How Much Do You Save In Retirement By Living In A State With Lower Taxes
The more money you have to withdraw in retirement, the more potential you have to save on your tax bill. Someone who withdraws $1.5 million per year could save 13.3% by moving from California to a state without an income tax, like Wyoming. That’s nearly $200,000 in savings every year. However, most people won’t withdraw more than a million dollars every year in retirement, so their tax brackets are much lower.
Financial Health Of The State
It is important that the state where you want to live is healthy in itself. Californias financial mess means that it is less attractive simply because of the specter of tax hikes. Snowbirds need to have a handle on any ongoing outlay and taxes are one of the certainties and not just income tax, think of sales tax, death and inheritance taxes too.
States You Might Want To Avoid
A few states are less hospitable to retirees. Not only are some of their tax rates high, but they also fully tax pension income, as well as 401 and IRA distributions. According to the Tax Foundation, a nonpartisan tax research group in Washington, D.C., these states and their top tax rates as of 2020 are:
- California: 13.3% on incomes over $1 million , but Social Security benefits aren’t taxed here
- Minnesota: 9.85% on incomes over $164,400
- Vermont: 8.75% on incomes over $200,200
- Idaho: 6.93% on incomes over $11,554 , but Social Security benefits that are included on a federal return aren’t taxed
- Connecticut: 6.99% on incomes over $500,000
- Nebraska: 6.84% on income over $31,750
- West Virginia: 6.5% on income over $60,000
- Rhode Island: 5.99% on income over $148,350
- Kansas: 5.7% on income over $30,000
- North Carolina: 5.25% on all income, but Social Security benefits aren’t taxed
- Massachusetts: 5% on all income, but Social Security benefits included in federal income aren’t taxed
- Arizona: 4.5% on income over $159,000 but Social Security benefits that are included on a federal return aren’t taxed
- Indiana: 3.23% on all income, but Social Security benefits aren’t taxed
- North Dakota: 2.9% on income over $433,200
California will tax you at 8% as of 2020one of the highest rates in the countryon income over $45,753.
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The One Reason Retirees Won’t Like Florida
Of course, there are no perfect states to retire in, even if no income tax, no tax on retirement benefits, an average cost-of-living, a homestead exemption, and ample sunshine sound great. The biggest issue retirees could run into in Florida, assuming they purchase property, is homeowner insurance costs.
One of the downsides of being in a temperate tropical climate is the potential to be hit by hurricanes. According to data from the National Oceanic and Atmospheric Administration, hurricanes have made landfall in Florida 117 times. By comparison, the next-closest states are Texas and Louisiana at a respective 64 and 54 landfalls . Because of its propensity to be hit by damaging storms, homeowners insurance costs a veritable arm and leg in Florida.
Insurance.com notes that insuring a $200,000 dwelling with a $1,000 deductible and $100,000 liability costs an average of $1,228 per year nationally. In Florida, though, the average annual rate, assuming the coverage listed above, is $3,575 a year, or nearly triple the national average. Ouch!
Are high insurance costs enough to dissuade you from considering Florida as a state to retire in? That’s up to you to decide.
What Are The Real Tax Benefits Of Moving To Florida If Any
Will you really save on federal, state and local taxes living in Florida? This article will provide some general information on what to consider when trying to determine what the tax benefits of moving to Florida may be, if any. DISCLAIMER: This article is not legal, tax or professional advice of any kind. For that, retain the services of a licensed professional.
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Florida Taxes A Quick Look
Major taxes collected in Florida include sales and use tax, intangible tax and corporate income taxes. Information regarding these and additional taxes can be located from the list below. There is no personal income tax in Florida.
- Florida Sales Tax: Florida sales tax rate is 6%.
- Florida State Tax: Florida does not have a state income tax.
- Florida Corporate Income Tax: Corporations that do business and earn income in Florida must file a corporate income tax return .
- Florida Property Tax: Florida Property Tax is based on market value as of January 1st that year.
How Do I Establish Residency In Florida For Tax Purposes
A) Steps to take to help establish residency in Florida.
Retaining a Florida attorney before you move could save you money in the long run, especially if you feel your old state may find breaking up with you hard to do.
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Floridas Not Always The Sunshine State
If youve visited Florida infrequently and for short periods of time, you probably dont know the full scope of Florida weather. Thunderstorms are frequent and intense, and Florida is virtually tied with Oklahoma as the lightning capital of the U.S. Oklahoma averages 83.4 flashes per square kilometer, with Florida close behind at 82.8 flashes per square mile.
