Retirement is your time—to relax, explore, and live on your own terms. But choosing where to retire can be just as important as choosing when. If you’re living in Maryland, moving just a few miles north to Pennsylvania could open the door to greater financial freedom.
Thanks to favorable tax laws and special benefits for those in Continuing Care Retirement Communities (CCRCs), Pennsylvania is one of the best states for taxes and retirement—and a move could mean keeping more of what you’ve earned.
At Fernecrest in New Cumberland, PA, just across the Maryland border, these financial advantages are paired with luxurious living, personalized services, and amenities designed with you in mind.
Here’s why more Maryland retirees are looking to Pennsylvania—and Fernecrest—as the smart choice for their next move.
Understanding Taxes on Retirement Income
An important question for any retiree to ask is: Is retirement income taxable? The answer depends entirely on the state you live in, and that can have a substantial impact on your long-term financial picture.
Retirement Taxes in Maryland
Maryland is one of the many states that still taxes retirement income. While Social Security benefits are exempt, income from IRAs, 401(k)s, and most private pensions is taxed at the standard income tax rate.
Maryland does offer a limited pension exclusion, up to $39,500 for qualifying residents over age 65, but the exclusion has restrictions and doesn’t apply to every type of retirement account. Depending on your county, you may also face local taxes that increase your total liability.
Why Pennsylvania is One of the Best States for Taxes and Retirement
Pennsylvania stands out for being exceptionally tax-friendly to retirees. The state does not tax:
- Social Security benefits
- 401(k) or IRA withdrawals
- Public or private pension income
- Military retirement income
That means many common sources of retirement income may be state tax-free—a financial advantage that compounds over time.
On top of that, Pennsylvania has no local income tax on retirement income, which makes budgeting simpler and often results in meaningful annual savings.
CCRC Tax Benefits: More Than Just Income
In addition to Pennsylvania’s generous treatment of retirement income, retirees who move to a community like Fernecrest have access to the high quality, comprehensive Messiah Lifeways® care continuum may benefit from federal tax deductions related to their healthcare and housing expenses.
What Can You Deduct?
- Entrance Fees: A percentage of the non-refundable entrance fee may be deductible as a prepaid medical expense.
- Monthly Fees: A portion of your ongoing monthly fee may also be deductible, based on the share allocated to health-related services.
These deductions can be especially valuable for those planning for future care while living independently today. This can result in thousands of dollars in potential deductions each year, depending on your individual financial situation and itemization—on top of the state tax savings.
A Tangible Example: What the Numbers Say
Let’s look at a simple comparison. Suppose you’re a Maryland resident earning $85,000 annually from retirement sources like pensions, Social Security, and IRA distributions. Here’s how your tax burden could shift by moving to Pennsylvania:
| Scenario | Maryland | Pennsylvania |
| Annual Retirement Income | $85,000 | $85,000 |
| State Tax on Retirement Income | Approx. $3,000–$4,500 | $0 |
| Local Income Taxes on Retirement | Up to 3.2% in some counties | $0 |
Estimated Annual State/Local Tax Savings | — | $3,000–$5,000 |
| CCRC-Related Tax Deductions | Limited | Up to $15,000 deductible, but this can vary widely |
Over a 10–15-year span, these numbers can result in tens of thousands of dollars in tax savings—resources you can reinvest in travel, health, hobbies, or your family.
Fernecrest: Elevating Retirement Living in PA
At Fernecrest, financial advantages are only part of the story. This thoughtfully designed community offers a lifestyle defined by choice, connection, and leisure. Located in a natural setting along the Yellow Breeches and minutes from downtown Mechanicsburg, Fernecrest is the newest community of Messiah Lifeways.
Here’s what you’ll find at Fernecrest:
- 15 distinctive floor plans, including upscale apartments and estate homes
- Lounge-style dining with chef-curated menus
- On-site walking trails, fishing, and kayaking opportunities
- Access to Messiah Lifeways’ broader wellness and learning programs
- Healthcare options at the neighboring campus, should your needs change over time
By choosing Fernecrest, you get more than a beautiful home—you get peace of mind and a retirement lifestyle that reflects the best of Pennsylvania living.
Frequently Asked Questions: Taxes, CCRCs & Retirement in Pennsylvania
Is retirement income taxable at the federal level?
Yes, most forms of retirement income (including IRA and 401(k) withdrawals) are subject to federal tax. However, Pennsylvania does not add a state-level tax on that income, making a big difference overall.
Are there any Pennsylvania taxes on Social Security?
No. Pennsylvania does not tax Social Security benefits—one of only a few states with this policy.
Can I deduct any part of my entrance fee or monthly fee at a CCRC like Fernecrest?
Yes. A portion of both your entrance fee and monthly service fees may be considered prepaid medical expenses, which are deductible under IRS guidelines if you itemize.
Do these deductions apply only in Pennsylvania?
No. The deductions are based on federal tax law, so they apply nationwide—but combining them with Pennsylvania’s state tax advantages creates an optimal financial scenario.
How do I know what percentage of my fees I can deduct?
Each year, Messiah Lifeways provides residents with a letter outlining the percentage of their fees allocated to healthcare services—this helps when filing your taxes or working with a CPA.
What other taxes should I consider when retiring in PA?
Pennsylvania does have an inheritance tax, but spouses are exempt, and rates vary depending on the heir’s relationship to the deceased. There is no estate tax and no local income tax on retirement income.
Is PA considered a good place for estate planning?
Yes. With no state estate tax and relatively straightforward inheritance rules, Pennsylvania is often seen as a favorable state for passing on assets, especially when compared to states like Maryland.
What if I still work part-time in retirement?
Wages from part-time or freelance work are subject to state income tax in Pennsylvania, but retirement income remains tax-free.
Does PA tax investment income like dividends and capital gains?
Yes, non-retirement investment income like dividends, interest, and capital gains is taxed at the flat 3.07% state income tax rate.
Choose a Life That Pays You Back
Retirement should give back what you’ve invested—time, energy, and hard-earned savings. In Pennsylvania, it does. With no state taxes on retirement income, potential federal deductions for CCRC residents, and a generally lower cost of living than neighboring states, Pennsylvania stands out as one of the best states to retire to for taxes.
At Fernecrest, those financial benefits are paired with something equally valuable: a lifestyle designed for enjoyment, connection, and peace of mind. From elevated amenities and enriching experiences to a continuum of care you can count on, Fernecrest offers a retirement that’s not only smart—but deeply satisfying.
When you choose Fernecrest, you’re not just choosing where to live. You’re choosing to live well—and to get more out of every day and every dollar.
Learn More Today
Visit Fernecrest.org or Contact our Residential Living Welcome Center by emailing fernecrest@messiahlifeways.org or calling 717.667.8738 to learn more about how Ferencrest could be the right fit for your retirement.
This blog post is for informational purposes only and does not constitute financial or tax advice. Please consult with a financial advisor or tax professional for personalized guidance.