PROVIDENCE – Despite recent changes to the state’s income tax rules, Rhode Island remains one of the 10 least tax-friendly state in the nation for retirees, according to GoBankingRates.com.
The personal finance website placed the Ocean State at No. 44 on the list, citing: a sales tax, at 7 percent, that is higher than in the majority of the states; property taxes, at 1.51 percent, that rank 10th-highest in the nation; and income tax, at 3.75 percent, that while it is not the highest in the nation, does not leave Social Security and pension income untouched. The list did not make a judgment on the cost of living of the 50 states, nor other quality of life properties. It was just about the overall tax environment.
Beginning with fiscal 2016, the General Assembly exempted portions of social security income, and more recently public and private pension payments, from the state income tax, based on household income. For single filers with gross income of less than $80,000, the first $15,000 of Social Security or pension income would be exempted from state personal income tax. The cut-off for married, filing jointly is $100,000.
Rhode Island was not alone in its poor showing in the region. Coming in at No. 48 was Connecticut, with an income tax rate of 5 percent (and with limited Social Security exemptions), property tax of 1.66 percent and state sales tax of 6.35 percent. Vermont was No. 45 on the list, with income tax of 3.55 percent, property taxes of 1.76 percent (fourth-highest in the nation) and state sales tax of 6.18 percent.
Faring better the Rhode Island were:
- Maine, No. 31, with income tax of 6.75 percent (all Social Security benefits are untaxed), property tax of 1.23 percent and state sales tax of 5.5 percent.
- Massachusetts, No. 25, with income tax of 5.1 percent, property tax of 1.13 percent and state sales tax of 6.25 percent.
- New Hampshire, No. 4, with no income or state sales tax and property taxes of 1.94 percent.
Sitting at the bottom of the list is Nebraska, which GoBankingRates.com reported having a sales tax of 6.89 percent, property taxes of 1.6 percent (eighth-highest in the nation) and income tax of 5.01 percent. It also gives lower-income residents a break on taxation of Social Security income.
According to the website, the most tax-friendly state is Alaska, with a state sales tax of 1.76 percent, property tax of 0.97 percent and no income tax.