Florida’s Orange County, where Orlando calls home, and Seminole County average roughly 160 flashes of lightning per square kilometer — the most in the U.S. Three of the 17 lightning deaths in the U.S. in 2020 were in Florida, which was tied for No. 1 with Texas in that category.
And Florida is often in the bulls-eye for hurricanes. The Atlantic hurricane season is a long one: from June 1 to Nov. 30 half the year peaking in August through October, according to the National Oceanic & Atmospheric Administration. In October, Hurricane Michael, one of the most powerful storms to hit the U.S. in 50 years, killed at least 20 people and devastated towns in Florida’s Panhandle. Hurricane Irma, which struck Florida in September 2017, caused $50 billion in losses, with most of the damage caused by wind. State lawmakers recently said they expect Hurricane Michael losses will exceed those of Irma’s.
The other side of the argument? Lots of sunshine and warm temperatures.
Floridas Tourists Can Slow You Down
Ever since you were a munchkin, you knew Florida as a tourist destination. If you visited Walt Disney World when you were a kid , you marveled at the crowds. As a resident, youll probably only be annoyed by them.
Approximately 87 million tourists visited Florida in 2020, according to Visit Florida, the lowest number since 2010. But that was during the pandemic, when tourism was down everywhere. In 2019, Florida had 131.42 million tourists, and the state has had more than 100 million visitors a year from 2010 to 2019 converging on the states famous theme parks, beaches and destination spots such as the Keys and Everglades National Park.
The high season, when the snowbirds, holiday travelers and spring-breakers all converge on Florida, lasts roughly from mid December to mid April. Theres also summer season, lasting from mid June to mid August, when the kids are out of school and summer vacationers hit Florida. That makes for a lot of people on the road, an annoyance to the locals when they need to run errands.
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Population 65 Years And Over
When youre looking for a place to call home, it stands to reason youd want a significant portion of the population to be around your age. What better way to make friends and feel comfortable in your neighborhood than to find out the percentage of the population ages 65 and older?
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Top 5 Tax Benefits Of Becoming A Florida State Resident
There is nothing new about people relocating to different states and countries for better opportunities, a new lifestyle, or an improved quality of life. Thats the reason why a lot of people are currently living in Florida.
The year-round sunshine and the picturesque beaches are not the only things that make the Florida state a popular choice for relocation. Favorable tax benefits attract thousands of people to the Sunshine State each year, and one notable reason is the Florida income tax rate of 0% that tops them all.
Apart from the picture-perfect beautiful beaches and warm weather, Florida has a lot to offer its residents. The Tax Cuts and Jobs Act of 2017 provides excellent tax incentives for Florida residents. This benefits older and young taxpayers alike as well as middle-income families. Here are the top 5 tax privileges of being a Florida resident that will help you realize why moving to Florida makes a lot of sense.
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Florida Military And Veterans Benefits
Summary of Florida Military and Veterans Benefits: Florida offers special benefits for its military Service members and Veterans including homestead tax exemptions, state employment preferences, education and tuition assistance, vehicle tags, as well as hunting and fishing license privileges. Eligibility for some benefits may depend on residency, military component, and Veteran disability status.
Florida Military and Veteran State Benefit Highlights and Eligibility
What are my Florida Military and Veteran State Taxes Benefits?
Florida Income Taxes: There are no individual income taxes in Florida.Distributions received from the Thrift Savings Plan are not taxed.
Florida Property Tax Exemptions and Discounts for Service Members, Disabled Veterans Spouses and Surviving Spouses: Florida offers property tax exemptions or discounts for resident Service members, honorably discharged Disabled Veterans and unremarried Surviving Spouses.
Surviving Spouse of Service Members Killed on Active Duty Property Tax Exemption: The Surviving Spouse of a resident Service member who died from service-connected causes while on active duty in the U.S. Armed Forces is exempt from taxes on their homestead. Use Florida Department of Revenue, Application for Homestead and Related Tax Exemptions Form DR-501 to apply. FS 196.081
What are my Florida Military and Veteran Education Benefits?
