Best and Worst States for Taxes for Retirees

[James Park]

Interest article published by Kiplinger for the most tax friendliest states for retirees. The darker green states are among the most tax friendliest states.

http://www.kiplinger.com/tool/retirement/T055-S001...

Georgia 

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Profile of one of the Most Tax-Friendly States for Retirees

One of Kiplinger's top ten most tax-friendly states for retirees, the Peach State is a peachy tax environment for retirees. Social Security income is exempt, and so is up to $35,000 of most types of retirement

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income for those age 62 to 64. For those 65 and older, the exemption is $65,000 per taxpayer. The statewide sales

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tax is 4%, but jurisdictions may add up to 4% of their own taxes. Full-time residents qualify for a homestead exemption, and seniors may qualify for additional deductions from property taxes.

State Sales Tax

4% (food and prescription drugs are exempt). But local taxes may add another 4%.

Income Tax Range

Low: 1% (on the first $1,000 of taxable net income for married couples filing jointly; on the first $750 for individual filers; and on the first $500 for married couples filing separately)

High: 6% (on taxable income over $10,000 for married couples filing jointly; on taxable income over $7,000 for individual filers; and on taxable income over $5,000 for married couples filing separately)

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Taxpayers who are 62 or older are eligible for a retirement-income exclusion. Retirement income includes pensions and annuities, interest, dividends, net income from rental property

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, capital gains, royalties, pensions, annuities, and the first $4,000 of earned income, such as wages. For married couples filing joint returns with both members receiving retirement income, the maximum adjustment may be up to twice the individual exclusion amount. The retirement-income exclusion is $35,000 for residents ages 62 to 64. For residents 65 or older, the exclusion is $65,000. Railroad Retirement income is exempt.

IRAs

Qualifies for retirement-income exemption of up to $35,000 or up to $65,000, depending on age.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Qualifies for retirement-income exemption of up to $35,000 or up to $65,000, depending on age.

Private Pensions

Qualifies for retirement-income exemption of up to $35,000 or up to $65,000, depending on age.

Public Pensions

Qualifies for retirement-income exemption of up to $35,000 or up to $65,000, depending on age.

Property Taxes

Median property tax on Georgia's median home value of $141,600 is $1,352, according to the Tax Foundation.

Tax breaks for seniors: For homeowners

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62 and older who earn $10,000 or less, up to $10,000 of their property's assessed value is exempt from school taxes. People 62 or older whose family income does not exceed $30,000 may qualify for an exemption from state and county property taxes equal to the amount by which the assessed value of the home exceeds the assessed value for the preceding tax year.

Individuals age 65 and older can claim an exemption from all state property taxes on their home and up to 10 acres of land surrounding the home. For those 65 and older who earn $10,000 or less, $4,000 of their property's value is exempt from state and county taxes as well. Many counties offer homestead exemptions that may be more beneficial to the taxpayer than the exemptions offered by the state. The homestead exemption is deducted from the assessed value (40% of the fair market value) of the home.

Inheritance and
Estate Taxes

California

The Bottom Line

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Profile of one of the Least Tax-Friendly States for Retirees

One ofKiplinger's top ten least tax-friendly states for retirees, the Golden State is a retiree's tax nightmare. Although Social Securitybenefits

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are exempt, all other forms of retirement income are fully taxed. California residents pay the highest income taxes in the U.S. The statewidesales

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tax is high, too.

State Sales Tax

The state sales tax increased to 7.5%, from 7.25%, as of January 2013. (The rate hike is temporary and is set to expire at the end of 2016.) Rates are higher in cities and counties with special taxing districts; with the addition of local taxes, the total can reach 10% in some locations. (Food

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and prescription drugs are exempt.)

Income Tax Range

Low:1% (on up to $15,498 of taxable income for married joint filers and up to $7,749 for those filing individually)

High:13.3% (on more than $1,039,374 for married joint filers and $1 million for those filing individually)

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Railroad Retirement benefits are exempt. All private, local, state and federal pensions are fully taxed. There is a 2.5% state penalty on early distributions from retirement plans, annuities and IRAs.

IRAS

Taxable at ordinary income tax rates. There is a 2.5% penalty on early distributions.

401(K)S AND OTHER DEFINED-CONTRIBUTION EMPLOYER RETIREMENT PLANS

Taxable at ordinary income tax rates. There is a 2.5% penalty on early distributions.

PRIVATE PENSIONS

Taxable at ordinary income tax rates.

PUBLIC PENSIONS

Railroad retirement benefits exempt. All other public pensions are taxable at ordinary income tax rates.

Property Taxes

The maximum amount of tax on real estate is limited to 1% of assessed value. Note, though, that property is generally only reappraised when it changes ownership or has new construction (a property's assessed value is typically equal to its purchase price adjusted upward each year by 2%). Under the homestead program, the first $7,000 of the full value of ahomeowner's

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dwelling is exempt.

Median property tax on California's median home value of $373,100 is $3,015, according to the Tax Foundation.

Tax breaks for seniors:In 2014, the Governor reinstated the property tax postponement program, which provides property-tax relief to senior citizens, with revisions. Senior, blind and disabled citizens with an annual income of less than $35,000 and 40% equity in their homes can defer payment of property taxes, beginning September 2016. Each county may also implement a property tax postponement program of its own if it elects to do so.

Inheritance and
Estate Taxes

There is no inheritance tax or estate tax.

Read more at http://www.kiplinger.com/tool/retirement/T055-S001...