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Federal Retirees in PA
Old 08-31-2014, 03:26 PM   #1
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Federal Retirees in PA

Hello All -

I am very close to retiring and am looking at where best to retire. Because of where our families are, MD, PA, and DE are all possibilities. I believe PA offers the best tax savings.

Our income post retirement situation:
- federal retirement pension (FERS)
- pension (wife) from an university hospital
- social security for both of us
- distributions from my Thrift Savings Plan
- distributions from wife's 403b
- interest/dividends from taxable account

The way I interpret the state tax in PA is the only income we will be taxed on is our interest/dividends from taxable account. All SS, pensions, and 401/403 distributions are not taxed in PA.

Was hoping there might be someone actually retired in PA who could confirm this. It just seems too good to be true.

I tried to do a simulated return on TurboTax and couldn't match my estimate. TurboTax still taxes me on my FERS annuity.

Appreciate any insight on this.

Thanks

Kannon
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Old 08-31-2014, 03:45 PM   #2
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Did you do the TurboTax state return and have it transfer data automatically? I know that in the Oregon version I had to specifically enter information about the non-taxable portion of my pension (CSRS pre Oct 1991).
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Old 08-31-2014, 04:09 PM   #3
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I could actually get pretty close to my state tax estimate when I selected the "PA eligible" choice in TurboTax - just want to be sure from those retired in PA that this is the right option to select for retirees in PA under FERS and other pension/annuities.
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Old 08-31-2014, 04:14 PM   #4
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Quote:
Originally Posted by kannon View Post
Hello All -

I am very close to retiring and am looking at where best to retire. Because of where our families are, MD, PA, and DE are all possibilities. I believe PA offers the best tax savings.

Our income post retirement situation:
- federal retirement pension (FERS)
- pension (wife) from an university hospital
- social security for both of us
- distributions from my Thrift Savings Plan
- distributions from wife's 403b
- interest/dividends from taxable account

The way I interpret the state tax in PA is the only income we will be taxed on is our interest/dividends from taxable account. All SS, pensions, and 401/403 distributions are not taxed in PA.

Was hoping there might be someone actually retired in PA who could confirm this. It just seems too good to be true.

I tried to do a simulated return on TurboTax and couldn't match my estimate. TurboTax still taxes me on my FERS annuity.

Appreciate any insight on this.

Thanks

Kannon
If you are old enough to collect these without Federal tax penalty, then yes it is confirmed.

I am a PA retiree who prepares taxes.
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Old 08-31-2014, 04:34 PM   #5
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On closer investigation, we discovered PA real estate taxes are about 50% higher than MD's for properties valued similarly to ours. We only looked in Centre and Lancaster counties, though.

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Old 08-31-2014, 04:54 PM   #6
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You do know about their (PA) estate tax?

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Old 08-31-2014, 05:11 PM   #7
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I meet all of the age requirements.

Know have to be careful about property taxes. People who i work with when you combine PA property and school tax are about the same as in the MD county we are in.

Estate tax - yeah - they (PA) eventually get to you.
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Old 08-31-2014, 05:52 PM   #8
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Inheritance Tax

Inheritance tax is imposed as a percentage of the value of a decedent's estate transferred to beneficiaries by will, heirs by intestacy and transferees by operation of law. The tax rate varies depending on the relationship of the heir to the decedent.
The rates for Pennsylvania inheritance tax are as follows:
  • 0 percent on transfers to a surviving spouse or to a parent from a child aged 21 or younger;
  • 4.5 percent on transfers to direct descendants and lineal heirs;
  • 12 percent on transfers to siblings; and
  • 15 percent on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax.
Property owned jointly between spouses is exempt from inheritance tax.





Pennsylvania has "Inheritance Tax" as opposed to "Estate Tax", paid by the heir.....See above......
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Old 09-01-2014, 05:55 AM   #9
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Quote:
Originally Posted by kannon View Post
Hello All -

I am very close to retiring and am looking at where best to retire. Because of where our families are, MD, PA, and DE are all possibilities. I believe PA offers the best tax savings.

Our income post retirement situation:
- federal retirement pension (FERS)
- pension (wife) from an university hospital
- social security for both of us
- distributions from my Thrift Savings Plan
- distributions from wife's 403b
- interest/dividends from taxable account

The way I interpret the state tax in PA is the only income we will be taxed on is our interest/dividends from taxable account. All SS, pensions, and 401/403 distributions are not taxed in PA.

Was hoping there might be someone actually retired in PA who could confirm this. It just seems too good to be true.

I tried to do a simulated return on TurboTax and couldn't match my estimate. TurboTax still taxes me on my FERS annuity.

Appreciate any insight on this.

Thanks

Kannon
If you take an early retirement distributions from your retirement plans, and box 7 of your 1099R is coded 1 or 2, the distribution may be taxable on a PA income tax return to the extent the distribution exceeds your basis in the retirement plan. PA has a flat tax rate of 3.07%
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Old 09-01-2014, 04:08 PM   #10
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early retirement for FERS = <59 1/2 yrs old.

I'm good for that, not touching hopefully till age 70
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