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The 10 Best And Worst States For Taxpayers Over 50

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SPECIAL FROM Grandparents.com

Where you live can significantly impact on how much money you save over a lifetime and how much goes to your dependents after death. States dramatically vary in how they treat income, property, sales, estate and inheritance tax—all of which can affect your retirement finances. Here are five of the best and worst states, in no particular order, for taxpayers in their golden years.
  • Best: Nevada
    WikiMedia:
    One of a handful of states that doesn't charge income tax, Nevada offers transplants a fiscal break says Clarence Kehoe, executive partner at Anchin, Block & Anchin accounting firm in New York City.

    "If you're moving from say a high-tax state such as California to a no-tax state such as Nevada and you have a significant amount of income, that savings could be tens of thousands of dollars," he says.

    Nevada also wins by having a low combined state and local tax burden—8.1 percent on average according to 2011 research from The Tax Foundation—and by eliminating inheritance, estate and gift taxes.
  • Best: Florida
    WikiMedia:
    On top of axing income tax, Florida wins taxpayer points because of its low sales tax and because it provides a homestead tax exemption of up to $50,000 for people over age 65 who own their residence and have limited income.

    But before moving to the Sunshine State, "you want to take [tax benefits] and compare it with the cost of living in that state," says Jonathan Bochese, Director of Resolution Services at the Tax Defense Network in Jacksonville.

    States that offer tempting tax breaks may have higher home prices, insurance costs or other expenses that can potentially offset the savings.
  • Best: Texas
    WikiMedia:
    Kiss income tax goodbye and say hello to homestead exemptions. Seniors over age 65 and disabled veterans who own their homes are qualified for up to a $15,000 property tax exemption. Pension and Social Security funds are protected from state income tax here and there's no inheritance tax your heirs will tangle with later.
  • Best: Alaska
    WikiMedia:
    Income tax and state sales tax don't exist in this far-flung locale, but Alaska is also particularly generous to property-owning seniors. Up to a $150,000 property tax exemption is available for seniors over age 65, widows and widowers ages 60 or over and to disabled veterans.

    On top of tax savings, the state also pays its residents to live there. Every year, Alaskans receive a check for their share of the state's oil wealth, which totaled $900 for 2013.
  • Best: Wyoming
    WikiMedia:
    This state doesn't tax income and offers residents an almost laughably low average sales and local tax rate of 5.49 percent, according to The Tax Foundation. Residential home owners are also only taxed on 9.5 percent of their home's market value, meaning that an owner would be taxed on less than $24,000 of a $250,000 abode.

    "There are several states where pensions and Social Security are excluded from the state taxes," says David Selig, a federal tax practitioner with Selig & Associates in New York City. "That can go a long way." Wyoming, along with Alaska, Texas, Nevada and Florida on this list don't tax pension or Social Security benefits.
  • Worst: New York
    WikiMedia:
    "New York City is probably the very worst place for a senior to retire," says David Selig. "Not only is the cost of living so prohibitive, there's actually a city income tax as well, sales taxes, when you sell property there's a tax. There's pretty much a tax on anything."

    State income tax up to 8.82 percent, average state and local sales taxes at nearly 8.5 percent and estate tax for estates over $1 million make New York a difficult sell for seniors. The Tax Foundation estimates that New York has the single highest tax burden of any state in the nation with residents paying nearly 13 percent in taxes annually.
  • Worst: Connecticut
    AP
    Fact: $7,150 from Connecticut citizens' pockets, on average, go to state and local taxes, with certain locales paying a disproportionate share. While New York has the highest state-wide tax burden, according to The Tax Foundation, a separate 2012 study of state and local tax burdens published by D.C.'s Office of Revenue Analysis reveals that Bridgeport, CT, has the highest tax burden of any U.S. city. A Bridgeport family of three earning $50,000 will fork over nearly 20 percent of income to state and local taxes.

    Part of the reason is because of Connecticut's significant property taxes, an expense which can impact home owners and renters alike, says Bochese.

    "With property tax, people may say, 'Well I'm not buying a home so it doesn't really affect me,' but that property tax does carry through to the rent," he says. "You'll find higher rental costs associated with places that have high property tax."
  • Worst: California
    State income tax alone hovers at 13.3 percent for California's richest residents, though most non-millionaires pay substantially less. Cali is still tough for those with moderate incomes. Sales tax currently sits at 7.5 percent and the average taxpayer hands over $5,136 per year just in state and local taxes, reports The Tax Foundation.
  • Worst: New Jersey
    WikiMedia:
    "If you're very concerned about taxes, you would be well advised to make sure there are not onerous inheritance taxes [or] different death taxes in the particular state that you're considering, because that can really gobble up an estate...," says David Selig.

    New Jerseyans know. Named one of Forbes' worst places to die in 2014, Jersey is one of a teensy weensy number of states that charges both estate and inheritance tax. The state collects inheritance tax on up to 16 percent of the value of estates worth over $500 and a possibly additional estate tax on property valued above $675,000.
  • Worst: Rhode Island
    AP
    Rhode Island packs a punch with a 7 percent sales tax, up to 6 percent income tax rate and estate tax, plus pensions are also fair tax game. Property taxes can also be formidable as can local taxes, the latter of which helps drive Rhode Island's average state and local tax burden to more than 10.5 percent each year.

    That doesn't mean that Rhode Island, or any state listed here for that matter, is a "good" or "bad" place to retire, says Jonathan Bochese. It just means that in addition to evaluating cost of living, transportation and proximity to loved ones, retirees should also investigate tax burdens or benefits various locales offer.

    "Each retiree needs to evaluate their situation when choosing where to retire," he says.



Read more from Grandparents.com:
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10 money tips for people over 50
7 easy ways to make extra money -- without working

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