Some states are more generous than others when it comes to tax breaks on retirement income. By Rachel L. Sheedy, Editor From Kiplinger's Retirement Report, September 2013 No matter where you retire, you'll owe the same to Uncle Sam in federal taxes. But your choice of retirement destination could have a significant impact on what you'll owe in state taxes. State tax burdens vary widely across the U.S.See Also: Retiree Tax Map If you're thinking of relocating, compare the taxes in potential retirement states to those in your current state. Wherever you retire, you may be eligible for senior-related breaks on retirement income, property taxes and sales taxes. Sponsored Content Here we examined three tax categories you should consider. For more information, check out Kiplinger's updated Retiree Tax Map. You can click on a state to see its full tax profile, and you can sort the map based on certain categories, such as states that don't tax Social Security benefits. New this year is a feature that allows you to compare up to five states at one time. Watch out for a state's sales tax, which can take a sizable bite out of your spending. Note that cities and counties can tack on their own sales levies. Advertisement Remember property taxes. Those levies are imposed locally and can be hefty. Pensions and Retirement Income Looking for a state that doesn't tax income? Try Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming. New Hampshire and Tennessee tax only dividends and interest. But Tennessee exempts taxpayers over 65 who have total annual income of up to $33,000 for single filers ($59,000 for joint filers) from the tax on dividends and interest. New Hampshire offers a $1,200 exemption for taxpayers 65 and older. Advertisement Of the 41 states, plus the District of Columbia, that have an income tax, most offer exclusions to protect some—and in a couple of cases, all—retirement income from tax. The most generous states: Mississippi and Pennsylvania, which exempt all retirement income, including public and private pensions and distributions from retirement accounts, such as IRAs and 401(k)s. Most other states have a set amount that they will allow retirees to exclude. Georgia offers the largest retirement-income exclusion, at $65,000 for a taxpayer 65 or older (couples can shelter $130,000). Taxpayers ages 62 to 64 can take a $35,000 exemption per person. Kentucky allows up to $41,110 of military retirement pay, qualified private pensions, annuity income and pensions from civil service and state and local government to be excluded from tax. Tax breaks can depend on the type of retirement income, so consider the sources of your income to figure out the state that might be the best match for tax purposes. For example, Kansas exempts in-state public pensions, but it taxes all private retirement income. Alabama excludes private pensions, but it taxes distributions from defined-contribution plans. Six states offer no safe haven for retirement income: California, Minnesota, Nebraska, North Dakota, Rhode Island and Vermont. Connecticut excludes 50% of military retirement pay from tax, but it offers no other retirement-income breaks. California imposes a 2.5% penalty for those who withdraw from a retirement plan before age 59 1/2. Advertisement Social Security Benefits States are pretty generous when it comes to Social Security. While Uncle Sam will tax up to 85% of your benefits, most states give Social Security recipients a pass. Besides the nine states that don't have a broad-based income tax, 27 states and the District of Columbia exclude Social Security benefits from state income taxes. They are Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin. Fourteen states, however, do tax Social Security to some extent. Rhode Island and West Virginia, for instance, tax benefits the same as the federal government does. Connecticut, Kansas and Missouri tax benefits when a taxpayer's income exceeds certain thresholds (which are above the federal threshold). Some of the states allow benefits to qualify for a tax break under its retirement-income exclusion. New Mexico, for example, lets a retiree protect otherwise taxable benefits under its $8,000 exclusion. Advertisement Iowa will become more tax friendly come 2014. For 2013, 11% of benefits are taxable, but Iowans will pay no tax on benefits next year. Estate and Inheritance Taxes The majority of states let estates and beneficiaries off the hook when it comes to taxes. Three states—Indiana, Ohio and North Carolina—repealed their death taxes as of 2013. But 19 states and the District of Columbia have an estate tax or inheritance tax (Maryland and New Jersey impose both levies). An estate tax hits the estate before assets are distributed, while an inheritance tax is paid by the heirs. Tennessee, which calls its tax an inheritance tax, subjects estates of more than $1.25 million to tax. However, the state is phasing out its tax by 2016. Generally, state estate tax rates are graduated up to 16% on the largest estates. A key factor is the size of the exemption. Often these exemptions are lower than the federal estate tax exemption, which for 2013 is $5.25 million. For example, in Illinois, estates will pay tax for transferred assets of more than $4 million for 2013; in New Jersey, the exemption is $675,000. That means that an estate that could be exempt from federal estate taxes could end up with a state tax tab. Two states also have their own gift tax. Minnesota's gift tax went into effect in July. Minnesotans can give up to $1 million in lifetime gifts before the gift tax kicks in. In Connecticut, the tax kicks in after a $2 million lifetime exclusion. Haven’t yet filed for Social Security? Create a personalized strategy to maximize your lifetime income from Social Security. Order Kiplinger’s Social Security Solutions today.