10 BEST and WORST U.S. States for Taxes

[ELVIS ZEPPELIN]

Taxes could easily end up comprising a large percentage of your expenses. Most states have sales taxes, income taxes, property taxes, gas taxes, estate taxes and inheritance taxes just to name a few. It makes sense to consider seriously the taxes each state imposes when deciding where you wish to live in retirement. While you probably will not move solely for tax benefits, picking between two locations could be decided by your financial situation and how much you can afford to pay toward taxes in your golden years.
Two of the heaviest taxes most retirees pay are income taxes and sales taxes. Depending on your income source and your consumption habits, it may make sense to consider states that lack an income tax or a sales tax so you can afford to live a comfortable life. Be sure to consider the whole tax environment of a state, since states often make up for the lack of one tax with a higher tax in another area, such as property taxes.
10 States with Most Favorable Taxation for Retirees
Analyzing which states favor retirees the most when it comes to taxation is a very complex task. Kiplinger has completed this analysis and has determined the top ten most tax-friendly states for retirees in 2014, as listed below.
1. Alaska
2. Wyoming
3. Nevada
4. Georgia
5. Arizona
6. Mississippi
7. Delaware
8. Louisiana
9. South Dakota
10. Florida
If you move to any of the above states, your finances will probably thank you. Of course, none of these states will seem like suitable retirement options for some people.
10 States with Least Favorable Taxation for Retirees
If you have enough money, you can live anywhere you want in retirement with no regard for the taxes you pay. However, you may still want to avoid a few states due to their heavy taxation of retirees. Kiplinger has also compiled a list of the top ten least tax-friendly states for retirees in 2014, as listed below.
41. New York
42. New Jersey
43. Nebraska
44. California
45. Montana
46. Oregon
47. Minnesota
48. Connecticut
49. Vermont
50. Rhode Island
Keep in mind these rankings take all taxes into account on a high level, overall basis. Your personal situation could result in a very different tax situation to the general population. In general, most states base their income taxes on a marginal income tax system, with the highest tax rate applying to all income over a certain level. For those that plan to have a large amount of taxable income in retirement, try to avoid states that have high income tax rates in their top tax bracket.
No matter where you decide to retire to, make sure you fully examine your retirement tax situation so that you avoid the shock of your first tax return of retirement. The types of income you will have in retirement can differ greatly from the wage income you earned your entire working career.

[mthomas]

For those that care about US politics, you might also want to keep in mind that most of the Good Tax states are Republican (Red) - with possible exception of NV, DE and FL,
and the Bad Tax states are mostly Democrat - with exception of Nebraska and Montana, based on how they voted in past Presidential elections.

Just something to keep in mind when determining where to retire and who to vote for in future elections! (that is if you like keeping more of your money, lol)

Of course, there are always other options like retiring to a country with cheaper living expenses.
Although, I believe if you earn money in a foreign country (and live there) but you still retain US citizenship you will have to pay US income taxes on that money.
(and possibly the other countries taxes as well?).

I'm not 100% sure of that but thought I heard that was why a lot of high income people were giving up their US citizenship when they were living and working abroad.

Again, I am NOT a lawyer nor do I play one on TV, so make sure you ask someone that is a tax/accounting expert about possible tax consequences of moving abroad and/or giving up your US citizenship.
(which generally I would say is NOT a good idea, especially since so many people would give just about anything to get one!)

Just my two cents!

[rocky12]

(04-01-2015 07:39 AM)mthomas Wrote:  Although, I believe if you earn money in a foreign country (and live there) but you still retain US citizenship you will have to pay US income taxes on that money.
(and possibly the other countries taxes as well?).

You are 100% correct that the U.S. demands taxes on foreign income earned by citizens living in other countries. I am not a lawyer or accountant either, but I believe the way it works is that you get a credit for taxes paid to the other country, and if the foreign taxes are less, you pay the difference to the U.S.

I know of a couple foreigners with green cards who had to hire attorneys to fight IRS demanding income taxes on income they earned in their country of citizenship in addition to income earned in the U.S.

Although I am not 100% certain about this either, I believe that (in part, anyway) the reason there is so much press about corporations not paying "any" taxes or very little taxes is because they pay foreign taxes on much of their income. So they do (theoretically) pay some taxes, just not all to the U.S.

[NotSo Invisible]

Living anywhere else in the world having a US Citizenship is a liability in today's world. Better just retire, sit and watch TV wishing you were born somewhere else... You should have plenty of time to daydream as well... Just saying.

