Florida does not impose a state personal income tax, so Florida does not tax Social Security benefits. However, federal income tax rules can still apply to Social Security benefits depending on your total income and filing status.
Prosperity Group can help you evaluate how state tax considerations fit into your broader retirement income strategy. While relocating to Florida or Tennessee may offer state tax advantages, the decision should also account for your income sources, assets, spending needs, and residency requirements. Read on to explore the tax laws in Florida and Tennessee that may affect your retirement planning and choice of where to live.
Tax Laws in Florida Compared to Tennessee
Florida and Tennessee both have tax structures that can be relevant to retirees, but they differ in how those structures are applied. Florida does not impose a state personal income tax, so Social Security benefits and other personal income are not subject to Florida individual income tax. Tennessee also does not impose a broad state personal income tax, and its former Hall income tax on certain investment and interest income was fully repealed beginning in 2021.
For retirees comparing the two states, this means neither Florida nor Tennessee currently taxes Social Security benefits at the state level. However, federal income tax rules still apply in both states and may affect Social Security benefits based on total income and filing status. Retirement planning should also consider 401(k) and IRA distributions, pensions, investment income, housing costs, and other expenses when evaluating a potential move.
Florida or Tennessee: Which Is Better for Retirees?
When deciding which state is best for your retirement, we recommend considering more than state income taxes, including housing costs, property taxes, insurance premiums, overall cost of living, lifestyle preferences, and proximity to family. Evaluate a potential move as part of your broader financial and retirement plan, not based on state tax rules alone.
Other Costs to Consider in Retirement
Florida and Tennessee both have no state personal income tax, but other taxes can affect retirees differently. Florida has a 6% state sales tax, plus county discretionary surtaxes, while Tennessee has a 7% state sales tax with local taxes that can increase the combined rate.
Property taxes and housing costs also vary by location, while Florida retirees may need to budget carefully for homeowners insurance. General living expenses, including housing, utilities, healthcare, transportation, and groceries, should be evaluated separately from taxes. Comparing both categories can give retirees a more complete picture of the potential financial impact of moving to Florida or Tennessee.
Beyond taxes, the cost of living can vary considerably between Florida and Tennessee. The U.S. Bureau of Economic Analysis reported 2024 regional price parity indexes of 103.4 for Florida and 91.9 for Tennessee, compared with a national average of 100. Housing is one of the largest differences, with Florida’s housing-rent index at 122.1 compared with 79.1 in Tennessee. Retirees should also compare utilities, transportation, healthcare, insurance, and everyday expenses when estimating their long-term retirement budget.
Build a Retirement Income Strategy With Prosperity Group
Planning for retirement requires considering how taxes, inflation, and market risk may affect your long-term income. Prosperity Group provides comprehensive retirement and wealth planning with strategies designed to create tax-free income options, grow 401(k) and IRA assets, and minimize risk. Our Financial Tax Specialists focus on safe money strategies designed to create pension-like income and inflation-friendly income as part of a customized retirement plan. Retirees in or moving to the Sarasota area can visit our Lakewood Ranch office.
Building safety, security, and solutions starts with understanding your options. Explore Prosperity Group’s educational resources by watching our television appearances or visiting the My-Money-is-Safe YouTube channel. When you’re ready to explore your retirement strategy, schedule an educational visit with our team to begin building your custom Prosperity Plan.
This article is for educational purposes only and is not tax or legal advice. Consult a qualified tax professional about your situation.