5f16c463f789252aa15679889236df9d61c6d424 Best IRA Companies: State Income Taxes



svētdiena, 2014. gada 31. augusts

State Income Taxes

During our personal retirement planning, countless hours (and considerable frustration) were expended trying to obtain pertinent state income tax information. Through this experience however, it was obvious that concise state income tax information was not readily available for people during their retirement and relocation planning. Thus, the decision was made to gather this information and include it on this site, so as to assist others in their retirement and relocation decisions.

Once you decide to relocate, or at least consider relocation in the U.S., state income taxes are a critical factor for most of us. There is a wide range of tax provisions among the fifty states and the District of Columbia (D.C.).
As of 2003:

  • Seven states have no general income tax requirements and two states have very limited income taxes.
  • Twenty-six states that have broad-based personal income taxes, exempt Social Security benefits from taxation.
  • Four states exempt private and public pension income (non-contributory private pensions and amounts employees contributed to contributory private pensions).

    Stop and think for a moment – what would your annual savings be if you resided in one of these states?

    Residing in a “tax friendly retiree state” can produce dramatic tax savings for most of us. As noted in the Social Security section, social security income provides 50 percent of the total income for two-thirds of retirees and, 90 percent of income for 30 percent. It is clear that related state income tax exemptions (or no state income tax) could produce dramatic, positive changes for all of us that have retirement income.

    The actual savings generated by favorable state income tax provisions will depend on your circumstances, e.g., the state in which you currently reside, income sources, your specific tax situation, deductions, and the state in which you establish a new residence.

    For example, a couple with combined social security and pension incomes, the annual savings could readily be $4,000 - $5,000. These savings could be used for your living expenses, recreation, travel, medications, etc.

    The State Income Tax Profiles, which are available on this site, reflect individual state tax rates by income range, treatment of social security, and pension income, sales tax rate, and gasoline tax.

    You can approximate your savings (assuming you relocate) by comparing the Profile information with your most recent tax returns from your current state of residence, e.g., social security and pension income and the related total state income taxes paid. Before you make a final decision, ask your tax professional to confirm your calculations.

    We retirees are likely faced with a future of fixed incomes and increasing lifespans, along with less income than during our employment years. In this situation (reduced revenue) businesses act to reduce their costs exactly as retirees wish to do. Again, while there are other factors to consider, state income tax savings offer among the most, if not the most potential savings for you and the years ahead.
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