When looking to move or retire, state and local taxes are an important factor to consider.  State and local income tax rates can range from approximately 0% to 14% depending on where you choose to live. Besides personal and state income tax, inheritance tax, sales tax, property tax, gas tax, and estate tax are also material costs to your personal finances and estate planning.  The difference between a high state tax vs low state tax environment can be very material to the available cash you have to live and enjoy life.  Taxes might not be the sole purpose of your move, but it could be an influential factor once you’ve narrowed down your selections. Typically the two biggest tax costs are income and sales tax.  Depending on your financial situation and spending habits, choosing a state that is exempt from sales or income tax may be a significant benefit to you. As you choose a state, be sure not to overlook a higher tax rate in one of the other taxes such as property tax.

---

 

Kiplinger has come up with a ranking system, based on a very complex taxation analysis, of the 50 states. Below are the top 10 that are most favorable for retirees.

Top 10: Most Tax Friendly States

1. Alaska
2. Wyoming
3. Nevada
4. Georgia
5. Arizona
6. Mississippi
7. Delaware
8. Louisiana
9. South Dakota
10. Florida

---

While these top 10 states may be the most tax favorable for retirees, the lifestyle opportunities in each state may or may not appeal to you.  With Nevada in the top 3 states, alongside Reno-Tahoe’s amazing lifestyle and Montreux’s spectacular luxury gated community, Montreux continues to land at the top of the list of the most discerning.  For more information on Nevada’s tax advantages, head over to our tax blog to get first-rate advice from Ashley Quinn, CPAs.

Bottom 10: Least Tax Friendly States

41. New York
42. New Jersey
43. Nebraska
44. California
45. Montana
46. Oregon
47. Minnesota
48. Connecticut
49. Vermont
50. Rhode Island

---

It’s important to know that these rankings take all taxes into account on an overall basis, and it may not reflect the personal taxation situation that you will experience in each given state. In most cases, the taxation of certain taxes, such as income tax, is based on a marginal income tax system, and the highest tax rate applies over a certain level of income. Some will have a high level of taxable income in retirement, and for those, it is important to keep in mind that they may be taxed in the highest possible bracket of certain states.

Whether you go for a top 10 taxation state, or not, it is important to take a good look at the state specific taxes for your income bracket as you plan for retirement.

---

For more on community news and taxation benefits, stay up to date with Parc Forêt and follow us on Facebook, Twitter, Instagram, and Youtube.