[ELVIS ZEPPELIN]

(04-01-2015 07:39 AM)mthomas Wrote:  For those that care about US politics, you might also want to keep in mind that most of the Good Tax states are Republican (Red) - with possible exception of NV, DE and FL,
and the Bad Tax states are mostly Democrat - with exception of Nebraska and Montana, based on how they voted in past Presidential elections.

Just something to keep in mind when determining where to retire and who to vote for in future elections! (that is if you like keeping more of your money, lol)

Of course, there are always other options like retiring to a country with cheaper living expenses.
Although, I believe if you earn money in a foreign country (and live there) but you still retain US citizenship you will have to pay US income taxes on that money.
(and possibly the other countries taxes as well?).

I'm not 100% sure of that but thought I heard that was why a lot of high income people were giving up their US citizenship when they were living and working abroad.

Again, I am NOT a lawyer nor do I play one on TV, so make sure you ask someone that is a tax/accounting expert about possible tax consequences of moving abroad and/or giving up your US citizenship.
(which generally I would say is NOT a good idea, especially since so many people would give just about anything to get one!)

Just my two cents!

You're right about party affiliation and higher tax rates. For the most part, it's simply the truth.
Max Reps for bringing up this point.

[ELVIS ZEPPELIN]

(04-01-2015 11:11 AM)rocky12 Wrote:  

(04-01-2015 07:39 AM)mthomas Wrote:  Although, I believe if you earn money in a foreign country (and live there) but you still retain US citizenship you will have to pay US income taxes on that money.
(and possibly the other countries taxes as well?).

You are 100% correct that the U.S. demands taxes on foreign income earned by citizens living in other countries. I am not a lawyer or accountant either, but I believe the way it works is that you get a credit for taxes paid to the other country, and if the foreign taxes are less, you pay the difference to the U.S.

I know of a couple foreigners with green cards who had to hire attorneys to fight IRS demanding income taxes on income they earned in their country of citizenship in addition to income earned in the U.S.

Although I am not 100% certain about this either, I believe that (in part, anyway) the reason there is so much press about corporations not paying "any" taxes or very little taxes is because they pay foreign taxes on much of their income. So they do (theoretically) pay some taxes, just not all to the U.S.

The Fed does not care if you paid a 100% tax on money earned anywhere else in the world.
They want their cut, period.
Max Reps for your comment.

[ELVIS ZEPPELIN]

(04-01-2015 08:08 PM)NotSo Invisible Wrote:  Living anywhere else in the world having a US Citizenship is a liability in today's world. Better just retire, sit and watch TV wishing you were born somewhere else... You should have plenty of time to daydream as well... Just saying.

Thanks for your comment and Max Reps

[cloneofclone]

You are exempt up to just over $90,000 a year as an individual to the USA (still on the hook for local taxes in the other country)...and as someone stated above if you hold a green card in the US and move away you are on the hook as well...the USA is one of 2 countries in the world (the other Eritrea which ironically the USA lambasted for their tax policies) that have taxation no matter where in the world you reside or where that income was generated....the other thing is thanks to the passage of FACTA it has become cost and resource prohibitive for foreign banks to offer the most basic services to those living and working outside of the US.

Lastly regarding the taxation above if you factor in the minuscule returns on those that have saved (ie: retirees) even the low tax states offer little respite from feckless US taxation and monetary policies...

And given that we have the smartest man on the planet as President it must be by design....

[ELVIS ZEPPELIN]

(04-02-2015 02:01 AM)cloneofclone Wrote:  You are exempt up to just over $90,000 a year as an individual to the USA (still on the hook for local taxes in the other country)...and as someone stated above if you hold a green card in the US and move away you are on the hook as well...the USA is one of 2 countries in the world (the other Eritrea which ironically the USA lambasted for their tax policies) that have taxation no matter where in the world you reside or where that income was generated....the other thing is thanks to the passage of FACTA it has become cost and resource prohibitive for foreign banks to offer the most basic services to those living and working outside of the US.

Lastly regarding the taxation above if you factor in the minuscule returns on those that have saved (ie: retirees) even the low tax states offer little respite from feckless US taxation and monetary policies...

And given that we have the smartest man on the planet as President it must be by design....

You know it. It's all by design.
Well, you know what good ol' Mark Twain said:
"If voting made any difference they wouldn't let us do it"
Max Reps...