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Reading the post about taxes in Washington State made me wonder....

What is the best State to retire in, from a tax standpoint?

Florida is much like Washington, no income tax but a tax on everything else. My Florida property taxes were 12 times what my North Carolina property taxes are, on an acre by acre basis....

So, anyone got any ideas?

Chuck
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What is the best State to retire in, from a tax standpoint?

From a tax standpoint, I would say that it's the state where the highest majority of people believe that the government that governs best, governs least. Montana comes to mind, but I can't say for sure.

4goneFool

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Hi Chuck,

There was a post a while back concerning this matter. I can tell you this much, as total taxes as percentage of income is concerned:
Washington is #6 @37.33%
Florida is #9 @36.50
Wyoming is #14 @35.94
Arizona is #19 @35.40
New Mexico is #20 @35.20
Oregon is #24 @35.01
Indiana is #25 @34.98
Georgia is #28 @34.70
Missouri is #34 @34.00
Texas is #36 @33.92
Colorado is #39 @33.85
North Carolina is #40 @33.68
Tennessee is #42 @33.47
South Dakota is #44 @33.19
New Hampshire is #46 @33.03
Alaska is #47 @32.92
Arkansas is #49 @32.75
Alabama is #50 @32.73






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Wrong again.

Montana is #35 of 50 states @33.98. While there is no sales tax, exc in certain resort areas, State and local taxes amount to 11.25% which rank it #25.
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I like East Tennessee. I live in a little town outside of Knoxville, TN called Maynardville in Union County. We have a house and ten acres. Our taxes are around $436 per year for our property. We have lived in our house for 13 years and have never been broken into. We have big sliding glass doors and all you would have to do is throw a rock and walk in. Our house sets in the middle of a huge woods so it is completely private. Land and housing values are probably some of the cheapest in the United States. Housing around Knoxville and East Tennessee is cheap compared to the rest of the country. Our weather is quite mild. We don't have excessively hot summers with bugs like Florida and our winters are mild as compared to most places up North. Snow Skiing is accessible though in Gatlinbury and North Carolina in the mountains. We don't get the hurricanes like our neighbors in North Carolina and we are on a tectonicallly stable area since the Appalachians are so old (no earthquakes). There is no state income tax in Tennessee. Most of the people who settled this area were Scotch Irish so they don't really like the goverment or anyone else for the matter messing in their affairs. You can build pretty much any kind of house you want to here without interference. This is a right to work state so you don't have to have Union workers do the work; i.e. you can get a house built cheap here if you would prefer that to buying. Although Knoxville is a buyers market and has been for the 18 years we have lived here. There are five major TVA resevoirs close by that are full of fish. Norris Dam is very clear in the spring and Summer and I enjoy skin diving in it. Trout fishing is excellent in the tail waters below the dam. The Great Smokey Mountains are only about 40 miles away and it is the most visited National Park in the United States. Knoxville has a bike path that is probably more than 12 or 15 miles long that runs from the Worlds Fair Park all the way to West Knoxville. East Tennessee is extremely accessible due to the fact that I-75 and I-40 run through it. If you like to visit Florida to go to the ocean to Scuba Dive it is only a short drive away also. East Tennessee is also only 3 1/2 hours from Atlanta the New York of the South. We have a beautiful new Airport that is going to make Flying in and out of Knoxville even easier. Nashville, Tennessee is also quite close if you like Country Music.



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Wow, thanks Cowboy...

I'm surprised there isn't a bigger difference between #6 and #50....
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To get my license plate registration each year only costs me $24/year (Tennessee) Also we don't have to have our cars emission tested. Tennesseans pretty much don't like any goverment intrusion in our lives.
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Oh there's a difference when you compare the other figures of combined state and local taxes.
A BIG difference:

New Mexico is #7 @12.19%
Washington is #8 @12.06
Oregon is #23 @11.16
Indiana is #24 @11.14
Montana is #25 @11.12
Florida is #32 @10.88
Arizona is #33 @10.83
South Dakota is #35 @10.74
Georgia is #36 @10.72
North Carolina is #38 @10.58
Missouri is #39 @10.49
Texas is #41 @10.27
Alabama is #45 @9.73
Colorado is #46 @9.65
Tennessee is #47 @9.45
New Hampshire is #48 @7.66
Alaska is #49 @7.61
Wyoming is #50 @7.29



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Wrong again.

Sorry. I guess I didn't realize my record was being tracked.

Montana is #35 of 50 states @33.98. While there is no sales tax, exc in certain resort areas, State and local taxes amount to 11.25% which rank it #25.

