Tax Tips for Retirees in West Coast States and Hawaii

Tax season is never fun, and can indeed be an extraordinarily stressful time, especially for those living on fixed incomes, like retirees. Additionally, each state has its own unique laws pertaining to taxation, especially with regards to Social Security benefits and retirement income, requiring seniors to know the rules before April 15 of each year.

For those who live on the West Coast or plan to retire there, what is required? What are the best states to live in? What are the most tax-unfriendly West Coast states for retirees?

Also see the top five tax-friendly states across America.

Alaska does not tax any income — including such income as Social Security benefits and retirement savings — but it does have a slightly above-average property tax rate of 1.16%. That said, the property tax rate is offset by homestead exemptions, in which retirees over the age of 65 can exempt up to $150,000 — meaning that if a senior’s home is valued at less than $150,000, no property taxes are required whatsoever.

In addition to its personal income tax exemption, California also provides a senior income tax exemption, allowing retired taxpayers to double the exemption provided to Californians.

While Hawaii does not tax Social Security benefits, nor public or private pensions, it does tax such retireement income as 401(k)s and IRAs, which cannot be deducted. The state does, however, have a very low property tax rate, and it has a homestead exemption that ranges from $120,000 to $160,000.

While Oregon does not tax Social Security benefits, it does tax IRAs, 401(k)s and similar retirement accounts. However, retirees with annual incomes of less than $22,500 (for individuals) or $45,000 (for joint-filers) and Social Security benefits of less than $7,500 (for singles) or $15,000 (for couples) can take a credit of up to 9% of their pension income.

No retirement income is taxed in Washington, as the state does not have an income tax of any sort — which makes tax time relatively easy for retired seniors. Also, homeowners who are over the age of 61 and/or are unable to work due to disability or because they are veterans can exempt a percentage of their property value up to $70,000.