5 Overlooked State Retirement Tax Considerations (Demystifying State Taxes)

by | Mar 2, 2024 | Retirement Pension | 17 comments

5 Overlooked State Retirement Tax Considerations (Demystifying State Taxes)




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In today’s video we take a make comprehensive look at the state taxes you may owe in retirement and how to find the most tax-friendly state for YOUR retirement.

Timestamps:
0:00 It’s Not Just About State Income Taxes…
1:49 State Tax Consideration #1
3:02 State Tax Consideration #2
5:12 State Tax Consideration #3
6:14 State Tax Consideration #4
8:29 State Tax Consideration #5
10:21 Choosing Your Ideal Retirement Location

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When planning for retirement, many individuals focus on factors such as savings, investments, and healthcare costs. However, one aspect that is often overlooked is state taxes. State taxes can have a significant impact on your retirement income, so it’s important to consider them when planning for your golden years.

Here are five state retirement tax considerations that you may not have thought about:

1. Social Security Taxation: While Social Security benefits are generally not taxed at the federal level, some states do tax them. Depending on your state of residence, you may have to pay state taxes on a portion of your Social Security benefits. It’s important to understand your state’s laws regarding Social Security taxation so that you can plan accordingly.

2. Pension Taxation: If you receive a pension from a previous employer, you may be subject to state income taxes on that income. Some states fully exempt pension income from taxation, while others only provide a partial exemption or no exemption at all. Make sure to check your state’s laws regarding pension taxation to avoid any surprises in retirement.

3. Property Taxes: Property taxes can vary widely from state to state, so it’s important to consider this when choosing a retirement destination. High property taxes can significantly impact your budget in retirement, so it’s important to research the property tax rates in potential retirement locations.

4. Sales Taxes: Sales taxes can also vary significantly by state, with rates ranging from zero to over 10%. High sales tax rates can erode your purchasing power in retirement, so it’s important to consider this when planning your retirement budget. Some states also have exemptions for certain items, such as groceries or prescription medications, so be sure to factor this into your calculations.

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5. Estate Taxes: Finally, estate taxes are another important consideration when planning for retirement. While the federal government has a high exemption for estate taxes, some states have much lower exemptions or have an estate tax that kicks in at a lower threshold. It’s important to be aware of your state’s estate tax laws and how they may impact your heirs.

In conclusion, state taxes can have a significant impact on your retirement income, so it’s important to consider them when planning for your golden years. By taking the time to understand your state’s tax laws and how they may affect your retirement income, you can ensure that you are financially prepared for a secure and comfortable retirement.

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17 Comments

  1. @pedepot

    States that tax pensions for people over age 60 STILL tax pensions for those of us below age 60. Need to include the details.

  2. @scottrudd3863

    The criminal politicians have to get their money some how. It all evens out.

  3. @amigatommy7

    There are good reasons sum states are cheaper. Cheaper is not 'Better'.

  4. @2Oldcoots

    Northern Nevada is Best by Test!

  5. @sallyprzybil2404

    Florida is more expensive than people realize. A huge expense is your property insurance due to hurricanes. Also, having your home hit, damaged by a hurricane is very emotionally taxing leading to health issues related to high stress such as heart attacks, strokes and worsening of many health issues. Texas has a very expensive economy especially DFW and other big cities. Property taxes in Tx are high. And the weather in Tx in summer is extremely hot, temps over 100 degrees for weeks, months, making it uncomfortable to impossible to enjoy outdoor activities. There are other things about different areas to take into consideration besides taxes.

  6. @sallyprzybil2404

    Missouri just changed their taxes related to Seniors in 2024. They’re giving Seniors bigger breaks. No longer taxing Social Security. In many counties they also freeze your property taxes so that tax won’t go up.

  7. @blushingangelswhimsy710

    They arewe going to get you, coming or going. One thing that helped us was to choose to live outside the city. We moved across the Tennessee state, from Memphis, to East Tennessee. We were paying about $6k on city & county property taxes in Memphis; we moved to a rural location in East TN, yet we are 7 minutes from the city. Our property taxes went from $6k, to $1k, a $5k savings, which is a great savings for our retirement income. Yes, there are taxes on our income and car plates are $80/car (we have 4), and sales tax is high, yet we aren't buying a lot, other than food. Car & home owners insurance seems to be going up every year, but that may be everywhere, not sure; when asking our State Farm agent about this year's car insurance increase, he stated that they went up to cover uninsured motorist….. We love East TN! It's one of the most beautiful places I've ever seen, and I've lived in CA, FL, MS, and traveled to RI, NV, WA, GA, SC, & NC. We call East TN, heaven on earth, it is that beautiful!

  8. @brandonswan9247

    Or you could live in the northeast where income tax is high and property tax is even higher. Also the cost / kwh of electricity is about 2.5X what it should be too. And of course houses are about 2X what they should be.

  9. @mikeestes5825

    As for states with a sales tax, it's important to note that prescription drug sales are exempt in all of them and that essentials like groceries are either exempt or taxed at a lower rate in a lot of them. Some even exempt over-the-counter medicine and clothing. The more you spend on essentials in those states, the less relevant sales tax becomes.

  10. @Redfour5

    I'm in MT with no sales tax. So, if you are young or have lots of money and buy a lot of things like cars, UTV's, travel trailers, RV's etc., MT might be the way to go. But as you retire, and/or you buy a lot less, then the states without an income tax might be the way to go.

  11. @RobMascarinas

    Looks like NV wins in almost all aspects.

  12. @tommcguire6472

    Not ONE of these sites will get a score of all the states, based on their data, and give us a list. Because they want you to watch the whole vid. This site tells me nothing. These youtube finance clowns are all thieves looking for clicks

  13. @jec5476

    The top marginal tax rate is a poor metric since the income level for that top rate is likely to be very different among those states. A better analysis would be the median tax rate.

  14. @mvp019

    I would want to stay away from Iowa, but it has nothing to do with its income tax rate!

  15. @goldengriffon

    An important topic, thanks!

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