You did say this was based on a percentage of total income, right? A retiree might find advantages that a full-time wage slave can't exploit. But I guess it makes sense that if the state government doesn't have to plow snow or repair frost damaged roads, they could have lower taxes. Alabama certainly qualifies in that respect. Still, I think reducing the role of government does more to decrease taxes that anything else. State govenments study demographics just like other marketers of products. The Florida state government knows it has a high percentage of non-wage earners. It therefore looks away from income and toward other sources for tax revenue. If retirees also expect more roles from their governments, this will drive taxes up. Then again, a high percentage of retirees drives down the percentage of kids needing publicly funded education.

Too many variables, brain overload.

The most revealing point of the survey you quoted is that the spread isn't that wide. IOW, it's hard for one state to obtain and retain an advantage, because pressure to provide the same services as other states is high.

4goneFool
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I found an interesting URL with state tax rates:

http://www.taxadmin.org/fta/rate/ind_inc.html

phantomdiver
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Having lived in several of those states, I can tell you than MT and WY plow as necessary, don't use salt & only cinders. State & County roads are taken care of best, because that's the tax base. We don't rely on Fed. funding to maintain our roads. And, when we do repairs, we don't use concrete.

With regards to FL, I've found that most retirees become "half-backs" after about five years or a couple of hurricanes. "Half-backs" are people that don't want to go all the way back to PA, NY or whereever, up north. They stop half-way back in GA, NC, SC & TN.

FL's Blue Cross and Blue Shield (in todays WSJ) has reversed itself on health care ruling. And that might stop the flow of recently downsized people from flooding into the state. I doubt it, but we can hope.
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To cmorford, Keep it quiet. You are already really close. But, don't tell everyone or it won't remain true. The answer is New Bern, North Carolina. I have travelled the World, and researched the entire US. New Bern is the answer. I'll explain later if you are interested, but it involves big fresh water, huge salt water, lack of flooding, protection from hurricanes, no earth quakes, low taxes, ambiance, historical significance, infrastructure, politics, and kind, honest down home folks.

Now, keep it quiet.
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He and I both know about it. Nice place but too far east for me.
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ariechert wrote:

... There is no state income tax in Tennessee.

Well, let me qualify that. There is no income tax on earned income... yet. (The governor is trying to change that.)

There is, however, the infamous Halls tax of 6% on dividends and interest. Not yet sure how that would affect 401(k) and IRA withdrawals... afraid to look.
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Ok, so, spill....

I have considered New Bern (or Oriental) as a home base when I start my cruising life, but what do you think makes it so special...

BTW, I actually live in Fuquay-Varina, about halfway between Raleigh and FayetteNam...
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I agree with Wycowboy. New Bern is way too far East. Everyone else take note. Stay away from New Bern, NC. It is too far to the East.
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for phantomdiver:

Thanks for the URL. I plan to move to Nevada in a few months. The site you gave says (ah, sweet music . .) Nevada: No State Income Tax.

Nevada has not previously been mentioned in this discussion. It's currently the fastest growing state in the Union.

More sites:

http://boards.fool.com/Message.asp?id=1380025000382000&sort=id
http://boards.fool.com/Message.asp?id=1380025000382001&sort=id
http://www.taxfoundation.org/prstatelocal99.html state tax burden
http://www.taxfoundation.org/prstatelocal99table.html

Nevada is listed 43rd in rank as state and local taxes as a percentage of income. But, Nevada is 8th in total taxes (putting federal income tax back in) at 36.55% while Alabama is 50th at 32.73%. The US average is 35.66%. Apparently, the people of Nevada are reasonably prosperous, paying heavy federal taxes but relatively light state and local taxes.

Chips, who doesn't do well in humid places

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What is the best State to retire in, from a tax standpoint?

The problem is that it isn't cut and dry. Since there's state income tax, property tax, sales tax, and various other fee's here and there (any on your car, gas, phone?, etc) the total tax is dependent on your spending habit.

This is the problem that I found when I was checking it out. Intercst has some good links on his page from a couple of years back, but they were based on a standard of $250k house, $50k spending, etc. The problem I saw was that while that might fit some people, often it doesn't fit people in this group. For the most part our spending habits are abnormal. That's what lets us RE, or being able to aim for it.

Personally I would like to make a site that lets you put in your statictics, and then gives you the info. It wouldn't be too hard, but it would be a bit of a project getting all of the info togeather. I think this will be one of the top things on my list to do once I RE later this year.

Until then, IMHO a list ranked in order really doesn't mean much. Some states don't have an income tax, but other taxes are higher...so this would depend even more on your spending habits. I think right now the only 2 ways to compare one state to another would be to give a detailed look at the taxes, as I just did for myself with AZ and CA. The other way is to compare the benifits and generally how many services the local government offers, which should give you a rough estimate.

4aapl

(since taxes aren't everything you could probably narrow your list down to 5 or so states that you would like to live in, and then go from there)
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Nevada is listed 43rd in rank as state and local taxes as a percentage of income. But,
Nevada is 8th in total taxes (putting federal income tax back in) at 36.55% while
Alabama is 50th at 32.73%. The US average is 35.66%. Apparently, the people of
Nevada are reasonably prosperous, paying heavy federal taxes but relatively light
state and local taxes.


