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We were fortunate to move to our retirement location eight years prior to DH's retirement, a few years ago to be near family. The nice bonus to this is having no income tax in FL, which means DH no longer pays 6.65% in NY income tax. The amount we have already saved in the three years here and in the projected next five years is significant.
We still live in NY for four months of the year and DH keeps a log of days worked in NY while we are there. Any day worked in NY over a certain amount triggers state income tax, which we pay. It's a minimal amount now since his time worked in state is small.
We never thought about the tax consequences until after we moved and saw the first paycheck being a FL resident and employee. A no income tax state is very important now and will continue to be later in retirement for us, but not as much as being near family.
I have a saying: The tax tail should never wag the economic dog and at a higher level, neither should the tax tail or the economic tail wag the emotional or quality of life dog. I personally can't imagine moving somewhere solely because of tax considerations but realize everyone is different.
I have a saying: The tax tail should never wag the economic dog and at a higher level, neither should the tax tail or the economic tail wag the emotional or quality of life dog. I personally can't imagine moving somewhere solely because of tax considerations but realize everyone is different.
You are completely right. But. . . . on the flip side of that arguement, the tax tail should be a factor in determining where you are moving once it is determined you are moving. Let's use this for example. If you are in a state like RI that has higher taxes for you going into retirement and you have an option of moving just across the border to MA at a lower cost and still are close to family then why not. Or if weather is an issue then while looking keep taxes in mind as well as the other costs in moving and relocating. Putting together a new support system in your new home will take time and effort. You will need to depend on people in your new location to help you navigate through the local process.
I think once your retired, state taxes wouldnt be that big of a factor seeing as your income would be much less than your working years.
Not entirely true. In retirement you are more likely in a fixed income situation. Your property values will continue to rise and also your property taxes will rise. You will be hit with rising costs and no rising income. Income taxes in some states are still taken from retirement pay as well. You are right though because you will have less income taxes will be less. That said however taxes as someone said should not be driving the train. It only should be a factor to consider if and where.
I think once you're retired, state taxes wouldnt be that big of a factor seeing as yourincome would be much less than your working years.
For the majority of people, yes, but there are substantial numbers of people who have as much or more income in retirement as they did when working full-time. Not everyone makes a lot of money while working. I never did make any money to speak of during my 34 years as a high school teacher, and while it's embarrassing to admit that, these discussions require a little honesty if they are not to be skewed.
So when I say that I have as much income now as I ever did (my pension plus additional money I put aside), it sounds like I am a fat cat but that's not so, as the amount is still modest.
I have to agree with Cnynrat about CA. The tax burden re property taxes is MUCH different for someone moving into the state than for a long time property holder already living in CA. There are also those interesting local taxes called MelloRoos or something, which are fair, but should be investigated before making a purchase decision.
Always a wise move to research before jumping in...
Thankfully, Property Tax in California is very simple to understand...
In a nutshell... the tax is based on the Fair Market Value at Transfer (Purchase Price 99% of the time) and annual increases are capped at 2% with voter approval for new assessments...
Prop 13 replaced volumes of tax code with a few short paragraphs...
There are also other Property Tax measures outside of Prop 13 that may allow a senior a one time downsize retaining current tax basis...
Another is exempting some Parent Child Transfers from reassessments... these are not automatic and must be applied for.
I know, ridiculous, isn't it! I'm surprised so many people are moving there these days...maybe they don't realize it until they get there?
As the posted website explains, those were the income brackets for singles and should be doubled for married filing jointly. Many of the people moving to Oregon are from California and are used to paying high taxes. To them the lower real estate and rental costs in Oregon are a bargain.
But I still don't think the taxes would be that bad in your case. Assuming you have an federal Adjusted Gross Income of $40k that you mentioned in a previous posting which is about a $2K federal income tax, Oregon allows you to deduct your federal tax of $2k, federal itemized deductions (assume standard deduction of $12,400), $4160 in Oregon standard deductions, and tax credits of $191 per person. This results in a state tax of $1080 - probably not that much more than your yearly costs for air conditioning in AZ.
Once you turn 62, you are allowed to deduct up to $1800 per person in medical expenses to include health insurance premiums assuming that amount was not deducted on the federal return. In your case with two persons, this would reduce your tax bill to $800. Your main issue will be cost of housing and property taxes. Not sure if housing is that much less expensive in Washington. You might want to look at Idaho or around Reno or southern Colorado.
I think once your retired, state taxes wouldnt be that big of a factor seeing as your income would be much less than your working years.
Yes, our income in retirement is about 40% less than when working, so we need to save where we can. If we stayed in CA the state income tax and the property tax (in excess of the prop. tax we pay in TN) would be an additional $6500 out of our budget annually. That's 8.6% of our gross income, and would amount to the largest thing in our monthly budget other than our mortgage.
Last edited by TheShadow; 10-05-2015 at 01:06 PM..
I'm still 3-4 years away from retiring, but my DH and I are considering a move at that time. Arizona's state income tax rates are very reasonable, but we have been considering other states for a change. We haven't ruled out Arizona either, there is a lot to like here, but we are checking out the options. We've lived here for over 20 yrs and the heat begins to take its toll. Cooler areas like Flag and Prescott have housing that is too expensive for our budget.
If you moved to another state in retirement (or are also considering a move), how important of a factor was the income tax tax rate to where you moved? For example, I would love to live in Oregon, but their income tax rates look crazy. I don't know exactly what our income will be, but not a lot. I'd say less than 40K per yr. and after paying for medical coverage, who knows?! We'll be in our late 50's so medicare won't be there for at least 5 yrs. I know there are other taxes to consider too, like property taxes, so it all gets a bit dizzying after a while.
I'm interested in what others have experienced after moving and/or discovered in researching places.
One thing to consider about Oregon is they don't tax social security income so only your income excluding ss income is taxed by Oregon. Also, Obamacare is a maximum of 9.5% of your income. Lastly, no sales tax in Oregon. I have found though that, in general, housing costs in Oregon are higher than Arizona so that's something to think about.
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