How Utah Taxes Can Impact Your Retirement Income
When you picture retirement, you’re probably imagining time with family, travel, hobbies, or simply a slower pace, not a maze of tax rules. Yet federal and state taxes can shape how far savings can go for Utah residents.
Utah is often seen as a friendly state for retirees, but its tax structure has some unique features worth understanding. Social Security benefits, retirement account withdrawals, pensions, property taxes, and even everyday sales taxes can influence how much income you actually keep.
The Big Picture: Where Retirement Income Comes From
Most retirees piece together income from a handful of places:
Social Security: Monthly benefits based on your earnings history.
Retirement accounts: Traditional and Roth IRAs, 401(k)s, 403(b)s, and similar plans.
Pensions: Monthly income from an employer plan.
Investment accounts: Dividends, interest, and capital gains from a brokerage account.
Real estate or part-time work: Rental income or side earnings.
Each of these sources can be taxed differently at the federal level. Utah then adds its own rules, which affect how your income plays out year to year.
Utah’s Income Tax and Retirees
Utah uses a flat income tax rate. The same percentage applies whether someone earns a little or a lot. As of 2025, that rate is 4.55% of taxable income.
Withdrawals from traditional IRAs and 401(k)s, as well as most pensions, count as taxable income. A helpful planning move is to pay attention to how much you withdraw from traditional IRAs or 401(k)s in a single year, since shifting withdrawals across different years can influence how much of your income falls under the state’s credit thresholds.
In contrast, Roth IRA withdrawals are generally tax-free at both the federal and state levels.
How Utah Taxes Social Security
Unlike many states, Utah taxes Social Security benefits, but it offers a state tax credit designed to offset that tax for many retirees. Here’s how it works:
The federal government determines how much of your Social Security is taxable.
Utah includes that taxable portion in your income.
The tax credit can reduce or eliminate the state tax on those benefits for retirees below certain income levels.
Once your income rises above those levels, the credit phases out, and you may owe some Utah tax on Social Security.
Understanding this balance matters because the way you combine Social Security with withdrawals from retirement accounts can influence whether you qualify for the credit in a given year.
Utah also has a Retirement Income Tax Credit, available to some retirees with modest income levels. In most cases, you can use either this credit or the Social Security credit, not both, for the same person. Deciding which one applies can be helpful when planning withdrawals.
Property Taxes: Managing Home-Related Costs
Utah’s property taxes are relatively low compared to the national average, but rising home values, especially on the Wasatch Front, can make total costs feel high.
Several programs are available for older homeowners such as:
Circuit Breaker Credit: Helps lower-income seniors by reducing property taxes or offering a renter’s refund.
Deferral Programs: Allow certain seniors to delay paying property taxes until the home is sold. Deferred taxes accrue interest at a reduced rate.
Exemptions: Available for disabled veterans and legally blind homeowners.
These programs can help retirees stay in their homes longer by reducing yearly expenses or spreading them out over time.
Lehi vs. Logan
Parkshore Wealth’s locations in Lehi and Logan serve two communities with different cost structures:
Lehi tends to have higher housing costs, HOA fees, and overall monthly bills.
Logan generally has a lower cost of living and can appeal to retirees looking to downsize or stretch cash flow.
For both locations, integrating property taxes, utilities, HOA dues, and maintenance into your retirement projections can reveal whether staying put, downsizing locally, or moving elsewhere changes your long‑term plan.
Sales Tax and Everyday Spending
Utah’s state sales tax is 4.85%, and local additions bring the combined rate to roughly 7% in many areas. Groceries have a reduced rate of 3%, and prescriptions are exempt, which softens the impact for many retirees.
Still, big-ticket purchases—cars, appliances, furniture—can lead to noticeable sales tax costs, so it helps to factor those into your retirement cash-flow plan.
Estate and Inheritance Taxes
Utah does not have an estate or inheritance tax. Only the federal estate tax applies, and that affects very large estates.
However, income tax rules on inherited retirement accounts and capital gains still matter for families planning to pass assets to the next generation.
Bringing It All Together
Utah’s tax rules affect everything from monthly cash flow to the timing of Social Security, the mix of account withdrawals you choose, and how you manage home-related expenses. Because federal and state tax systems interact in ways that aren’t always obvious, many retirees benefit from reviewing these issues regularly as part of an organized financial plan.
At Parkshore Wealth Management, helping clients evaluate these decisions is part of our ongoing work with them. When you understand how taxes shape your retirement income, you can make choices that better fit your goals for the years ahead.
Schedule a complimentary, 15-minute chat with a fee-only, fiduciary financial advisor to discuss your personal situation.
This material was written in collaboration with artificial intelligence (ChatGPT) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor with offices in Granite Bay and Folsom, CA, and Lehi and Logan, UT. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country’s leading professional association of fee-only financial advisors.