Thinking of Moving to Another State?

- Before you move, find out how much you owe in state taxes.

- Both short-term and long-term living expenses can be impacted by property and sales taxes.

- In certain states, legacy planning may be impacted by estate and inheritance taxes.

Considering relocating to a state that does not impose income taxes? Examining the entire tax picture in greater detail initially might be beneficial.

When choosing where to live, some people take the state income tax into account, but it's not the only tax that counts. Before deciding to move, consider these four important tax categories.

1. Income taxes

Wage income is not subject to state-level taxation in nine U.S. states. Even while income taxes are frequently the first thing that springs to mind for those who are thinking about moving, it's crucial to remember that other taxes can still be applicable.

Retirement may bring about a shift in the situation. In most states, Social Security payouts are not subject to state taxes, but income from pensions, traditional IRAs, and employer retirement plans is usually subject to both federal and, frequently, state income taxes.

To illustrate how taxes may vary by location, some assessments compare the combined federal and state taxes on withdrawals from retirement accounts, assuming things like federal standard deductions and no credits. When deciding where to retire, it can be useful to research state-specific regulations as methodology and exemptions differ.

2. Property tax

Property taxes are how local governments pay for public services like emergency response and education. From one region of a state to another, effective property-tax rates can differ substantially.

Texas is a prime example: county-level rates vary greatly, with some places having rates above 2%, yet the average effective property-tax rate is approximately 1.36%. Depending on eligibility, homestead exemptions or elder reductions may assist in reducing prices in a number of states.

Your home's worth and the location you choose to reside in have a big impact on how much you owe.

3. Sales tax

Spending power can be impacted by sales tax, especially for lower-income households that spend a larger percentage of their income on taxable items.

State-level sales taxes are collected in 45 states. Of those, 38 permit additional local sales taxes to be imposed by counties or cities. Certain categories, such as groceries and apparel, are excluded in some states; however, regulations vary depending on the kind of item or the price level.

Therefore, the combined state and municipal sales tax burden can still be significant even in states without income taxes.

4. Inheritance and estate taxes

The amount your heirs receive may be impacted by estate and inheritance taxes.

By 2024:

- There is an estate tax in 12 states and Washington, D.C.

- Six states have inheritance taxes.

- The only state with both is Maryland.

Reviewing the laws in the state where you currently reside or intend to relocate is crucial because rates and exemptions vary greatly.

The bottom line

One aspect of affordability is taxes. Insurance, housing, and medical expenses can all have a big impact, particularly for retirees who depend on their funds.

Knowing the full tax environment can help you make better financial decisions in the long run. You can assess how a move would impact your income, assets, and objectives with the assistance of a tax professional or financial planner.

Do you need assistance organizing your retirement move?

You can investigate how taxes and benefits might affect your retirement income with the assistance of the Retirement Group. Give (800) 900-5867 a call to speak with a professional about your circumstances.