Last month, even as they slapped a new tax on hospitals, raised dozens of user fees and eliminated a low-income tax credit, Georgia legislators passed income tax relief for one group: well-off retirees. For residents 62 or older, Georgia already exempts from its 6% tax all Social Security and $70,000 per couple of income from pensions, retirement accounts, annuities, interest, dividends, capital gains and rents. But in 2012 the exemption for couples 65 and older will rise to $130,000, and by 2016 all their retirement income will be exempt--a break Governor Sonny Perdue championed as a lure for well-heeled seniors.

If you're looking for a domestic retirement tax haven, Georgia is hardly the only place worth considering. Seven states--Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming--don't tax personal income at all. New Hampshire and Tennessee tax interest and dividends but not other income. The rest of the states have broad income taxes but give old taxpayers breaks, some quite generous. A recent study by Karen Smith Conway of the University of New Hampshire and Jonathan C. Rork of Georgia State calculates that retirees pay, on average, only half the state income tax of working folks with the same income.

That means the best tax locales aren't necessarily the same for retirees as they are for working stiffs. Some states, such as New Jersey, soak taxpayers of all ages (particularly affluent ones) with stiff income, real estate, sales and estate taxes. But others with a more moderate tax burden might compensate for having no income taxes with high real estate levies. New Hampshire, with no sales tax and a narrow income tax, has among the highest real estate burdens in the nation. Consider, too, the condition of local finances and prospects for tax hikes.

More details on state estate taxes, income tax breaks and state finances are at www.forbes.com/investmentguide.

### Income Taxes

The most common exemption among states with an income tax is for Social Security benefits; 27 states and the District of Columbia don't tax them at all while the rest provide a partial exemption, according to tax publisher CCH. Three states--Illinois, Mississippi and Pennsylvania--also exempt all private and public pension payouts, including withdrawals from individual retirement accounts. Kentucky exempts up to $82,220 per couple in pension and IRA income.

Georgia isn't the only state that exempts at least some of seniors' investment income as well as pension income. In Michigan couples 65 and older can shield up to $20,115 of interest, dividends and capital gains from tax; if they do it reduces the $90,240 of private pension income that's state-tax free per couple. (The pension break is available beginning at age 591/2.) South Carolina residents 65 and older can exclude $30,000 of income of any sort (in addition to Social Security) from tax.

### Estate Taxes

As of June 1, 19 states and the District of Columbia imposed their own estate and/or inheritance taxes--that's separate from any federal estate tax due. (The federal estate tax has lapsed for 2010, but Congress may impose it retroactively, and in any case it's set to return Jan. 1, 2011 with only $1 million per estate exempt from tax, compared to $3.5 million in 2009.) Usually states exempt bequests to spouses.

For nonspouse inheritors, New Jersey exempts $675,000. Delaware has adopted a "temporary" estate tax, with a $3.5 million exemption per person, effective July 1, 2009 through July 1, 2013. Vermont dropped its exemption amount from $3.5 million to $2 million for 2009 and beyond. Illinois' estate tax lapsed on Jan. 1, but a bill is pending to reinstate it retroactively to Jan. 1 with a $2 million exemption.

### Property Taxes

All states and many local governments have real estate tax breaks for old people; these programs often are reserved for homeowners with low incomes and/or provide only limited or unattractive relief. (For example, you might be able to defer tax hikes, but the government will collect its due when you or your heirs sell your home.)

In some cases--California being the most notable example--caps on property tax hikes protect longtime residents at the expense of newcomers. So if you move to California now you could easily pay two or three times what your neighbor pays. The upside is that once you've moved in, you're protected, too, from future hikes.

Perhaps more worrisome for retirees is the prospect of large future real estate tax increases. Investigate local finances, including the prospect that big unfunded pension liabilities could force tax hikes, regardless of which politicians are in charge. Over the past decade some New Jersey towns doubled their real estate levies to 4% of assessed value a year, without any protection for existing homeowners.

### The Fleeing Rich

Just over half of America's 3,200 counties have a demographic problem: Departing residents of these 1,700 districts are richer than arriving residents. Internal Revenue Service data based on 2008 tax returns show that the problem is particularly acute in the Rust Belt, western Great Plains and inland California. Receiving the wealthy: business-friendly southeastern states like Florida and scenic mountain redoubts in the Rockies. The map in "Where Americans Are Moving" illustrates the income gap between arriving and departing migrants by county. --Jon Bruner

#### Where The Rich Are Heading

| Income Per Capita*
County | Arriving | Departing
Collier County, Fla. | $76,200 | $26,100
Greene County, Ga. | 56,400 | 25,400
Nassau County, Fla. | 51,800 | 29,300

#### Where The Rich Are Leaving

| Income Per Capita*
County | Arriving | Departing
Pitkin County, Colo. | $41,100 | $71,500
Dukes County, Mass. | 32,000 | 40,700
Santa Clara County, Ca. | 40,800 | 46,000
*Per capita income calculated as aggregate income divided by number of exemptions. Source: Internal Revenue Service. Data cover moves during 2008.