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TN state sales tax on groceries is 5.5% , not 7%. In addition, there is a single item exemption that the sales tax cannot be charged for more than $1600 dollars of value on a single item. So if you purchase a $3000 item, it is taxed as if it cost $1600. And many other states have sales tax, so it's necessary to calculate the difference in sales tax to really see that it's not that big a deal. In my previous home (Placerville, CA), our state and local sales tax came to 9.25%, so that's an additional cost to me of fifty cents per hundred dollars that I spend. To me that's hardly worth quibbling over. We save over $3000 in property taxes and over $500 in vehicle taxes every year in TN. These taxes are differing within the state, however, and it is worthwhile to find out what the taxes are in the specific county you intend to move to.
We save an additional $2000 per year in state income taxes because TN does not tax our pensions, and will not tax our SS when we start to collect it. We would have to pay taxes on the dividends and interest too in other states without the exemptions mentioned above.
Last edited by TheShadow; 03-21-2016 at 07:22 AM..
So if I"m not mistaken the $59,000 figure takes into account all income: SS, 401 and IRA non-Roth withdraw, dividends on investments etc. Is that correct?
Now clearing $59,000 for a couple in retirement is a goal most don't make I would think.
Yep. Interest on retirement accounts is pretty low. No one in their right mind living entirely off retirement income would have that money in stocks at that point- it would all be lower interest bonds and whatnot.
At 4% interest (and again this is being very generous), that couple would need to have somewhere around 1.5 million in an account to be generating 60K alone in interest.
This is way, WAY above the average.
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Even among those who do have retirement savings, their nest eggs are small. The agency found the median amount of those savings is about $104,000 for households with members between 55 and 64 years old and $148,000 for households with members 65 to 74 years old. That's equivalent to an inflation-protected annuity of $310 and $649 per month, respectively, according to the GAO.
This isn't a tax that's hitting "seniors." This is a tax that's pretty much exclusive to the wealthy, and a handful of middle class that were REALLY good at planning for retirement.
So when you take distributions from IRAs - like RMDs - they're not taxed?
Don't you have a right to contest/appeal your property appraisal? Robyn
Quote:
TENNESSEE
Sales Taxes
State Sales Tax: 7% on tangible property (prescription drugs exempt); 6% on food and food ingredients. Counties and cities may add another 1.5% to 2.75% to the total of either rate (click here). Gasoline Tax: 39.8 cents/gallon (Includes all taxes) Diesel Fuel Tax: 42.8 cents/gallon (Includes all taxes) Cigarette Tax: 62 cents/pack of 20; 77.5 cents/pack of 25 Personal Income Taxes
Salaries, wages, Social Security, IRAs and pension income are not taxed. A 6% tax is levied on stock dividends and interest from bonds and other obligations. The first $1,250 in taxable income received by a single filer is exempt ($2,500 for joint filers).
That is correct. taxes from IRA and 401Ks are not taxed in TN.
As for my property taxes yes I am allowed to request an abatement. Here is what happened this year. The taxes went from $6012 annual to $7250 annual. I asked for an abatement and I got it dropped $500. Yay!! They are assessing me on about 85% of the actual value. In TN that same house would cost me 1/3 of that. You can bet I am looking hard at TN. Robyn I am not living in TN but it is on my list of places to visit to see if I can see myself there. I am going to weigh the move against downsizing in MA. I will weigh each location on my list which by the way are not just states but communities (not specifically retirement communities) just locations within the individual states that interest us.
If you Google "Tennessee Income Tax," the Hall Tax is explicitly mentioned in the first thing that comes up. Same with the Tax Foundation - it is clear that this tax exists. If someone moves to Tennessee, doesn't know about the tax, then whines about it, they didn't do the bare minimums of due diligence.
As a native Tennessean, this tax is there to ensure there is no broad based tax on earned income. I would much rather have this Hall Tax than to introduce an even minor regular income tax.
I currently live in Indiana, and between state and local income taxes, I pay about $250/month. The state takes a flat ~3.4% from everyone, the county takes another 1%. Some counties are as high as 3%. For me, that's a car payment, or my electric and cable/internet bill put together, etc. While that alone isn't enough reason to move, it's not a small amount of money.
Also, people need to realize property taxes in Tennessee are generally low, especially outside incorporated city limits. My grandmother lives in an older subdivision outside of Kingsport, TN (not a rural area) and her property taxes were about $600 this year on a house assessed for ~$120k. Taxes vary considerably by location, but I pulled up a $130k homr within the city of limits of Nashville where property taxes are estimated at $1,200 annually, and my guess is Nashville has one of the (if not THE) highest property tax rates in the state. Find any list of ten states with the lowest property taxes, and Tennessee is likely among them. If you're coming from a rich area, property taxes are likely to be your biggest savings in Tennessee.
You can somewhat control what you pay in sales tax. If you want to eat out at that five star restaurant in Nashville, you're going to pay more. If you decide to eat at home, you'll pay substantially less. Until the last couple of years, internet purchases were completely sales tax free in TN unless the business had a physical office in the state. You aren't that far from another state's borders anywhere in Tennessee. I lived about ten miles from the Virginia line, and I made every major purchase I could in Virginia (sales tax 4%). If you needed to buy a riding mower, for instance, the difference in sales tax between the states on that mower would be $50-$100. TN does tax unprepared food at 5.5%. Prescription drugs are exempt. Clothing is not, but honestly, how much clothing are you buying if this is a serious consideration?