I was surprised you hadn't chimed in earlier <grin>

NV has a few things going for it. A vast amount of it is barren, not making it the most attractive place (though it does have it's places, such as Las Vegas (if you're into that), Tahoe, and probably others that I don't know of like down by the colorado river). The temps are a bit extreme at different times of the year (depending on what part you are in). And the state takes in a lot of money from gambling.

The combination of these IMHO gives the tax situation, with little to do with "he people of Nevada are reasonably prosperous"

That said, it's still a great place to live as far as taxes go. My partneership fell through, but I think I'm going to do it on my own, letting me live where ever I want. Though there will be a bit of a high cost of living, I'm thinking Tahoe for a few months in the summer and then back to AZ for the rest of the year might be a good fit for me for the next couple of years :)

4aapl
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An that's why they make chocolate and vanilla!
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There have been a number of good replies, one of which was to narrow your choices down to a few places that you would consider/want to live in. Your desired lifestyle should make that a fairly easy task. As a diehard golfer (like intercst), I was not interested in anywhere north of the M/D line, or anywhere (AZ or CA) that the cost of living far exceeds my comfort level. When I retired (12/31/98 ) I considered Texas (Mansfield), Florida (Ocala), Alabama (Anniston) and Georgia (Macon) - all areas we had lived in or around at one time or another during my working life. All had their qualities but in the end, my wife decided (she got 2 votes, I got 1) on Macon because it was the closest to Atlanta and our youngest grandchildren.
I am not sure of the criteria they use, but www.homefair.com has a pretty good tool for comparing the cost of living between 2 different cities.

arahFool
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wycowboy,

regarding:

I can tell you this much, as total taxes as percentage of income is concerned.

Are these numbers based on investment income or earned income?

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4APPL said:


What is the best State to retire in, from a tax standpoint?

The problem is that it isn't cut and dry. Since there's state income tax, property tax,sales tax, and various other fee's here and there (any on your car, gas, phone?, etc)the total tax is dependent on your spending habit.

I could not agree with him more. The tax tables ranking each state if pretty much useless to me. My wife plugged in our retirment budget spreadsheet numbers into another spread sheet that has all the various taxes for two states and came up with a $14,000 overall tax savings (for our particular situation) between CA and WA. The big reasons were

1) we are not big consumers
2) a house of the same size in WA is cheaper than
calif bay area and thus the absolute taxes as a dollar
amount is cheaper too.

So I agree with 4appl, they only way to calculate this is to take your individual spending habits and size of house, old car vs. new car, etc and plug it in for each state.

Also those numbers are represented as a percentage of income. They don't tell you what income level it is based on. Is it the average income for that state or the average income across the US?
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Huh?

That figure includes the minimum 15% Fed tax.
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When I moved from FL to WY: the cost of living went up slightly because of the increased costs of fuel, food and transportation. It went down dramatically on property taxes, utilities, insurance & health care.

I can live comfortably on 25K a year in WY, AR & TX but not in FL or most anyplace else in the country.
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<<My wife plugged in our retirment budget spreadsheet numbers into another spread sheet that has all the various taxes for two states and came up with a $14,000 overall tax savings (for our particular situation) between CA and WA. The big reasons were

1) we are not big consumers
2) a house of the same size in WA is cheaper than
calif bay area and thus the absolute taxes as a dollar
amount is cheaper too.

So I agree with 4appl, they only way to calculate this is to take your individual spending habits and size of house, old car vs. new car, etc and plug it in for each state. >>

Exactly. It depends on your spending patterns, lifestyle and such. You lose on federal taxes if you live in a state with high sales taxes (WA) since they aren't deductible on federal income taxes. Also those taxes as a % of income statistics make states with a higher % of poor people look good. I would like to retire with a modest house in a state with no income tax and low sales taxes where most of the state/local taxes are based on property taxes. But I guess I would like warm weather, access to skiing and rain only at night.
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Would be US Virgin Islands. No sales tax, no local tax other than property tax. Of course, you get what you pay for and cost of living is high. But the views are amazing.
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How was this year's crop of hurricanes? Where does one go when just about everything is at sea-level. And, aren't you a bit annoyed by all the tourists descending on paradise?
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<<Would be US Virgin Islands. No sales tax, no local tax other than property tax. Of course, you get what you pay for and cost of living is high. But the views are amazing.>>

Sounds interesting- I'll look into it (unfortunately I
won't be going anywhere for a while)
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wycowboy: How was this year's crop of hurricanes? Where does one go when just about everything is at
sea-level. And, aren't you a bit annoyed by all the tourists descending on paradise?