Benefits Of Retiring In Florida
Florida is known for its low taxes, and more specifically, having no State income tax. This means that Social Security retirement benefits, pension income and income from IRAs or 401 are all untaxed. Florida also has no estate or inheritance tax, and property and sales tax rates are close to national averages. According to a 2016 study by Kiplinger, median property tax on homes is slightly below the national average. Plus, residents are eligible for homestead exemption of as much as 50 000. Some city and county governments give residents age 65 and older who meet certain income limits additional homestead exemption of as much as 50 000. Another benefit of Florida retirement? The Sunshine State also boasts one of highest number of continuing care retirement communities-or CCRCs-in nation. CCRCs can help secure your finances by securing your future healthcare needs. Those with life care plans actually prepay for tomorrow’s healthcare in today’s dollars, making you to enjoy life today more freely without those burdens. Learn more about retiring in the Florida Acts community. With the numerous benefits and advantages of retiring in Florida, it’s easy to see why the state has been such a popular retirement destination for a long time.
* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions.
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Retiring To Florida Has More Benefits Than A Friendly Climate
When retirees or soon-to-be retirees begin talking about where they want to hang up their hats, retiring to Florida is one of the most appealing options for its sunshine, beaches and carefree lifestyle. But did you know that retirement living in Florida can also be very friendly to the wallet?
Before we get into the financials, let’s talk a little more about the obvious: The benefits of retiring in Florida are many for seniors. Its climate is certainly near the top. They don’t call it “The Sunshine State” for nothing. The pleasant weather aside, it’s also a state known to have the most golf courses per capita in the nation. Need a buddy to do all that golfing with? Florida also has the highest percentage of people aged 65 and over of any state.
Also important to seniors is the tremendous number of healthcare options available in Florida. The entire state is peppered with providers, both well-known hospital brands like the Cleveland Clinic in Weston and the Mayo Clinic in Jacksonville, as well as highly ranked hospitals like the University of Miami-Jackson Memorial Medical Center and Tampa General Hospital. The benefit of all these medical providers goes above and beyond simply having numerous options because of the competition, the quality of health care in the state benefits in a great way.
Now, let’s get into the important stuff: Protecting your precious finances.
Retirement Account And Pension Income
The way a state handles retirement account and pension income can have a huge impact on the finances of a retiree. Many states do not provide any kind of deduction, exemption or credit on withdrawals from a retirement account such as a 401 or IRA.
How might that affect a typical retiree? Lets say your effective state tax rate in one of these states is 4% and your annual income from your 401 is $30,000. That would add up to taxes of $1,200 on that retirement account income taxes that you wouldnt have to pay in states like Alaska and Mississippi .
Exemptions for pension income are more common. Only nine states fully tax income from a government pension, while 16 tax income from a private employer pension. The other states either exempt that income or provide a deduction or credit against it.
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States With No Income Tax
Eight states don’t impose an income tax on earned income as of 2021: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire and Tennessee only tax dividend and interest income, so you can hold down a side job in these two states without it costing you in taxes. Tennessee’s tax was the latest to be repealed, which occurred on Jan. 1, 2021.
States that lack an income tax might seem like an attractive option, but many collect revenues in other ways. They might have steep property or sales taxes, which can easily offset the lack of an income tax.
Scammers Like Florida As Much As Retirees
You can run but you can’t hide from scammers. You can also retire, move to Florida, and you still can’t hide from scammers. That’s because the Sunshine State ranks No. 3 in the U.S. for fraud, with 1,123 reports per 100,000 residents in 2020, according to the Federal Trade Commission’s Consumer Sentinel Network report.
The most common scams in Florida involved debt collection, identity theft and imposter scams. The latter is a particular scourge for older folks who might become more susceptible to deception as they age and cognitive skills decline. Scammers take on many guises, from romantic interests to government officials, in an attempt to talk would-be victims out of their money and personal information. And the stakes get higher the older you get. The median fraud loss for victims in their 40s is $278, but that figure rises to $635 for victims ages 70 to 79 and $1,300 for victims 80 and older.
The best expert advice: Hang up or hit delete if a stranger calls or emails out of the blue asking you to verify information about your bank account, credit cards, Social Security benefits, Medicare coverage, tax returns and so on. It’s a scam.
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Floridas A Lot Less Taxing
Moving to the Sunshine State could save you a lot of money in taxes. Florida, one of our 10 most tax-friendly states for retirees, has no state income tax. That means no state taxes on Social Security benefits, pensions, IRAs, 401s and other retirement income. It also has no inheritance tax or estate tax.
But snowbirds who maintain a second home in a colder state cant just tap their heels together to claim Florida as their primary state of residence. Youll need to show that you spend more than half the year183 daysin Florida. But dont expect state tax auditors to take your word for it. For starters, keep a diary or log showing the number of days you spend in each state during the year, says Tim Steffen, director of financial planning for Robert W. Baird. Here’s what else to do:
