3,200. Localities can add up to 2.75%, with an average combined state and local rate of 9.55%, according to the Tax Foundation. Local taxes are limited, though: Only the first $1,600 of any single item is taxable.

  • Groceries: Taxable (4% state rate; additional local taxes may apply)
  • Clothing: Taxable
  • Motor Vehicles: Taxable (7% basic rate, plus 2.75% state tax on sales price between $1,600 and $3,200; additional local taxes may also apply)
  • Prescription Drugs: Exempt

Income Tax Range: Tennessee has no state income tax. But dividends and some interest are subject to the Hall Tax at a 1% rate. The first $1,250 in taxable income for individuals ($2,500 for joint filers) is exempt. 2020 is the last year for the tax, which is being phased out. Also, the tax is waived if you’re over 100.

Taxes on Social Security: Social Security benefits are not taxed by the state.

Property Taxes: In Tennessee, the median property tax rate is $636 per $100,000 of assessed home value.

For more information on these and other Tennessee state taxes, see the Tennessee State Tax Guide for Retirees.

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Texas

Cowboys and cowgirl in silhouette at sunrise in Weatherford, Texas.

Overall Rating for Taxes on Retirees: Least tax-friendly.

Sales Tax: 6.25% state levy. Localities can add up to 2%, with an average combined rate of 8.19%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Income Tax Range: Texas has no state income tax.

Taxes on Social Security: Social Security benefits are not taxed by the state.

Property Taxes: In Texas, the median property tax rate is $1,692 per $100,000 of assessed home value.

For more information on these and other Texas state taxes, see the Texas State Tax Guide for Retirees.

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Utah

One person looks out over the canyon of Canyonlands National Park in Utah during sunset

Sales Tax: State levy is 4.85%, but mandatory 1% local sales tax and 0.25% county option sales tax are added to the state tax (for a 6.1% total rate). Plus, localities can add up to an additional 2.95%, making the average combined state and local rate 7.19%, according to the Tax Foundation.

  • Groceries: Taxable (1.75% state tax, plus mandatory 1.25% in local and county taxes)
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Income Tax Range: Utah has a flat tax of 5%.

Taxes on Social Security: Social Security benefits are taxed. Benefits may qualify for the retirement-income tax credit described below.

Property Taxes: In Utah, the median property tax rate is $575 per $100,000 of assessed home value.

For more information on these and other Utah state taxes, see the Utah State Tax Guide for Retirees.

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Virginia

View from a residential street in Old Town Alexandria, Virginia, featuring early 1800s townhouses

Overall Rating for Taxes on Retirees: Tax-friendly.

Sales Tax: 5.3% state levy, including 1% that is allocated to local governments. Northern Virginia, Central Virginia, and the Hampton Roads area have an additional 0.7% sales tax to pay for transportation improvements. An additional 1% tax is levied in Halifax and Henry Counties (effective April 1, 2021), and an extra 1.7% tax is levied in the “Historic Triangle” area. These additional taxes give the state an average combined state and local rate of 5.73%, according to the Tax Foundation.

  • Groceries: Taxable (1.5% state rate, plus 1% local tax)
  • Clothing: Taxable
  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 4.15% excise tax
  • Prescription Drugs: Exempt

Income Tax Range: Low: Low: 2% (on up to $3,000 of taxable income). High: 5.75% (on taxable income over $17,000).

Taxes on Social Security: Social Security benefits are not taxed by the state.

Property Taxes: In Virginia, the median property tax rate is $804 per $100,000 of assessed home value.

For more information on these and other Virginia state taxes, see the Virginia State Tax Guide for Retirees.

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West Virginia

Sunrise from high atop Dolly Sods Wilderness area in West Virginia with Sunbeams and reflections

Overall Rating for Taxes on Retirees: Mixed tax picture.

Sales Tax: 6% state levy. Municipalities can add up to 1% to that, with an average combined rate of 6.5%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Income Tax Range: Low: 3% (on up to $10,000 of taxable income). High: 6.5% (on taxable income of $60,000 or more).

West Virginia municipalities can also impose city service fees on people working in the city.

Taxes on Social Security: In 2020, 35% of Social Security benefits taxed by the federal government are excluded from taxable income for single taxpayers with federal adjusted gross income of $50,000 or less ($100,000 or less for joint filers). In 2021, 65% will be excluded for qualifying taxpayers. After 2021, qualifying taxpayers can exclude all Social Security benefits.

Property Taxes: In West Virginia, the median property tax rate is $571 per $100,000 of assessed home value.

For more information on these and other West Virginia state taxes, see the West Virginia State Tax Guide for Retirees.

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Wisconsin

Red sandstone cliffs at the Apostle Islands National Lakeshore, Lake Superior, in winter. Lake is frozen and two small figures walking on the ice emphasize the height of the cliffs.

Overall Rating for Taxes on Retirees: Least tax-friendly.

Sales Tax: 5% state levy. Municipalities can add up to 1.75% to that, with the average combined rate at 5.43%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Income Tax Range: Low: 3.54% (on up to $11,450 of taxable income for singles or up to $15,960 for married couples). High: 7.65% (on taxable income over $263,480 for singles or over $351,310 for married couples).

Taxes on Social Security: Social Security benefits are not taxed by the state.

Property Taxes: In Wisconsin, the median property tax rate is $1,684 per $100,000 of assessed home value..

For more information on these and other Wisconsin state taxes, see the Wisconsin State Tax Guide for Retirees.

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Wyoming

Aspen grove in fall colors with snow covered mountains in the background, Grand Teton National Park, Wyoming

Overall Rating for Taxes on Retirees: Most tax-friendly.

State Sales Tax: 4% state levy. Municipalities can add up to 2% to that, with a combined rate of 5.33%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Income Tax Range: Wyoming has no state income tax.

Taxes on Social Security: Social Security benefits are not taxed by the state.

Property Taxes: In Wyoming, the median property tax rate is $575 per $100,000 of assessed home value.

For more information on these and other Wyoming state taxes, see the Wyoming State Tax Guide for Retirees.

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