fasdgasgag
Del Webb's Lake Providence in Tennessee is a popular 55+ community known for its amazing amenities, elegant homes and fantastic state tax benefits.

While searching for the best place to retire, savvy active adults begin looking for ways to stretch their savings. Choosing a tax friendly state as a retirement destination is a smart way to make the most of a fixed income - but finding the best location can take a bit of research.

Federal taxes are about the same regardless of where you choose to live. However, the amount of state and local taxes you pay can vary widely. When searching for the best place to retire, be sure to look into the individual community’s entire tax burden, including income tax, property tax, sales tax and taxes on pension plans. Many states also offer special tax programs for seniors, which can save you money after reach a certain age.

Which other tax friendly states make great retirement locations? The tax benefits from one state to another will predominantly depend on your personal financial situation. For example, someone with a military pension may prefer a state with pension-friendly tax laws. While the answer will be different from one retiree to the next, here are five states to consider:

1. Alaska

Alaskan residents do not pay income tax or sales tax, and there are government refunds due to the revenue earned from oil drilling. For those who like the Alaskan climate and lifestyle, this can be an affordable retirement destination. However, not many retirees are interested in Alaska’s harsh winters and relative isolation from the rest of the nation.

2. New Hampshire

This tax-friendly state has no general income tax or sales tax. The state relies heavily on property taxes, yet there are programs to offset these taxes for adults beginning at age 65. Like Alaska, this state’s climate does not meet the popular picture of a retirement location.

3. Tennessee

There are no broad-based income taxes in Tennessee, which means no taxes on salaries, Social Security benefits, IRA distributions or pension income. There are, however, taxes on stock dividends and interest income from investments. With rural beauty and a low cost of living, Tennessee is gaining popularity as a retirement destination.

4. Delaware

This small state is a tax friendly location for retirees. There is no sale tax and limited income taxes. Social Security benefits are exempt from state income taxes. Older residents may also qualify for special tax credits and tax relief programs.

5. Alabama

In addition to being tax-friendly, Alabama enjoys a warm climate that appeals to many retirees. This beautiful southern state offers state income exemptions for Social Security benefits, as well as military, civil service, and government pensions. There is a 4-percent sales tax statewide, however additional local sales tax rates do raise this to up to 12-percent in some areas. Residents over the age of 65 are exempt from county property taxes.

Before making the final decision on where the best place to retire is for you, be sure to research your potential tax burden and to consider state and local taxes, including specific county and city taxes. Most states provide tax information online, which makes it easier than ever to find your own tax friendly retirement destination.

Think you know of some great tax havens, tell us about it in the comments section below.