By Glenn Ruffenach
A good deal of our mail comes from readers asking about the “best” places to live in retirement and, in particular, the tax burdens associated with various locales. This resource can help answer many of your questions.
The Retirement Living Information Center, based in Redding, Conn., is focused, in large part, in helping would-be retirees decide whether to move in later life and, if so, how to find the “right location, lifestyle and housing opportunity.”
To that end, the company and its website, retirementliving.com, offer monthly reports on new retirement communities, an online newsletter, a guide to state aging agencies and links to related resources.
That said, one of the site’s most valuable tools is an exhaustive guide to taxes in all 50 states. Yes, taxes are of interest to anyone who might be relocating. But retirees, the website notes, “have extra cause for concern since their income may be fixed.”
The tool provides information about state income taxes, sales and fuel taxes, taxes on retirement income, property taxes, and inheritance and estate taxes.
You may be tempted, when accessing the tool, simply to click on the map provided and begin researching individual states. But first, take time to read the valuable introduction to state taxes found below the map.
For instance, the introduction notes that many people – when looking for a place to retire – use the “presence or absence of a state income tax as a litmus test” for a top destination. Retirement Living, though, characterizes that move as a “serious miscalculation.” The reason: Higher sales and property taxes can “more than offset the lack of a state income tax.” In short, state income taxes alone aren’t a good indicator or a state’s total tax burden.
In the introduction, you also will find, among other insights, that California has the highest sales tax (at 7.25%); that nine states permit cities or counties to impose a local tax on fuel; that two states, North Dakota and Oregon, allow full deductions for medical and dental expenses; and that 27 states with income taxes (as well as the District of Columbia) provide a full exclusion for Social Security benefits.
“To get a true sense of which state is less expensive, you need to look at state and local tax burdens,” the introduction concludes. “Only then do the low tax states stand out.”