Which States give retirees the best TAX breaks and deals? (pensions, weather)

[TootsieWootsie]

Texas gives you something like $28,000 off the cost of your home when you file your property tax after 60 or 65. Great deal!
Florida doesn't tax your earnings on stocks, bonds and so forth (like Texas), which is wonderful.
What other States make it worth a good look into moving to them? Taxes and costs are about my no. 1 concern right now.

[RichCapeCod]

Which state has the most advantages for a person hinges on a whole bunch of family/individual specifics. Where your earning/income is coming from, whether you buy or rent a home, car/s you own, etc. Some years ago I saw a study done by one of the larger financial investment (Bloomberg??) sites. It broke down all the states (and Wash DC) into four theoretical family income groups. Again, it was some time ago, but I recall they had basically a (all higher income) working family, a retired family and a family that received its income mostly from investments. The differences in what the various states cost these fictitious families was quite remarkable. Indeed, if a one lived just over the boarder of one state from a contiguous one they saved over $40,000 dollars a year in taxes!

OK, found the article (I saved it to my computer!). It's from April, 2000 and it is from Bloomberg Personal Finance. Here is how they listed their "Top" and "Bottom" ten states for being tax friendly:


TOP 10 Overall
1 Wyoming
2 Nevada
3 Washington
4 Tennessee
5 Alaska
6 Florida
7 Louisiana
8 South Dakota
9 Texas
10 Alabama


BOTTOM 10 Overall
42 D.C.
43 Nebraska
44 Oregon
45 Maine
46 Vermont
47 Wisconsin
48 Minnesota
49 New York
50 Montana
51 Rhode Island

Here's one quote from the article;

"Location, location, location. The first rule of retailing applies to your taxes too: Which side of the state line you happen to sleep on can make a jaw-dropping difference in the tax bill you pay. The contrast is starkest along the border between Wyoming (for the third year in a row, the wealth-friendliest state in our survey) and Montana (50th out of 51 jurisdictions)."

Hope this was helpful.

Rich

[normie]

Tootsie--this is a great subject to search for in the retirement forum archives. There have been a number of detailed threads in the last 6 months, which very useful links.

[StealthRabbit]

Originally Posted by RichCapeCod

.... It's from April, 2000 and it is from Bloomberg Personal Finance. Here is how they listed their "Top" and "Bottom" ten states for being tax friendly:


TOP 10 Overall
1 Wyoming
2 Nevada
3 Washington
4 Tennessee
5 Alaska
6 Florida
7 Louisiana
8 South Dakota
9 Texas
10 Alabama


BOTTOM 10 Overall
42 D.C.
43 Nebraska
44 Oregon
45 Maine
46 Vermont
47 Wisconsin
48 Minnesota
49 New York
50 Montana
51 Rhode Island

Here's one quote from the article;

"Location, location, location. The first rule of retailing applies to your taxes too: Which side of the state line you happen to sleep on can make a jaw-dropping difference in the tax bill you pay. The contrast is starkest along the border between Wyoming (for the third year in a row, the wealth-friendliest state in our survey) and Montana (50th out of 51 jurisdictions)."

yes a comprehensive and current list would be good, and it does depend on your situation and source of income. Most of these states continue to rank as shown, especial AK, TN, AL, WY; but the weighting might have been skewed to 'no-income-tax' states which have less value to most retirees, than favorable property, sales, and business taxes.

Due to the dated info I think WA and TX have dropped out of beneficial top 10 due to high property taxes (inflated RE). I will attest to the benefits of living along a state line with radically different tax structures (i.e. living and working in NO INCOME tax state, and having a NO SALES tax state 5 min away.) That is similar with WY - MT border mentioned. The last 'total tax burden' chart I saw had raised MT higher on the list, but WA had dropped to #45. I hear DE has some retiree positive tax benefits.

[TootsieWootsie]

I will try going thru the archives again per your suggestion as I am really interested in this.
Yes, Bloomberg (now changed hands and out of biz, I think) did some great studies. But where is New Hampshire, which is showing up as #2 now for less taxes, I wonder????

[StealthRabbit]

this site sticks NH at #44 (with 50 being worst) for retirement tax
http://moneycentral.msn.com/content/RetirementandWills/P45875.asp (broken link)

as with all charts it has problems... this one only looks at state capital cities, and thus the cost of homes and subsequent property tax is not too representative, data is a bit out of date too, with two of the property tax heavy states reporting lower than actual home values
Olympia, WA and Austin, TX; each ~ $156,000 and $152,000. Probably need to multiply those values by 150-180%. Property taxes would thus increase but not by same proportion.

