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Financially yes, but lifestyle-wise I am not fully certain yet. As multiple people mentioned on this thread in connection with state taxes on retirement income, other factors regarding a particular state may be far more important to a retiree than some extra tax that he or she may need to pay to that state.
As you may have noticed, I am not strapped for money, do not need to leave inheritance, have not retired extremely early (60 was early-ish for my profession in general, but I know someone in the same profession who retired happily at 42), and am not trying to maximize my money - most definitely not at the expense of something I enjoy. I have bought my second (West Coast) base for a particular reason: I enjoy returning to a certain place repeatedly and spending there some extended time (I figured 5 weeks at a time is the best length of time for periodic returns). In the 20 years that I worked on temp contracts, I had gotten into the rhythm of being regularly away from my main home for blocks of time, and it would be hard to abandon that habit in retirement. And the cheapest way to maintain that habit is actually to own a second home in some pleasantly exciting place.
Also, despite my love of travel, I prefer to travel to an entirely new place only once per year, so that I have plenty of time to prepare, and then savor memories and read more about the place I visited ... until I am ready to start preparing for another one. So, traveling to the West Coast 3x per year, and to Europe or Asia once per year, with maybe a train trip across the Western US once a year in some years, would be the best rhythm for me.
But I did not anticipate such a tremendous decline of my Western base city....
As you said, some cities do come back. The particular suitability of my Western base city for being the center of the upcoming AI technologic revolution may support the turnaround, ie, the return of that city to the good days of the 2000s when I spent a lot of time working there, from which time I have fabulous memories, and during which time I bought my pied a terre condo there. But in the last few years the city has been, and continues being, extremely mismanaged. Like many other people, I am watching intently this CA tax measure which I mentioned upthread, which will go for vote in Nov 2024. If it passes, it will significantly curb the ability of various incompetents and mental patients who have been ruining my particular 2nd city to continue running it into the ground. So, I figured I'd wait and see what happens at the end of 2024. The outcome of that ballot in CA will majorly determine my further plans. That's my story regarding "where to live in retirement" basically :-). Since my full-year home is in MA, my only tax concern in CA are property taxes (and of course quality of life, but QOL is essentially the same concern as property tax, because the same people and factors that are driving property taxes up are also driving local QOL down). Property taxes are already high in CA, but if the measure passes in Nov, all taxes will at least be frozen at the current %, and no new ones added. That should also encourage tech kids to come back and work on AI, which should lift the QOL in the city back to the high level, plus will hopefully drive the political grifters out of town, since the tech kids won't be electing that kind of people to run the city. So yes, there is still some hope, and Nov 2024 will be critical to see whether the hope is realistic....
I lived in the Bay Area 1988 to 2002 and Monterey in '82-'83. So, I do understand the appeal of SF. I know it is way different there now than it was in the 80's and 90's and I was shocked when I was there briefly in '13. I still have friends in the Bay Area and in that sense I never really left. It was a very difficult transition to leave and it took years before I stopped feeling compelled to move back. I guess that's where the song "...I left my hear in SF..." comes from
I pay through the rear to live where I live and I get that sometimes when you pay more for something you actually get more. But, I think retirement might take some concessions from me (or at least the consideration of certain concessions).
I bought the condo for $285k cash, and if I sell it for $400k, realtor fees would be $24k, so taxable gain would be about $100k, ie, I would net about $70k, plus I'd get back the $285k with which I bought it, which is a total of about $350k. .
Not so fast Missy. You forget you need to pay both capital gains tax & income tax.
Figuring 15% of that $100K goes to capital gains tax. The remaining money becomes your income for that year at 26% federal income tax bracket + your beloved state of Massachusetts wants a 5% of your flesh.
I think you'll also need to pay Obama care tax, not sure.
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Quote:
Originally Posted by BigfishTim
Not so fast Missy. You forget you need to pay both capital gains tax & income tax.