Hurricanes are a major pain in the you know where. We have to pack up the entire house because we live in a pre-fab home which could easily blow away. (The house is a perk of the job and we are LBYM kind of people.) Every thing gets bagged. For those people who live in more normal housing, the efforts are less severe. If you are dependent on public utilities, (which we are not,) you may be without power, cable, phone or water for weeks after a severe hurricane. The good news is that there have been a lot of serious hurricanes in the last 10 years and most of the weak structures got blown away to be replaced with much better construction. Also they are working on burying the utility lines. Unfortunately they are expecting another busy hurricane season this year. The US Virgin Islands are not flat so we don't ever get that close to sea level. With our housing we do get evacuated almost every storm to my husband's office, but that again is due to our cheap housing. Most people with cement homes hunker down and many have a sheler built on their property.

As for tourists, we love them. They are one of the major industries on the island. I actually got to meet a fellow Fool when she and her husband came here on a cruise. It was fun playing tourist for the day.
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Would be US Virgin Islands. No sales tax, no local tax other than property tax. Of course, you
get what you pay for and cost of living is high. But the views are amazing.


I should qualify this. We do of course pay Federal taxes. They however stay in the Virgin Islands which is why there are no other non-property taxes. However, since we don't support the Federal Government, (even though they are very good to us with FEMA and welfare,) we cannot vote in the Presidential elections.
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<<I should qualify this. We do of course pay Federal taxes. They however stay in the Virgin Islands which is why there are no other non-property taxes. However, since we don't support the Federal Government, (even though they are very good to us with FEMA and welfare,) we cannot vote in the Presidential elections.>>

Isn't there some saying that death is the only way to escape federal income taxes? I could tolerate not voting in elections. I imagine that "stuff" costs more because it has to be shipped in at least offsetting the advantage of no sales tax. The Florida intangibles tax came as a surprise recently. Still hoping to move someplace warm after retiring.
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No great loss, not voting in Fed elections. Puerto Rico is another place you should consider. It too has no fed vote and is not a state, and probably never will be. All the major corps are there, because they pay no fed tax on income derived from their investments on the island. Island life is hard to get used to, esp on small bits of sand like the Virgins.
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I imagine that "stuff" costs more because it has to be shipped in at least offsetting the advantage of no sales tax.

Very good point. At least 30% more. But the question was from a tax point of view. This further points to a previous posters position that there is more to consider than taxes. We will not be retiring here.
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No great loss, not voting in Fed elections. Puerto Rico is another place you should consider. It too
has no fed vote and is not a state, and probably never will be. All the major corps are there,
because they pay no fed tax on income derived from their investments on the island. Island life is
hard to get used to, esp on small bits of sand like the Virgins.


I confess I find it rather freeing knowing that with good conscience I can ignore all the hot air the candidtates are spouting. It can be very hard to adjust to island life, particularly if you are too young to take advantage of the senior airline tickets which are a great deal. Personally, we wouldn't have moved to Puerto Rico had the job been there. We have both worked there for a short period of time. The people are great and the island is much bigger. They actually have real malls with multiple stores and we only have KMART. But the humidity was way too much there for us. The Virgins have great weather if there is not a hurricane.
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so "inparadise" refers more to a state of mind than your current physical location?
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so "inparadise" refers more to a state of mind than your current physical location?

The US Virgin Islands are known as "America's Paradise". So yes we are litterally living in paradise. It also happens to be my state of mind because I am just generally in hog heaven with many things that have nothing to do with this board, as well as the pretty recent revelation that we will probably be retired by 45.

But there is no such thing as perfection, and there is always a price to pay for paradise. In this case we have hurricanes, an inept and corrupt government, very expensive air fare for when you feel that old island fever creeping up on you, a healthcare system that stinks, and high prices for poor quality vegetables, (they have been on a boat for a week). Liquor and cigars are cheap if that's your fancy, and the views and beaches are amazing. So is the snorkeling, diving, sailing, and anything water related.

It is not a place for LBYMers unless you have everything provided for you by your company as we do,(house, utilities, private school tuition,) but not so bad for a winter respite if you are pretty flush. A GREAT PLACE TO VISIT, but I really don't want to live here long term, and would in no way retire here.

Every place has it's positive and negative sides to it. If you know a place that doesn't have negatives, let me know. There will probably be some I'll find for me, but I'm sure willing to check the place out. We are hoping in about 5 years to move back to the mainland to a town house we own that should be paid for by then. When our boys have school vacations, we will take off (probably in a smallish used motorhome)and explore our beautiful country for our mainland paradise.

Life is Good.

How is that for an answer to a one liner?
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<<But there is no such thing as perfection, and there is always a price to pay for paradise. >>

I was afraid of this but I think that having the right state of mind is probably the most important factor. Living in the midwest isn't entirely my preference but it is getting me to er.
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