Other taxes and fees are very reasonable in Tennessee. Registering my Hyundai Elantra here in Indiana was between $400-$500 the year I moved here, $266 last year, and probably over $200 this year. Since it's based on the value of the car, imagine what it's like to register an expensive sports car, SUV, etc. An expensive car could run you well over a grand a year here. In Tennessee, virtually any vehicle is $24-$31.50 out the door. Some counties have a wheel tax in TN, many do not, but it's not nearly as severe as what I pay. Tennessee has no personal property tax (there is a "yacht tax" for boats over a certain length), no emission checks/vehicle inspections at the state level, no toll roads, and few "gotcha" type fees.
Tennessee has a lot of problems, especially for people trying to earn a living. While the tax environment is certainly favorable, wages for many fields are substantially lower than other places (not including high priced coastal areas) with a similar cost of living. For instance, I've never been able to make over $35k in Tennessee, and currently make over $60k in Indiana. The tax savings in Tennessee wouldn't even come close to accounting for that kind of wage gap. Cost of living is rising dramatically in Nashville, where most of the good jobs in Tennessee are being generated. There are a lot of problems with crime, drugs, etc., in rural areas. Small town Tennessee has been battered in the recession and really isn't recovering.
People from "up nawth" are often being transferred down with companies, keeping their northern salaries, while locals hired into similar roles will often be making 30%-50% less, assuming similar qualifications and title. I was talking to a guy yesterday at the brewery who worked with Bridgestone Tire in their Chicago offices. Those offices are closing next year and being folded into a new building in downtown Nashville. He's expecting to pay $7,000-$10,000/year less in property taxes, dropping the earned income tax, as well as everything else in Illinois, but he's being transferred with that big time Chicago salary. Those people end up bidding up real estate beyond what native Tennesseans can afford based on what the wages in the local labor market are.
For the most part, the bad things in Tennessee don't impact retirees, as long as they choose to relocate intelligently. The Hall Tax shouldn't be a deterrent in of itself IMO, as TN is still low tax otherwise.
Property taxes are collected on a county level, and each county in Tennessee has its own method of assessing and collecting taxes. As a result, it's not possible to provide a single property tax rate that applies uniformly to all properties in Tennessee. Williamson County (Nashville area) pays the highest in the state. You can use this site, and change it to whatever county you are considering. There is a calculator function in the lower half of the page where you can enter a county and a hypothetical home value and get a property tax estimate. I checked it and it worked pretty well.
Property taxes are collected on a county level, and each county in Tennessee has its own method of assessing and collecting taxes. As a result, it's not possible to provide a single property tax rate that applies uniformly to all properties in Tennessee. Williamson County (Nashville area) pays the highest in the state. You can use this site, and change it to whatever county you are considering. There is a calculator function in the lower half of the page where you can enter a county and a hypothetical home value and get a property tax estimate. I checked it and it worked pretty well.
That is another point that MUST be emphasized. Property tax rates vary substantially between counties. The counties in Eastern Tennessee have very low property tax rates. The counties around Nashville tend to be very high. Not quite Chicago high but about 25% less than what I was paying in Illinois.
When I was doing a financial model while planning retirement, I found that in OUR circumstances, moving to Kentucky would yield a lower overall tax situation.
That is another point that MUST be emphasized. Property tax rates vary substantially between counties. The counties in Eastern Tennessee have very low property tax rates. The counties around Nashville tend to be very high. Not quite Chicago high but about 25% less than what I was paying in Illinois.
When I was doing a financial model while planning retirement, I found that in OUR circumstances, moving to Kentucky would yield a lower overall tax situation.
There are some use cases where TN is not going to be the lowest overall burden - people dependent upon income streams subject to the Hall Tax, wanting to live in a part of TN with high property taxes or cost of living (around Nashville generally), etc. People who spend up every last dollar they make in TN will be vulnerable to the sales tax, as will the poor as high sales taxes are particularly regressive.
Still, I've been in six states for at least a month since 2010, and have had "lived in" five of those for tax purposes (IN, IA, SC, TN, VA). TN is by far the best for overall tax burden for my specific situation (earning a regular income, single, vehicle - nothing strange). Of course, there is more to life than taxes, and as I mentioned in a previous post, the tax savings in TN were not nearly enough to justify the piddly wages.
There are other things to consider with TN - particularly in eastern TN, where groceries are extremely expensive due to a near monopoly by Food City (other than Walmart/Sam's - Food City is about all there is in the regular grocery segment). Eastern TN is basically ignored by the state government in Nashville, who seem to think TN stops at Sevier County. The overall economy is lousy, and depending on what you need/want and where you are, you may end up being hours away from something. I know that being from Kingsport, folks who needed sophisticated medical treatment not available locally were often sent to Vanderbilt or Duke.
The fact that the Hall Tax merited an article in WSJ is mind-boggling. It's basic information.
Again it varies widely by county. I just tried 4 different counties in Kentucky and came up with 4 amounts all higher than we pay here in our county in TN. So, as always, research, research, RESEARCH, because "your mileage may vary" as they say.
SeriousConvo, don't forget that KNOXVILLE is part of eastern TN (I know, you know that). You make it sound like we don't have Ingle's, Kroger, Publix, Costco, Trader Joe's, Food Lion, EarthFare, Whole Foods, etc. The economy around Knoxville is not lousy (Jan 2016 unemployment of 4.5%, lower than the national 4.9%), and we have several excellent Covenant Health hospitals (ParkWest, Ft Sanders, etc), Blount Memorial, and University of Tennessee Medical Center.
I agree, the Hall tax is not exactly earth-shattering news. Especially since it is probably less than most people would pay if they paid state income tax on pension or SS as you do in many states. Hardly worth mentioning, and every year the legislators debate getting rid of it.
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