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Lumberton Ledger

 

 

 

Physical Address:

1238 S. Main

Lumberton, Texas 77657

 

Mailing Address:

P.O. Box 8031

Lumberton, Texas 77657

 

Phone: 409-751-5334

 

Email:

editor@lumbertonledger.com

lisa@lumbertonledger.com

 

 

© 2019 by Lumberton Ledger

Choosing a Retirement Destination

October 17, 2018

With health care, housing, food, and transportation costs increasing every year, many retirees on fixed incomes wonder how they can stretch their dollars even further. One solution is to move to another state where income taxes are lower than the one in which they currently reside.
But some retirees may be in for a surprise. While federal tax rates are the same in every state, retirees may find that even if they move to a state with no income tax, there may be additional taxes they're liable for including sales taxes, excise taxes, inheritance and estate taxes, income taxes, intangible taxes, and property taxes.
In addition, states tax different retirement benefits differently. Retirees may have several types of retirement benefits such as pensions, social security, retirement plan distributions (which may or not be taxed by a particular state), and additional income from a job if they continue to work in order to supplement their retirement income.
If you're thinking about moving to a different state when you retire, here are six things to consider before you make that move.

1. Income Tax Rates
Retirees planning to work part-time in addition to receiving retirement benefits should keep in mind that those earnings may be subject to state tax in certain states, as well as federal income tax if your combined income (individual) is more than $25,000. Combined income is defined as your adjusted gross income + nontaxable interest plus 1/2 of your Social Security benefits. If you file a joint return, you may have to pay taxes if you and your spouse have a combined income that is more than $32,000. If you see this scenario in your future, it may be in your best interest to consider a state with low income tax rates (Pennsylvania, Arizona, or New Mexico for instance) or no income tax such as Florida, Nevada, Alaska, Washington state, or Wyoming.

2. Income Tax on 
Retirement Income
Income tax on pension income varies for each state. Some states do not tax it at all. In other states, a portion of pension income is exempt, and still other states tax pension income in its entirety. Remember, however, that state tax laws, like federal tax laws, are always changing. Call if you have any questions about tax law changes in your state.

3. Tax on Social Security
In 2018, thirteen states tax social security income in addition to taxing social security income at the federal level. Among them are Colorado, Connecticut, Montana, New Mexico, Vermont, and West Virginia.

4. State and Local 
Property Taxes
Despite a decline in property values, property taxes have not decreased for most homeowners. Some states, however, offer property tax exemptions to retirees who are homeowners and renters. Again, this varies by individual state. Please call if you have any questions about your state or the state to which you are planning to move.

5. State and Local Sales Taxes
State and local sales taxes may or may not be a factor in the overall decision about where you decide to retire, but keep in mind that only five states, Alaska, Delaware, Montana, New Hampshire, and Oregon, do not impose any sales or use tax.

6. Estate Taxes
Estate tax may or may not matter, depending on your estate and whether you care about what happens to your estate after you die. Like other state taxes, estate tax varies depending on which state in which you reside. In fourteen states, there is a tax on estates below the federal threshold amount ($11.18 million in 2018). Hawaii uses the same threshold amount as the IRS when figuring federal estate tax, and New York will do so starting in 2019. Many states have no estate tax whatsoever including North Carolina, Delaware (repealed in 2018), Kansas, Oklahoma, and Arizona.

Final Thoughts
When it comes to retirees, relocating, and taxes there are a number of factors to consider-- including the overall tax burden. As you've read here, not all states are created equal. If you're thinking about retiring to another state, please contact the office and make an appointment with a tax professional who will help you figure out which state fits your particular circumstances.
Remember, “You retire only once. We retire every day ℠.”
With over 30 years financial expertise, Todd Hickman co-hosts a weekly financial radio show on NewsTalk 560AM KLVI, airing Saturdays at 6AM and Sundays at 11AM. You can reach Todd during the week at 409-840-6900 or by visiting his company’s website at http://savemyretirement.com. Asset Growth Associates is celebrating its 20th year in business.
Call today and speak to a tax and accounting professional you can trust. Detailed guides outlining subject matters such as Life Events, Business Strategies, Investment Strategies, Tax Strategies and the answers to 500 every day financial questions can be found free at http://savemyretirement.com.

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