Tax Tips for Retirees in Southern States

Tax time is always a stressful one, especially for those who have to contend with a fixed retirement income being taxed as well. As such, finding a tax-friendly state for a retiree can be paramount to the stability of their golden years. In a number of states, retirement income is not taxed at all; in others, there are multiple loopholes and benefits that retirees can take advantage of.

Curious which Southern states are the best for retirees at tax time? Check out these tax tips.

Retirement in the Yellowhammer State is rather tax friendly, as Alabama exempts all retirement benefits. There is also a homestead exemption that cuts property taxes, as well as pension exemptions — retirees settling in Alabama should definitely take advantage of all of the above.

Arkansas is another tax-friendly state for retirees, with no Social Security income taxed, and with pensions and withdrawals from retirement accounts only partially taxed. Retirees can take a deduction of $6,000 for retirement income, such as an IRA or a pension.

Florida is essentially a tax haven in the South, offering no state income tax, no tax on Social Security income, no tax on any form of retirement income and relatively affordable property taxes.

Further, the Sunshine State offers exemptions for its property taxes — with $25,000 exempted from a home’s assessed value and an additional $50,000 exception available to retirees over the age of 65.

Not only does Georgia not tax Social Security income, it offers a tax exclusion for seniors on retirement income — retirees between 62 and 64 can exclude $35,000, and retirees 65 and older have an exclusion of $65,000 applied to all retirement income. If a taxpayer has retirement income of less than $65,000, they pay no taxes at all.

All Social Security income in Kentucky is exempt from taxation. Moreover, the state has very low sales and property taxes, and pensions, 401(k)s and IRAs are exempt up to $31,110 — all of which are facets of Kentucky’s tax code that retirees are recommended to take advantage of.

Louisiana is yet another state that exempts all Social Security retirement benefits from state income tax. While the state does tax other forms of retirement income, such as pension income and retirement savings accounts, it also allows a deduction of $6,000 for single filers and $12,000 for joint filers over the age of 65. 

Moreover, property taxes in Louisiana are very low (which makes up for the high sales taxes).

While Maryland has a fairly high estate and inheritance tax, it somewhat evens out by having no Social Security income taxation. The state offers a homestead credit, though, that’s worth taking advantage of. Available to all taxpayers who own homes, the credit is equal to 10% of the assessed value of their homes.

Mississippi is a haven for retirees, seeing as how it does not tax Social Security benefits, IRAs, pensions or 401(k)s — and it has extremely low sales taxes with no estate or inheritance tax. Also, all homeowners are eligible for homestead tax exemptions.

North Carolina does not tax Social Security income and offers a few other exceptions. The Bailey exemption lets taxpayers with federal government retirement plans or state/local government retirement plans completely exempt their incomes, and the state’s low-income exclusion lets those who are 65 or older with incomes under $33,800 deduct either $25,000 or 50% of taxable value, whichever happens to be higher.

Oklahoma comes with no Social Security taxation for retirees, as well as a $10,000 deduction on all other forms of their retirement income. Further, the state has very low property taxes, and no estate or inheritance tax at all. Retirees can also “freeze” tax valuation hikes as long as they own their own home, make no more than $85,300 and are over 65 years old.

South Carolina taxpayers over the age of 65 can take a $10,000 deduction on all non-Social Security retirement income plans such as 401(k)s and IRAs. Elsewhere, the state does not tax Social Security benefits. The state also offers a homestead exemption, in which the first $50,000 of a home’s fair market value is exempt from taxation. 

Since Tennessee has no income tax whatsoever, it is a state with no retirement income taxation. Even further, property taxes are very low in the state, which helps offset the very high sales tax. Additionally, Tennessee has a Property Tax Relief Program that allows tax relief for retired applicants who make no more than $36,370.

In Texas, the minimum cash wage payment is $7.25 per hour. For tipped employees who earn more than $20 in tips, the tip credit is $5.12 per hour, and the minimum cash wage is $2.13 per hour.

Virginia is a state that does not tax Social Security income. Additionally, seniors can take advantage of a deduction up to $12,000 annually against their retirement income.

West Virginia is slowly phasing out the taxation of Social Security — by 2026, all Social Security benefits will be tax exempt (currently, 35% are exempt from the 2024 tax year, and 65% will be exempt for 2025). 

The state also allows seniors over the age of 65 to claim deductions of $8,000 against their retirement income. There is also a homestead exemption of $20,000 on the assessed value of a taxpayer’s property.