Louisiana Retirement Tax Friendliness

Louisiana Retirement Taxes

Louisiana has a total population of nearly 4.7 million people. Its culture is unique among U.S. states, with strong African, French, Spanish and Native American influences. Likewise, its geography is unlike that of any other region of the U.S., as much of the state’s surface area is a part of the Mississippi River Delta.

Seniors who are moving to or staying in Louisiana for retirement will face a relatively friendly tax environment. The state does not tax Social Security retirement benefits or income from public pensions and it has the fifth-lowest property taxes in the country. At the same time, retirees may feel the sting of paying a high sales tax and income taxes on income from retirement savings accounts.

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Is Louisiana tax-friendly for retirees?

As is mentioned above, Social Security retirement benefits are exempt from the state income tax, as is income from a public pension. Other forms of retirement income, including income from private pensions, is taxed after a deduction of $4,500 ($9,000 for joint filers), which is available to all taxpayers 65 or older. While sales taxes in the Bayou State are extremely high, property taxes are very low. Louisiana has no estate or inheritance tax.

Is Social Security taxable in Louisiana?

The state of Louisiana does not tax Social Security income. Social Security retirement benefits earned by Louisiana residents may still be subject to federal income taxes, however.

Are other forms of retirement income taxable in Louisiana?

Income from a 403(b), 401(k) or regular IRA is subject to the state income tax in Louisiana. Income from a public pension such as a state teacher’s retirement system or the Federal Employees Retirement System pension is exempt, but non-public pension income is not.

Taxpayers who are at least 65 years old can claim an exemption of $6,000 total per year, per person on all retirement income. If your total retirement income is under $6,000, you won’t pay taxes on any of it. Any income over that limit will be subject to the Louisiana income tax. The table below shows rates and brackets for the state income tax in Louisiana.

How high are property taxes in Louisiana?

Louisiana has the eighth-lowest average property tax rate in the country at just 0.55%. The typical homeowner in Louisiana pays just $1,065 annually in property taxes, a fraction of the amount paid by homeowners in most states.

What is the Louisiana homestead exemption?

The Louisiana homestead exemption is a form of property tax relief available to any Louisiana resident who owns and occupies his or her home. It exempts the first $75,000 in assessed value from property taxes.

Senior homeowners may also be eligible for the senior citizens assessment freeze. Persons age 65 and older can claim the assessment freeze, provided they have an income below the state's annual limit. The freeze prevents any increases in a property’s assessed value, but it does not affect actual tax rates.

How high are sales taxes in Louisiana?

While the Louisiana state rate is among the lowest in the U.S. at just 4.45%, city and county rates average an additional 5.1%. That makes the average total rate in Louisiana 9.529%. This is the absolute highest in the U.S.

While groceries and prescription drugs are exempt from the state tax, they may be subject to local tax rates, depending on whether the local government has decided to exempt them.

What other Louisiana taxes should I be concerned about?

Most capital gains are subject to the Louisiana state income tax. They are taxed at the rates shown in the bracket table above. So, for example, if you have invested in the stock market or in real estate and plan to sell those investments for additional income during retirement, any gains on those sales will be taxed at state income tax rates.

Louisiana does not have an estate or inheritance tax.