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Finding Your Personal Tax Haven in Retirement

Why you need to consider more than just state income taxes

By Adriane Berg

(In her new book, The Retirement Income Explosion, personal-finance writer and radio host Adriane Berg offers smart financial strategies to help us as we live longer lives. The following is an excerpt from the book, aimed at helping you take taxes into consideration when deciding where to live in retirement.)

Woman doing her taxes
Credit: Adobe

One driving force behind your retirement relocation decision may be taxes. The wrong choice can eat up a whopping 40% of your cash flow, especially with property, income, excise, gasoline, fuel, sales and luxury taxes. Not to mention the estate tax and probate costs that form a merger between death and taxes.

Don’t make the mistake of judging states (or foreign countries) by income tax alone. Some states with low income or property taxes will have higher sales taxes, for example, and vice versa. Striking a balance is necessary.

For example, one of the least taxing states is New Hampshire. It has no sales tax whatsoever and the second-lowest income tax of those states that have an income tax (only about $18 on every $10,000 in income). What’s more, it does not tax retirement income.

In 12 states, a car tax could make the state a high tax venue if you drive a lot.

But New Hampshire taxes food purchases, and while there is no income tax on W-2 reported earnings or pensions distributions, you will be taxed on dividend income and other investment income. And it imposes a comparatively large property tax.

Compared to its bordering neighbors, Maine and Massachusetts, however, and its almost bordering neighbors, Rhode Island, Connecticut and New York, New Hampshire is genuinely the tax haven next door. You can move there, shop there, and educate your children there, or semi-retire there on tax-exempt earned income.

Take the reverse case of Pennsylvania, which does have a high-income tax. It, however, exempts Social Security benefits and withdrawals from public and private pensions. But, because of high property taxes, it comes in near the end of a nationwide survey by Kiplinger.

Arizona, Florida, Nevada, and Wyoming are top tax choices according to the Kiplinger report: State-by-State Guide to Taxes on Retirees 2019. New York, New Jersey, Illinois, and Vermont come in at the bottom.

Tailoring 'Best Places' List to You

Nevertheless, despite credible sources like Kiplinger, advice must be tailored to you.

For example, in 12 states, a car tax could make the state a high tax venue if you drive a lot. That’s something you won’t care about if you plan to live in a big city and rent a car only occasionally.

New York City does well tax-wise, so long as property taxes aren’t in your life.

The Retirement Income Explosion by Adriane Berg
Credit: Wealthbuilder Press

If you’ve always thought Alaska was a tax haven, you might be right — or wrong, depending on who you are. Alaska imposes a severance tax on companies for taking raw materials, principally oil, from the land. This gives it enough revenue to dispense with a sales tax or income tax. And every year, each man, woman and child receives a check for their share of the excess of the severance tax over the state’s expenses.

But the housing costs and property taxes are high in Alaska.

Florida is just the opposite. They pay you to die there, or almost.

Florida has no estate tax. That is, it does not impose a burden on your assets when you die. You still must pay the federal estate tax.

There is no income tax in Florida, either. But there is a hefty sales tax, and a tax on intangible assets like stocks, bonds and mutual funds. Annuities, insurance and qualified retirement assets and IRAs are exempt from taxes.

Why Domicile Matters

The key to your tax picture is your domicile or your intended permanent residence.


Domicile means more than just living there. You can have many homes, but only one domicile.

Domicile is determined by the nexus between the elements of your life and the venue. This includes where you vote, register your car, keep your investments, establish bank accounts, file your taxes, spend most of your time, affiliate with clubs and religious institutions and even how you buy things on the web or subscribe to e-mail.

The government or courts can challenge what you call your choice of domicile. They look at the facts.

Of course, it all starts out with you. You select where you intend to make your main home. Only if a taxing entity disagrees will you have to prove your domicile.

Your Tax Checklist

When comparing locations, use this checklist of taxes, prioritizing them from one to eight to see where your tax haven lies:

_______ Property tax per $1,000

_______ Excise tax

_______ Food and transient occupancy tax (when friends and family come to visit and stay in a hotel)

_______ Luxury tax

_______ Income tax per $1,000 yearly income

_______ Sales tax

_______ Car, gasoline, cigarette, or other special taxes

_______ Tax on assets (intangible tax)

Adriane Berg is a recognized expert in lifelong financial security, long term care, and universal design; author of 13 books including The Retirement Income Explosion and host of the syndicated radio show Generation Bold: The Fountain of Truth. Read More
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