Kiplinger recently took a look at the tax situation for retirees in all 50 states and judged that Arizona was most "tax friendly.”
The authors of the Kiplinger study summed up Arizona’s tax situation is six words ”Sunshine, sunshine, sunshine – and low taxes.”
The state placed 11th for their average state and local combined sales tax rate of 8.39 percent. Arizona though does not levy estate or inheritance taxes, something that many retirees need to consider.
There is also no tax on Social Security and railroad benefits. The rate of nontaxable military income has gone up by $1,000 in 2019 to $3,500.
Arizona also places no taxes on up to $2,500 of local government retirement, designated Arizona state government, and federal government retirement plans.
As the Kiplinger report says “While plenty of other states have more generous exemptions, Arizona’s low income tax rates keep the net burden down.”
According to the report, retirees who own their own home also can benefit from numerous tax opportunities. Among them are that “Homeowners who are at least 70 years old, have either resided in their primary residence for at least six years or have lived in the state for at least 10 years, and do not receive more than $10,000 of taxable income per year can defer their property taxes.”
Homeowners, particularly those 65 and older, who have lived in their homes for two years and meet certain income limits, can ask their local assessor to freeze the valuation of their home. This provides those eligible residents with an additional tax exemption.