Retirement Planning: How Different States Tax Retirees
Retirement Planning: Choosing the right place to retire can save a bundle in taxes. 1 Minute Video from The Wall Street Journal…
Many people when conducting retirement planning use the presence or absence of a state income tax as a litmus test for a retirement destination. This is a serious miscalculation since higher sales and property taxes can more than offset the lack of a state income tax. The lack of a state income tax doesn’t necessarily ensure a low total tax burden.
States raise revenue in many ways including sales taxes, excise taxes, license taxes, income taxes, intangible taxes, property taxes, estate taxes and inheritance taxes. Depending on where you live, you may end up paying all of them or just a few.
This section of our Web site provides you with information on state income taxes, sales and fuel taxes, taxes on retirement income, property taxes and inheritance and estate taxes. as well as sales and fuel taxes. It is intended to give you some insight into which states may offer a lower cost of living. To check out the state where you want to retire, just select from the state menu above.
All states except Alaska, Delaware, Montana, New Hampshire and Oregon, collect sales taxes. Delaware collects a Gross Receipts Tax (GRT) which is a business and gross receipts tax that can total 2.07%. Some have a single rate throughout the state though most permit local city and county additions to the base tax rate. Those states with a single rate include Connecticut, District of Columbia, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Rhode Island, and West Virginia.
States with the highest sales tax are: Indiana (7%), Mississippi (7%), New Jersey (7%), New Jersey (7%), Rhode Island (7%), Tennessee (7%), Minnesota (6.875%), Nevada (6.85%), Arizona (6.6%), Washington (6.5%), Kansas (6.3%), Texas (6.25%), California (6.25%), and Illinois (6.25%).
Most states exempt prescription drugs from sales taxes. Some also exempt food and clothing purchases and a few also exempt non-prescription drugs.
Every state collects excise taxes on gasoline, diesel fuel and gasohol. The figures shown for each state reflect not only the price of the fuel but also federal and state excises taxes.Where applicable they include sales taxes, gross receipts taxes, oil inspection fees, underground storage tank fees and other miscellaneous environmental fees. They do not include the federal excise tax which is 18.4 cents for gasoline and 24.4 cents for diesel fuel.
Self Directed IRA, Checkbook IRA, Self Directed IRA LLC or Solo 401k (also known as Individual or Owner-Only 401k) should be utilized as a great tool for retirement planning.