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California doesn’t tax Social Security. Maybe that’s a factor.
Not the reason - 39 states don't tax SS - only 11 states do tax SS - TX doesnt tax any income yet rated most unfriendly.
There are 8 states that do not tax income (NH taxes investments), another 3 that do not tax retirement plans like pensions or 401K distributions and 30 states that don't tax Military retirement - CA is not one of these - SS is the only thing not taxed.
If you click on the state you can go a more detail explanation as to why the state was given their ranking.
California
The Golden State's reputation as a high-tax state is built in part on how aggressively it goes after big earners, with a 13.3% income tax rate that kicks in at $1 million (for single filers) of taxable income. But the state's income tax brackets are actually very progressive, so for more modest incomes, the impact is far milder.
I read it but still makes absolutely no sense - you only have to earn $60K to be taxed at 9.3%, higher rate than the top rate in all but 4 other states and only $48K to be taxed at 8%, higher than the top rate in another 4 states. Only need to make $50K outside of SS (from pension, 401k) or investments and you are taxed at a higher rate than a multi-millionaire in all but 8 states. Essentially anyone retired and living on more than about $100K ($40K SS) will be taxed at a 9.3% marginal rate in CA and that is not a lot in many areas of CA. Those on regular income are paying these marginal rates when only making $60K
We paid almost double the income taxes in SC than we would in California. SC has high income taxes, car taxes, sales tax. The only tax that is reasonable is property tax.
We paid almost double the income taxes in SC than we would in California. SC has high income taxes, car taxes, sales tax. The only tax that is reasonable is property tax.
Can't compare income taxes, that would be very individualized, but our sales tax is 7% and car taxes have been much lower than when we lived in CA. in fact, the only thing we found more expensive than CA is our water bill, we've saved on everything else.
We paid almost double the income taxes in SC than we would in California. SC has high income taxes, car taxes, sales tax. The only tax that is reasonable is property tax.
Yes, but those high taxes might not impact a lot of seniors. In addition to S.C. not taxing Social Security, up to $30k of other retirement income from pensions, IRAs, 401(k)s, etc., is tax-free for married couples aged 65+. So theoretically, such a couple could have a six-figure retirement income and not pay a penny in state income taxes.
Yes, but those high taxes might not impact a lot of seniors. In addition to S.C. not taxing Social Security, up to $30k of other retirement income from pensions, IRAs, 401(k)s, etc., is tax-free for married couples aged 65+. So theoretically, such a couple could have a six-figure retirement income and not pay a penny in state income taxes.
And SC gives people a break at 62 and then a bigger break at 65 regarding exclusion of pension income.
I'm here 3 years now and pay no SC state tax.
And SC gives people a break at 62 and then a bigger break at 65 regarding exclusion of pension income.
I'm here 3 years now and pay no SC state tax.
The break at 62 is $3000 per person and at 65 is $15k per person if I am remembering correctly. Desiring to do ROTH conversions leading up to SS though complicates matters. Waiting until 65 means you can convert more without also paying state income tax, but then it might also affect when you plan to take SS and the effect on your tax bracket. Pension income takes all of our exclusion at both ages so any conversions are still state taxable, but overall less total money is taxable at age 65. Just something to complicate matters when looking at whether to do a Roth conversion or not and when trying to stay in the 12% bracket.
Also, all military pensions are now tax free in SC. Wish they'd do it for retired state employees considering the COLA is 1% and can't exceed $500. At least a tax break would help offset inflation. That pension income is going backwards very quickly in this environment.
The break at 62 is $3000 per person and at 65 is $15k per person if I am remembering correctly. Desiring to do ROTH conversions leading up to SS though complicates matters. Waiting until 65 means you can convert more without also paying state income tax, but then it might also affect when you plan to take SS and the effect on your tax bracket. Pension income takes all of our exclusion at both ages so any conversions are still state taxable, but overall less total money is taxable at age 65. Just something to complicate matters when looking at whether to do a Roth conversion or not and when trying to stay in the 12% bracket.
Also, all military pensions are now tax free in SC. Wish they'd do it for retired state employees considering the COLA is 1% and can't exceed $500. At least a tax break would help offset inflation. That pension income is going backwards very quickly in this environment.
It's all so individual based.
I left Texas because of the high prop tax which you really can't escape even with Ag exemption.
I was paying near $10K on my Ag Exempt ranch, $12K on my 6 acre home (1800sq ft) when I lived near Austin.
Even if I have to eventually pay SC income tax, prop tax, car tax it will be nowhere what I was paying in Texas.
Planning wise...Roth conversions would be good in Texas (no state income tax).
TMSretired, very true. Property taxes are much more reasonable in SC than alot of places, but having to pay property tax yearly on all vehicles regardless of age should be changed. If you have a new vehicle your yearly taxes could be over $500-800 a year for many years. 14 years later and you still are paying over $100 in property tax on that car! And a 20 year old boat could be $1000 a year!
How were the sales taxes in Texas? I know we are near 8% and even tax free Tennessee is only around 9%. I'd actually love to see where these income tax free states generate their revenue. ObviouslyTexas does it with high property tax, but Tennessee doesn't have high property taxes in comparison. I don't know about Florida.
Glad to see that state income taxes are being reduced ever so slightly over the next couple of years in SC though. At least something is going down. Might put an extra $20 in my pocket!
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