Boomers: Compare State Taxes… Before You Move!

Before You Choose Where to Retire, Be Sure To Compare State Taxes

If you plan to move to another state when you retire, take time now to examine the tax burden you’ll face when you relocate. While there are many factors to consider when deciding where to retire and what’s going to be affordable, the different types of state taxes you will need to pay are among the costs to consider when building your retirement plan of action.

Writer’s Note: Low taxes alone are not enough of a reason to relocate when you retire but it is an important consideration. Also, you need to look at the bottom line to understand the net effect for you when you retire. For most, Delaware is either the most tax friendly or one of the best. If that is attracting you to Delaware, however, I recommend that you come and spend some time with us, let us show you the area, and see if you like it here. Kathy Sperl-Bell

Tax-Man

Download the PDF at the end of this article to print it out!

A recent article on www.retirementliving.com cites many boomers think that the State’s Income Tax structure is the litmus test for choosing a retirement destination. Boomers should have extra cause for concern since some are on a fixed income. The article goes on to say, “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.”

We have compiled the information to make it easy for you to compare taxes in these Mid-Atlantic States… DE, DC, VA, PA, NY, NJ, MD and CT. The taxes that you should evaluate before considering a retirement move are Top Income Tax, Sales Tax, Property Tax, Estate Tax and Inheritance Tax. Download the PDF at the end of this article to print it out!

DELAWARE

Top Income: 6.6%

State Sales Tax:  None

Property Tax per capita: $737

Estate Tax: 0.8% to 16%*

Delaware’s top individual income tax rate was scheduled to decrease in 2014, but state officials decided to keep the rate at 6.6 percent to plug a budget shortfall. For 2012, the state had the seventh-highest individual income tax collections per person, at $1,307. It also ranks as one of the highest per capita collectors of corporate income tax, placing fifth at $288 per person. *Exemption is $5.34 million.

CONNECTICUT

Top Income: 6.7%

State Sales Tax:  6.35%

Property Tax per capita: $2577

Inheritance Tax: See Note

Estate Tax: 7.2% to 12%*

Connecticut has the third-highest state gasoline tax in the country, behind California and New York, at 49.3 cents per gallon. It’s generally a high-tax jurisdiction, which is evident from its “tax freedom day,” representing how long a person would have to work into the year to have earned enough to pay all federal, state and local taxes. Connecticut has the latest such day of all states — May 13, according to the Tax Foundation. Those high taxes also come with the highest income per capita — $60,847 in 2013, according to preliminary numbers from the Bureau of Economic Analysis. Connecticut is one of 13 states that tax Social Security income. *Exemption is $2 million.

MARYLAND

Top Income: 5.75%

State Sales Tax:  6%

Property Tax per capita: $1449

Inheritance Tax: See Note

Estate Tax: 0.8% to 16%*

Maryland and New Jersey are the only states with both an estate tax and an inheritance tax. This year Maryland is expected to enact significant changes to its estate tax that will increase the exemption amount. The current $1 million exemption would be gradually increased over five years to match the federal government’s exemption amount, which is now $5.34 million, and is indexed for inflation. The General Assembly had a recent brush with Hollywood when “House of Cards” star Kevin Spacey visited Annapolis to persuade lawmakers to increase the Netflix show’s subsidy for its third season. The show is set in the District of Columbia, but much of it is filmed in Maryland. Note: Spouse, lineal-descendant, spouse of lineal-descendant, and sibling transfer is tax-free; all other transfers are taxed at 10%.;*Exemption is $1 million.

NEW JERSEY

Top Income: 8.97%

State Sales Tax:  7%

Property Tax per capita: $2893

Inheritance Tax: See Note

Estate Tax: Variable Tax Rates*

Same-sex married couples in New Jersey can use a joint tax return for both federal and state income tax filings. And gamblers can choose whether they place their bets by computer or in person, since New Jersey recently started allowing online gambling. In February, online gambling brought $10.3 million in revenue to the state. *Exemption is $675,000.   Note: Transfer to a spouse, domestic partner, lineal descendant or charitable organization is tax-free; transfer to children-in-law is taxed at 11 percent to 16 percent with a $25,000 exemption; all other transfers are taxed at 15 percent to 16 percent with a $500 exemption.

NEW YORK

Top Income : 8.82%

State Sales Tax:  4%

Property Tax per capita: $2335

Estate Tax: See Note

New York collects more individual income tax per person than any other state: $2,289 as of 2011. And its gas tax of 49.6 cents per gallon is the second-highest in the U.S. But under its recently enacted budget, some New York residents may pay less in property taxes. A plan was announced earlier this year to allow 20 hospitals to distribute medical marijuana via executive order, but it’s unclear whether the trial program will lead to a larger plan to tax and regulate the herb. Note: For people who die on or after April 1, 2014, and before April 1, 2015, the exclusion amount is $2,062,500 and the rate range is 3.06 percent to 16 percent. New York is increasing the estate tax exclusion amount over three years. By April 1, 2017, it will be $5,250,000.

PENNSYLVANIA

Top Income : 3.07%*

State Sales Tax:  6%

Property Tax per capita: $1305

Inheritance Tax: See Note

Estate Tax: None

Pennsylvania’s 3.07 percent flat income tax rate is the lowest top rate of states that impose individual income tax, according to the Tax Foundation, and its property tax collections per capita of $1,305 are 25th lowest nationally. Taxpayers here work until April 17 to earn enough to pay the year’s total tax bill. Pennsylvania has one of the highest corporate income tax rates of the states, at 9.9 percent. Only two jurisdictions — Iowa (12 percent) and the District of Columbia (9.975 percent) — have higher rates. Not all of the state’s taxes are high; a recent report found that Pennsylvania has among the lowest taxes on gas drilling in the country.

VIRGINIA

Top Income : 5.75%

State Sales Tax:  5.3%*

Property Tax per capita: $1377

Estate Tax: None

Virginia recently enacted special fees on environmentally friendly vehicles, but has kept tax rates low on tobacco. In this tobacco-rich state, the cigarette excise tax rate of 30 cents per pack ranks 49th lowest out of 50. Last year the Virginia General Assembly passed a sweeping deal to overhaul how the state pays for transportation. This year, the legislature repealed a small part of that act — a $64 annual fee on electric car owners, meant to ensure that all car owners contribute equally to repairing the state’s roads. *4.3% state, 1% local; the Tax Foundation includes a “mandatory, statewide, local add-on sales tax” in the state rate.

WASHINGTON DC

Top Income : 8.95%

State Sales Tax:  5.75%

Property Tax per capita: $2871

Estate Tax: 0.8% to 16%*

The District of Columbia’s sales tax is the lowest in its local region for the first time in 45 years, according to the Tax Foundation. The D.C. Council (the District’s local governing body) voted last year to cut the previous 6 percent sales tax rate by a quarter of a percentage point to roll back a 2009 increase that was used to cover a budget shortfall. The rate reduction and the fact that there are no other local sales tax rates give Washington, D.C., one of the lowest combined sales tax rates in the country. Residents may feel the pinch more in property ownership than in retail shopping. Property tax collections are some of the highest in the country, at $2,871 per person. *Exemption is $1 million.

AAR_State Tax comparission_042414-1Click the link to download the PDF of our Tax Comparision Info and print it out!