Members TampaYankee Posted November 10, 2010 Members Posted November 10, 2010 Tax-Unfriendly States For Retirees by Kiplinger staff Wednesday, November 10, 2010 Some states offer attractive tax benefits for retirees. Not these states, however. Here's our list of Tax-Unfriendly States for Retirees, either because of higher-than-average taxes across the board, or for policies that don't exempt much retirement income from state taxation. Where's the best state for you to retire? For retirees living on a fixed income, state income and sales taxes can really eat into your nest egg. California State Income Tax: 1.25% - 10.55% State Sales Tax: 8.25% Inheritance Tax: No The Golden State is a retiree's tax nightmare. Although Social Security benefits are exempt from state income taxes, all other forms of retirement income are fully taxed. Californians pay some of the highest income taxes in the U.S. State and local sales taxes can reach 10.5% in some cities and towns, although food and prescription drugs are exempt. Real estate is assessed at 100% of cash value, but taxes are capped at 1% of value. Rhode Island State Income Tax: 3.75% - 9.9% State Sales Tax: 7% Inheritance Tax: No Retirees face plenty of tax shoals in the Ocean State. Social Security benefits are taxed just like they are by the federal government. Rhode Island nicks virtually all other sources of retirement income, too. Starting this year, capital gains are taxed as ordinary income, eliminating the lower capital-gains rate in effect before 2010. The nation's smallest state also has one of the biggest statewide sales-tax rates -- 7% -- although it excludes food, medicine, some clothing and precious metal bullion. The Tax Foundation says Rhode Island's median real estate taxes are the fifth-highest in the U.S. New Jersey State Income Tax: 1.4% - 8.97% State Sales Tax: 7% Inheritance Tax: Yes Its nickname may be the Garden State, but New Jersey is a thorny thicket for some retirees. Median real estate taxes are the highest in the nation, according to the Tax Foundation. There are a few bright spots: New Jersey does not tax Social Security benefits and military pensions. It also allows residents 62 or older with incomes of $100,000 or less to exclude up to $15,000 ($20,000 for married couples filing jointly) of pensions, annuities and IRA withdrawals. Groceries, medicine and clothing are exempt from sales tax. The state imposes an inheritance tax on the transfer of real and personal property worth $500 or more, but bequests to family members are exempt. Vermont State Income Tax: 3.55% - 8.95% State Sales Tax: 6% (localities can add another 1%) Inheritance Tax: No There are no exemptions for retirement income in the Green Mountain State, except for Railroad Retirement benefits (which are exempt in every state). Out-of-state pensions are fully taxed. Vermont exempts medical devices and prescription and nonprescription drugs from its 6% sales tax. But it imposes a 9% tax on prepared foods, restaurant meals and lodging, and a 10% sales tax on alcoholic beverages served in restaurants. Real estate taxes have two components: school property tax and municipal property tax collected by towns and cities where the property is located. Iowa State Income Tax: 0.36% - 8.98% State Sales Tax: 6% (localities can add another 1%) Inheritance Tax: Yes The Hawkeye State allows single retirees to exclude up to $6,000 of retirement-plan distributions from state income taxes, and married couples can exclude up to $12,000. It taxes a portion of residents' Social Security benefits, although it is in the process of phasing out the tax. Food and prescription drugs are exempt from state sales tax. Real estate is assessed at 100% of market value, and most property is taxed by more than one taxing authority, such as cities, counties and school districts. There is a small homestead tax credit for residents who live in-state at least six months of the year. See the full list of 10 Tax-Unfriendly States for Retirees See original article at: http://finance.yahoo.com/focus-retirement/article/111229/tax-unfriendly-states-for-retirees?mod=fidelity-managingwealth&cat=fidelity_2010_managing_wealth Quote
Members Lucky Posted November 11, 2010 Members Posted November 11, 2010 Being honest about living in New York sure was a mistake for me. If they didn't know I had moved there I wouldn't have had to pay $300 a month in New York CITY taxes. I never earned a dime there, but paid them far more than I pay in California. Quote
Members TampaYankee Posted November 11, 2010 Author Members Posted November 11, 2010 Thankfully there still are a few states without income taxes. They deserve close scrutiny by the retired or retiring. I am unsure if any states give significiant tax breaks to retirees. Quote
Members TampaYankee Posted November 11, 2010 Author Members Posted November 11, 2010 Sorry Charlie, I accidently deleted your post. I am very sorry. Quote
Members MsGuy Posted November 11, 2010 Members Posted November 11, 2010 REPEAT AFTER ME (100 TIMES): I WILL NOT DELETE POSTS. I WILL NOT DELETE POSTS. I WILL NOT DELETE POSTS... ---- By the way, how's that thumbs up smilie project coming along? Quote
Members Lucky Posted November 11, 2010 Members Posted November 11, 2010 Sorry Charlie, I accidently deleted your post. I am very sorry. That could make a great line for a commercial. Why didn't I think of that? Quote
Guest glutes Posted November 12, 2010 Posted November 12, 2010 [Apparently Nevada is the State to move to for income tax avoidance... Quote