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Arizona a so-so state for retiree taxes

For those not there yet, retirement is a time of life veiled in excitement but with perhaps a tinge of fear and uncertainty thrown in. Several myths and misconceptions have arisen over retirement, particularly over the financial aspects. USA TODAY

Arizona retirees don’t face especially high or low taxes, according to a new study.

Story Highlights

  • Ariz. tax policies for seniors aren’t especially high or low, a new study says
  • Retirees here benefit from mild income, property taxes but pay fairly high sales taxes
  • Arizona is among the majority of states that don’t tax Social Security, according to Kiplinger

Arizona retirees don’t face especially high or low taxes, according to a new study.

retiree taxes

The report by Kiplinger places Arizona neither among the 10 most-friendly or least-friendly states when it comes to income, property, sales and other taxes levied on retirees. States like Arizona that didn’t make either the top or bottom 10 were not ranked.

Tax-friendly factors in Arizona cited by Kiplinger include a modest income-tax rate that tops out at 4.54 percent, no inheritance taxes or estate taxes, and an exemption of up to $2,500 on military, state and local government pensions (though pensions from other state governments are fully taxed, as are private pensions and distributions from Individual Retirement Accounts and 401(k)-style plans.

Also, Arizona is one of 38 states that don’t tax Social Security benefits, according to the report.

In addition, property taxes for senior homeowners are fairly mild, Kiplinger noted. The publication cited a statewide tax credit for homeowners and renters 65 and older who earn $3,750 or less (singles) or $5,500 or less (married couples). Also, homeowners 70 and up with taxable income not exceeding $10,000 might be able to defer their property taxes, while moderate-income seniors 65 and up can apply to their county assessor to have their property valuations frozen for three years.

Anyone seeking the senior property-tax credit must complete Arizona tax form 140PTC.

The Department of Revenue provides a rather complicated description of the credit on its website .

The Yavapai County Assessor’s Office provides a helpful explanation of the statewide property-value deferral on its website.

The Arizona Attorney General’s Office provides more information on the property valuation freeze for seniors on its website.

Conversely, sales taxes in Arizona are on the high side, starting with the 5.6 percent statewide levy plus county and city taxes that can push overall sales taxes into the range of 8 percent or higher, including 8.6 percent combined in Phoenix.

retiree taxes

Kiplinger cited Alaska as the most tax-friendly state for retirees, followed by Wyoming, Nevada, Mississippi and South Dakota. The publication ranked Vermont as least tax-friendly, followed by Connecticut, Minnesota, Oregon and Montana. The report can be read at kiplinger.com.

Source: Study: Arizona a so-so state for retiree taxes