Kiplinger.com named Connecticut the No. 1 least tax-friendly state for retirees in a comprehensive guide to taxes on retirement income, which the Washington, D.C.-based publisher released this week.
High property tax and sales tax rates, coupled with fully taxed out-of-state government and civil-service pensions were among the top reasons Connecticut trailed the nation’s other 49 states in the measure of friendliness toward retirees. But while it can be a bit embarrassing for a typically over-achieving state to land at the top of a “worst of” national ranking, Connecticut can at least be comforted by the appearance of nearby Vermont at No. 2., Rhode Island at No. 3, New Jersey at No. 9 and New York at No. 10.
Connecticut can be inhospitable to retirees, depending on their income level and where they earned their retirement benefits. Some residents of the Constitution State can exclude their Social Security benefits from state income taxes, but only if their adjusted gross income is less than $50,000 (less than $60,000 for married couples). All out-of-state government and civil-service retirement pensions are fully taxed, but half of military retirement pay is excluded from taxes. The statewide sales tax rate is 6.35%, with luxury items taxed at 7%. Connecticut residents pay the second-highest property taxes in the U.S., according to the Tax Foundation, but residents 65 and older may qualify for an annual property-tax credit or rent rebate.
Wondering where you should pack up and move for your golden years? Alaska, Alabama, Delaware, Georgia, Louisiana, Mississippi, Pennsylvania, South Carolina and Wyoming all made Kiplinger’s Top 10 list of the most friendly states for retirees.