Ever thought about retiring to a tax-advantaged state to lower your bills? Do you really think it’s worth it?
With help from Mary Beth Franklin of Kiplinger, we found that we need to look at the big picture when deciding – focusing only on state income taxes isn’t enough.
Many states have an income tax but offer generous exemptions for retirement income. This can often end up leaving you better off overall.
Many of them exclude government and military pensions from income taxes, too, or offer blanket exclusions up to specific dollar amounts for a wide variety of retirement income.
Plenty of retiree tax heavens furthermore exempt Social Security benefits from state income taxes.
One important thing to bear in mind are local taxes. Municipalities sometimes impose hefty property taxes or layer local sales taxes on top of statewide levies.
A final thing – federal taxes. If you claim the standard deduction, they’ll be the same no matter where you live.
If you itemize your deductions, however, you’ll be able to write off real estate taxes and state income taxes, which reduces your federal tax bill and can make life that little bit easier.
So always remember to total up the entire bill – don’t only look at the income tax in a particular state – and if you’re not sure, get professional, fee-only advice.
Best to get a proper grasp of the situation before making any hasty decisions.