Figuring 15% of that $100K goes to capital gains tax. The remaining money becomes your income for that year at 26% federal income tax bracket + your beloved state of Massachusetts wants a 5% of your flesh.
I think you'll also need to pay Obama care tax, not sure.
Not so fast Missy. You forget you need to pay both capital gains tax & income tax.
Figuring 15% of that $100K goes to capital gains tax. The remaining money becomes your income for that year at 26% federal income tax bracket + your beloved state of Massachusetts wants a 5% of your flesh.
I think you'll also need to pay Obama care tax, not sure.
What remaining money? I paid $285k in cash (after-tax savings - I keep the cancelled check) to buy the condo, and there was no mortgage. So, $285k is not taxable again anywhere for any reason. Only $100k capital gain is taxable at 15% to IRS, and I am looking at 13% California state tax (although the total tax will be less than that; that is only the marginal tax bracket). MA gives tax credit for what I paid in tax to CA, so I don't pay any tax for this transaction in MA. Thus, after about $30k tax , my net gain is about $70k, and I get back my $285k with which I bought the condo, which is a total of about $350k.
What is Obama care tax? You mean extra 2% or so that they charge on annual income above $250k (or some similar cutoff, I don't remember any more - I used to pay that to the IRS, but have not paid it in a while)? I won't owe that because my annual inconme will be well below that cutoff.
Thus... a major free lunch. (You can eat well on $500k IN YOUR POCKET every 24 months)
If you sell it yourself... There's another $24k in your pocket. BTDT on 38 of 40 properties.
But this is not my primary residence (and never has been). The amount of $250k (or $500k for couples) is exempt from tax if you sell your primary residence, not if you sell just any personal residence. It used to be that you could apply this tax exemption to any personal residence where you resided in 2 of the most recent 5 years, but the law changed I think in 2009, after which it has been allowed to apply this exemption only to the sale of primary home.
I lived in the Bay Area 1988 to 2002 and Monterey in '82-'83. So, I do understand the appeal of SF. I know it is way different there now than it was in the 80's and 90's and I was shocked when I was there briefly in '13. I still have friends in the Bay Area and in that sense I never really left. It was a very difficult transition to leave and it took years before I stopped feeling compelled to move back. I guess that's where the song "...I left my hear in SF..." comes from
I pay through the rear to live where I live and I get that sometimes when you pay more for something you actually get more. But, I think retirement might take some concessions from me (or at least the consideration of certain concessions).
Well, I'm ok with paying more in order to get more, but am not ok with paying much more to get much less - which is what is happening now with planned "redistribution" of "wealth" in SF to the homeless, unless that plan is halted by the CA ballot measure I mentioned in Nov 2024, which would give the actual taxpayers a decisive say in what is a reasonable property tax and how it may be applied.
But this is not my primary residence (and never has been). The amount of $250k (or $500k for couples) is exempt from tax if you sell your primary residence, not if you sell just any personal residence. It used to be that you could apply this tax exemption to any personal residence where you resided in 2 of the most recent 5 years, but the law changed I think in 2009, after which it has been allowed to apply this exemption only to the sale of primary home.
Thank you for clearing this up. I know for a fact, when I sold my home in CA, in order for me to take advantage of that tax break, it had to be my primary residence. I think you need to live in it at least 6 months of the year. Rental properties, vacation homes and part time homes don't qualify.
I lived in the Bay Area 1988 to 2002 and Monterey in '82-'83. So, I do understand the appeal of SF. I know it is way different there now than it was in the 80's and 90's and I was shocked when I was there briefly in '13. I still have friends in the Bay Area and in that sense I never really left. It was a very difficult transition to leave and it took years before I stopped feeling compelled to move back. I guess that's where the song "...I left my hear in SF..." comes from ...
We lived inthe Bay Area from 1980 -2010. We still have friends in the Bay Area as well. When we return to the Bay Area for events such as weddings and birthday parties and the like, we are astonished at its decline. Everything is in a state of disrepair. Weeds and trash. Potholes. Filth. Excrement. Soul-crushing traffic.
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