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Oh, I'm sorry. I have posted it a few times and didn't realize that. I know it's accurate for my state so I just figured it was reliable. Sorry, scratch that.
You be the judge.
I am a retiree on pension and my Dw works p/t in a grocery store. Neither of us are old enough to qualify for the extra deductions for elderly.
When looking at some sites, you would see that all of our income is taxable and you would assume that as a retiree we would be paying 8.5% in income taxes.
However in reality when we file our taxes: our standard deduction, our exemptions, and our pension exemptions, add up to close to our gross income. How much is left over is not enough to exceed the lowest tax bracket. So we pay no income taxes.
I have routinely seen discussions on CD where folks were comparing states in which to retire, and who claim that this state would be 'bad' for retirees because we have income taxes which tax pensions. They assume that a pensioner would be paying that 8.5% income tax.
Looking at 'retirement living' now I see that it does seem to have been updated to show that there is a pension deduction.
My point in previous discussions has been that even in states which do have income taxes; some times you can move there and pay no income taxes. Simply because the standard deduction, exemptions, and other exemptions will add up your gross income.
The state of Tennessee does not tax retirement pensions, but does tax income from dividends. Tennessee also does not have a state income tax. Overall, the cost of living in some parts of Tennessee is lower than most other places.
I found it instructive to down load the tax forms for prospective states, look up the taxes and fees for licencing etc. and work up my situation using their structure and forms. This gives a more realistic view of the tax bite from one place to another. The reality is that states must get their money from someplace so if they don't tax in one area, they might tax highly in another. Or, your situation might be more advantageous under one tax scenario than another.
And then there is the looming problem of about 4/5th of the states having severe budget problems and the likelihood that whatever they do now will be changed as they try to stay above water. since baby-boomers continue to be a demographic bubble, tapping our money will continue to be an objective.
That's the right approach, IMO. You can find a lot of resources that will rank cities or states according to how much they tax a retiree. But, each one of them makes a set of assumptions about where the retirement income is coming from (e.g. how much from SS, IRA, etc.). I have my own spreadsheet with a lot of columns. Like Tesaje, I go to the state tax assessor web sites and fill out a form with my particulars to see what the state income tax bite will be for me. I do the same for property taxes, sales taxes, auto taxes, utilities...on and on. I also make sure I look at specifics that apply to me. For example, I could move to North Carolina and pay no state income tax, thanks to the state supreme court decision in the "Bailey versus state of NC" some years ago. We all have our unique situations...so...try a spreadsheet. And...I agree with Tesaje, that with so many states scrambling to make ends meet, state taxes could change before you pack up and move to your new location.
Even though time consuming, the individual state sites are the best route. I've had this discussion with people because I retired to a state that is not exactly senior tax friendly.
However, Wisconsin did change and are no longer taxing social security payments although they still tax private penion payments. This is why it is best to zero in on a few states and research their info directly with the state. Lists published cannot possibly keep up with all the changes.
Even though time consuming, the individual state sites are the best route. I've had this discussion with people because I retired to a state that is not exactly senior tax friendly.
However, Wisconsin did change and are no longer taxing social security payments although they still tax private penion payments. This is why it is best to zero in on a few states and research their info directly with the state. Lists published cannot possibly keep up with all the changes.
That and the necessity of using a mythical profile of the taxpayer. Often the sites don't disclose what that profile is so you can't tell and often, the profile chosen does not fit what a particular individual situation is even if they do reveal it. If the profile isn't what my situation is, the calculation is useless for me. Often, very far off.
There are some sates that are routinely cited as very tax unfriendly but in my situation, it could be favorable.
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