NH is known for burdensome property taxes, so you would want to rent rather than own, and have your real estate equity in an income producing property in a more tax efficient state. (be advised NOT to own income property in a state with HIGH income taxes... that would torpedo the advantage). You could own NH income prop, IF you can pass the property taxes on to the tenants, and keep rental rates competitive. - of course if you have a prudent landlord, you will be covering their high property taxes while renting in NH.

here are some stats
NEW HAMPSHIRE
Sales Taxes
State Sales Tax: None. There is an 8% tax on lodging and restaurant meals and a 7% tax on two-way communications.
Gasoline Tax: 19.6 cents/gallon
Diesel Fuel Tax: 19.6 cents/gallon
Cigarette Tax: 80 cents/pack of 20

Personal Income Taxes
New Hampshire depends more upon real property taxes for revenue than most states since there are no general income, sales or use taxes. The state also receives substantial revenue from taxes on motor fuels, tobacco products, alcoholic beverages sold through the state liquor stores, and pari-mutuel betting. The state income tax is limited to a 5% tax on dividends and interest income of more than $2,400 ($4,800 for joint filers). A $1,200 exemption is available for residents who are 65 years of age or older.
Retirement Income: Not taxed.

Property Taxes
Local property taxes, based upon assessed valuation, are assessed, levied and collected by municipalities. To view the tax rates for each town, click here.
A state education property tax rate of $3.33 (2005) per $1,000 of total equalized valuation is assessed on all New Hampshire property owners. An elderly exemption for property taxes can be age, net income limits, including Social Security income, and net asset limits. Property taxes can be deferred but accrue interest at the rate of 5% per annum. The deferred property tax may not exceed more than 85% of the equity value of the residence. The deferral is available (if granted) by the assessing officials, to any resident property owner who is at least 65 years old. For single homeowners 65 and older who earn less than $5,000 and married couples who earn less than $6,000, $5,000 of their property's assessed value is exempt from taxes. In addition, the homeowner's other assets besides the home must be worth less than $35,000.

There is a Low & Moderate Income Homeowner's Property Tax Relief program in New Hampshire. Click here. You must own a homestead subject to the state education property tax; reside in such homestead as of April 1 of the year for which the claim for relief is made; have a total household income of (1) $20,000 or less if a single person or (2) $40,000 or less if married or head of a New Hampshire household.

Call 603-271-2687 for details on property taxes or click here for municipal tax rates.

Inheritance and Estate Taxes
New Hampshire's Legacy & Succession Tax was repealed in 2002 and is effective for deaths occurring on or after January 1, 2003. As a result there is no inheritance or estate tax.

For further information, visit the New Hampshire Department of Revenue Administration site or call 603-271-2191.

[mrschilicook]

Check out this website...
http://money.cnn.com/galleries/2007/...ndliest/5.html

We retired about 5 years ago and chased the "best tax break" thing in doing so. We temporarily located to Las Vegas NV where there are no income taxes, reasonable housing costs (from a Calif. perspective), property taxes comparable to Calif. From there we started searching for our ideal place which included low taxes.

Yes, Nevada is tax friendly..not just to seniors but basically to everyone....depending where your from, if you like living in the desert, if you like dust, dirt, and tourists (LOTS of 'em). In Las Vegas you have to also like heat. 110 during the day in the summer is normal....and it gets a bit oppresive after a few weeks of it. But as a temp. place, for us, it was a good home base while we began the search.

What we learned is that lots of states end up with being "tax friendly" but you may pay an arm and a leg for a home which eats up any paltry tax savings. Utilities may soar depending on where you go...again, tax savings down the drain. The general cost of living may outweigh any tax savings. Or worse yet, you may have managed to skip on the taxes, but you hate the place you've chosen to live.

For seniors, property taxes may far out weigh any income tax as "earned income" is generally small or non-existent. Only a few states tax social security, some give breaks to IRA's some don't. Some states tax pensions, some partially tax them, and some treat them like income. But depending on your source of income, it is taxed differently than "earned income" in many cases.

After searching all of the "income tax free" states like Texas (high prop. taxes), Nevada (high housing now, hated the weather) New Hampshire (high prop. taxes, LONG winters), Florida (too much humidity, too many problems, lots of hidden taxes), etc..we decided we needed to find someplace that had an overall reasonable cost of living. Reasonable income taxes, reasonable/low property taxes, low insurance rates, low auto registrations/personal prop. taxes, and generally an overall lower cost of living. AND someplace we loved that met our criteria (trees, water, boating, fishing, shopping, etc.).

When we quit focusing on "taxes" it did make the whole "where to retire" questions much less easier to answer and made the search less frustrating.

[brightdoglover]

I believe Colorado doesn't tax the first $20K of annual pension income.

[normie]

One other thing to remember--

Tax laws are not written in stone. Things can change, especially if a state suddenly has financial trouble. If you move to a state solely for tax reasons, you are taking a risk that it could all change and you would have nothing you liked about your new home.

[Ellwood]

Originally Posted by TootsieWootsie

Texas gives you something like $28,000 off the cost of your home when you file your property tax after 60 or 65. Great deal!
Florida doesn't tax your earnings on stocks, bonds and so forth (like Texas), which is wonderful.
What other States make it worth a good look into moving to them? Taxes and costs are about my no. 1 concern right now.

I think the quality of life is just as important as the cost of living. If you are bored and lack activities in the area you choose to retire, taxes are meaningless if you are unhappy. Although it is important to evaluate the cost of living, it is just as important to research the area for cultural, community, etc.