Tax-Free in the Rust Belt

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Looking for a retirement tax haven? You might find it close to home.

When John Jazdcyk retired in 2004 from his management job at a Green Bay, Wis. Procter & Gamble plant, he and his wife, Susan, debated whether to move full-time to their vacation home on Lake Mullet in Cheboygan, Mich. Then they learned that Michigan exempts $81,840 a year in private retirement income per couple, in addition to Social Security, from its 3.9% state income tax. Wisconsin, by contrast, taxes private retirement payments, as it does salary and other income, at 5.6%. "Whenever taxes can be avoided, I feel better," says new Michigan resident Jazdcyk, 59.

Accepted wisdom: Tax-averse retirees should move to Florida or Nevada, which have no state income or estate taxes. But what if you don't worship the sun or relish a long-distance move? In recent years other states, too, have been lavishing tax goodies on retirees, including affluent ones. With a little research you might discover your own retirement tax haven is close to home.
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http://finance.yahoo.com/retirement/article/103293/Tax-Free-in-the-Rust-Belt