Vermont named #1 least tax friendly state for retirees

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Vermont named #1 least tax friendly state for retirees

Wed, 10/12/2016 - 2:14pm -- tim

Vermont Business Magazine Vermont has once again been ranked the nation's least tax friendly state for retirees. Kiplinger recently revealed its annual list of the most and least tax-friendly states for retirees. In Vermont, the report cites Vermont's property taxes, income taxes (even on Social Security) and estate taxes as leading to the "#1 least" ranking. Kiplinger’s 2016 Retiree Tax Map reveals senior tax breaks across all 50 states, and compares taxes on income (including Social Security benefits, pensions and other forms of retirement income), property, everyday purchases and, ultimately, your estate. The Northern states generally fall in the least friendly category while the Southern states are most friendly.

“Retirees and near-retirees, particularly those considering a move, will get great use out of the Retiree Tax Map,” said Sandra Block, senior associate editor of Kiplinger’s Personal Finance. “It’s not just what you have—but where you live—that can make all the difference for your golden years."

The 10 Most Tax-Friendly
States for Retirees:

  1. Alaska
  2. Wyoming
  3. Nevada
  4. Mississippi
  5. South Dakota
  6. Florida
  7. Georgia
  8. Delaware
  9. Louisiana
  10.  Tennessee

 

The 10 Least Tax-Friendly

States for Retirees:

  1. Vermont
  2. Connecticut
  3. Minnesota
  4. Oregon
  5. Montana
  6. California
  7. Nebraska
  8. New Jersey
  9. New York
  10. Utah

 

The Retiree Tax Map is a sister project to Kiplinger’s annual Tax Map—which outlines each state’s income taxes, sales taxes, gas taxes, “sin” taxes (for products such as alcohol and tobacco) and other tax rules and exemptions. The 2016 Tax Map launched in August.

The 2016 Retiree Tax Map features comprehensive retiree tax profiles of each state, a list of the 10 most tax-friendly states for retirees and a list of the 10 least tax-friendly states for retirees, as well as additional roundups including lists of states that don't tax your Social Security benefits, states with their own estate taxes, and much more.

Vermont

The Bottom Line

Map of Vermont

Least Tax-Friendly

One of Kiplinger's top ten least tax-friendly states for retirees, the Green Mountain State doesn't coddle retirees. Not only does it tax most retirement income, including Social Security, it has a steep top income tax rate. Vermont's state sales tax rate is 6%, and local jurisdictions may add 1%. Vermont's property taxes are among the ten highest in the U.S., according to the Tax Foundation.

State Sales Tax

6% state levy. Municipalities can add 1% to that, but the average combined rate is 6.17%. A wide range of clothing as well as nonprescription drugs are exempt. Soda, however, is taxable.

Income Tax Range

Low: 3.55% (on up to $39,900 of taxable income for singles and up to $69,900 for joint filers)

High: 8.95% (on taxable income over $415,600 for single filers and over $421,900 for joint filers)

Social Security

Social Security benefits are taxed to the extent they are taxed at the federal level.

Exemptions for Other Retirement Income

Railroad Retirement benefits are exempt, but all other retirement income is taxed. Out-of-state government pensions are fully taxed.

IRAs

Taxable at ordinary income tax rates.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Taxable at ordinary income tax rates.

Private Pensions

Taxable at ordinary income tax rates.

Public Pensions

Taxable at ordinary income tax rates.

Property Taxes

Eligible Vermont residents can make a claim for a rebate of their school and municipal property taxes if their household income does not exceed a certain level. Generally, household incomes of $99,000 or more do not receive an adjustment. The maximum property tax adjustment is $8,000.

There is a property tax exemption for veterans. The first $10,000 (may be increased up to $40,000 by a vote of the town) of appraisal value of the residence of a qualifying veteran, his or her surviving spouse, or child may be exempt.

The median property tax on Vermont's median home value of $214,600 is $3,797.

Tax breaks for seniors: If you are 65 and older or disabled, you may qualify for a Vermont tax credit that is worth 24% of the Federal Elderly and Permanently Disabled Tax Credit, as long as you do not exceed certain income limitations.

Inheritance and Estate Taxes

Vermont has no inheritance tax, but it does have an estate tax if property exceeds $2.75 million. The maximum estate tax rate is 16%.

About Kiplinger

For nine decades, the Kiplinger organization has led the way in personal finance and business forecasting. Founded in 1920 by W.M. Kiplinger, the company developed one of the nation's first successful newsletters in modern times. The Kiplinger Letter, launched in 1923, remains the longest continuously published newsletter in the United States. In 1947, Kiplinger created the nation's first personal finance magazine. Kiplinger.com is the fastest growing Web site in the personal finance space. Located in the heart of our nation's capital, the Kiplinger editors remain dedicated to delivering sound, unbiased advice for your family and your business in clear, concise language. Become a fan of Kiplinger on Facebook or Kiplinger.com and follow Kiplinger on Twitter, LinkedIn and Tumblr.

Washington, D.C. (October 5, 2016)—Kiplinger