State Income Tax: not always perfect

[braumeister]

My kid plans to never change his Florida residency as long as he stays active duty.

Especially considering state taxes at his current posting.

That's what I did. I was a New York resident when I went on active duty so I changed it to Florida and kept it there until I retired from the military. Since we got moved around from state to state so often it just made the most sense. I voted by absentee ballot in Florida every year but that was my only real connection to it.
They really made it very easy -- told me to just write in "Courthouse Precinct" for my address on the absentee ballot and they would accept it.

 

[Sunset]

I like that in IL , retirement income is tax free.
I've reduced our taxes paid by decreasing our LTCG's at least for a while.

However, the politicians did increase State income tax up to 4.95% flat tax, and tried to change that to be a sliding scale, but got defeated in a referendum.

IL already has a (-) population growth, and once a sliding income tax scale is passed, I fear increasingly higher rates of taxation, and more folks moving out.

The property taxes are already ~2nd highest in US, it's ~2% of property "value".

 

[Stormy Kromer]

My home state taxes LTCG as ordinary income. More than a few retirees pay more in State income tax than Federal. SS and retirement income are also taxed.

 

[Dash man]

Yes, it’s the Foundation for Catholic Education. I believe similar foundations exist for other faiths. There are lots of Catholics in Pennsylvania though.

 

[USGrant1962]

My home state taxes LTCG as ordinary income. More than a few retirees pay more in State income tax than Federal. SS and retirement income are also taxed.

Yea, I ran into that my first year of semi-retirement in Maryland. I sold off my last individual stock and used the proceeds to live off of in 2018 (it was a 10-bagger I held for maybe 20 years). I paid more in state than Federal income tax.

 

[USGrant1962]

Here's a study of retirement moves out of state in 2023, though not specifically driven by income taxes. Florida and South Carolina were the biggest destinations, with California and New York leading the departures (as a percent of all retirement moves, so influenced by state population).

https://blog.hireahelper.com/2024-study-a-look-at-the-biggest-wave-of-retiree-moves-in-three-years/

Takeaways:

-More than 338,000 Americans moved to retire in 2023, an increase of 44% compared to 2022
-Florida is the top destination for retirement moves that crossed state lines, attracting 11% of them in 2023
-California (18%) and New York (11%) have the highest share of retirees moving to new states
-Miami-Fort-Lauderdale, FL is the #1 metro for retirement moves, with 12.3% of them headed to this area in Florida
-Nearly a quarter (23%) of all Americans moving to retire were early retirees aged under 55

The last bullet is interesting.

 

[523HRR]

Moved to FL from CT in 2018. Saving ~$30K annually in state income taxes. Property taxes are less with twice the house. No snow. No brainer.

 

[Gumby]

Moved to FL from CT in 2018. Saving ~$30K annually in state income taxes. Property taxes are less with twice the house. No snow. No brainer.

If you would be paying that much state income tax in Connecticut, your annual income probably exceeds $500,000 per year. So you can probably easily afford to live wherever you want. If you prefer Florida to Connecticut for other reasons, then by all means live in Florida, but I would never move just because of taxes. (I once lived in Florida; I prefer Connecticut, even with the taxes.)

 

[523HRR]

If you would be paying that much state income tax in Connecticut, your annual income probably exceeds $500,000 per year. So you can probably easily afford to live wherever you want. If you prefer Florida to Connecticut for other reasons, then by all means live in Florida, but I would never move just because of taxes. (I once lived in Florida; I prefer Connecticut, even with the taxes.)

Correct. But even higher income people don’t sneeze at $30K in free cash flow in exchange for better climate, better life style, and lower cost-of-living. FL spends almost a third less per capita (with better roads and services), with no income tax and no estate tax, than CT — and still runs a surplus. Where is all that CT spending going? Not surprising to see migration patterns toward lower tax states.

 

[Teacher Terry]

Probably best to create a new thread (please feel free to move this post, mods), but do any of you have good ideas to combat this problem? Kansas loses population every year, and taxes are often cited as a reason. Our legislature is currently possibly passing a pretty large tax reform package that will lower income taxes, eliminate SS income taxes and lower state property taxes. But I honestly don't believe that is going to stop the outflow of taxpayers.

Personally, I believe it has more to do with "there's nothing to do here", a common refrain of younger people. And mostly they are correct. Only Rhode Island has fewer total acres of public land than Kansas, and RI is geographically smaller than the county I live in (Butler), let alone our entire state. Back when I was a kid you could feel safe hiking, hunting, fishing, biking, etc. on other people's land here. All of the mobile meth labs from Missouri back in the 90's/00's ruined that. Now the landowners shoot first, and the state supports that for the most part.

I have lived in Wichita Kansas twice and I think people leave because the weather is awful, there’s nothing to do and it’s really ugly. Pluses of course are that people are very nice and the COL is low. I think the Lawrence and KC areas are pretty but I never lived there.

 

[athena53]

Probably best to create a new thread (please feel free to move this post, mods), but do any of you have good ideas to combat this problem? Kansas loses population every year, and taxes are often cited as a reason. Our legislature is currently possibly passing a pretty large tax reform package that will lower income taxes, eliminate SS income taxes and lower state property taxes. But I honestly don't believe that is going to stop the outflow of taxpayers.

Personally, I believe it has more to do with "there's nothing to do here", a common refrain of younger people.

I live in the MO side and MO just quit taxing SS- so KS had to follow! KS recently stopped applying state sales taxes to food, which has been true on the MO side since I moved here. If you're in the KC area it's pretty easy to choose your state based on taxes and other factors. (MO is reputed to have lower-quality schools but also lower property taxes, for example.)

"There's nothing to do here" may also be a reflection of job opportunities. They're mostly in the big cities and the suburbs.

 

[MarieIG]

Yep - will be taking my state estimated tax (ok and federal too) to the post-office this weekend. I will slightly frontload the first payment of the state income tax to ensure safe harbor - as DH's pension and the agent for one of my holdings which withhold for federal, refuse to withhold for the state.

 

[TheWizard]

Probably best to create a new thread (please feel free to move this post, mods), but do any of you have good ideas to combat this problem? Kansas loses population every year, and taxes are often cited as a reason. Our legislature is currently possibly passing a pretty large tax reform package that will lower income taxes, eliminate SS income taxes and lower state property taxes. But I honestly don't believe that is going to stop the outflow of taxpayers.

Personally, I believe it has more to do with "there's nothing to do here", a common refrain of younger people. And mostly they are correct. Only Rhode Island has fewer total acres of public land than Kansas, and RI is geographically smaller than the county I live in (Butler), let alone our entire state. Back when I was a kid you could feel safe hiking, hunting, fishing, biking, etc. on other people's land here. All of the mobile meth labs from Missouri back in the 90's/00's ruined that. Now the landowners shoot first, and the state supports that for the most part.

I graduated high school in Russell and went out of state for college. Afterwards, I found (high tech) employment nearby.
Lack of suitable employment opportunities is a big reason Kansas loses lots of bright young folks, I suspect, Johnson county and the KC area being an exception...

 

[TheWizard]

I may not have the exact numbers but they're pretty close IIRC: In Mass, 20% of kids age 25 to 35 plan on leaving the state.

Two of our own nephews moved out of Mass in January. In their case, the overall quality of life and COL was the issue. They each have two other friends who left before them and encouraged them to join them.

I think that many or most states lose a similar percentage of young folks, but some of it is countered by other folks moving in, as I did in MA several decades ago...

 

[jebmke]

I think that many or most states lose a similar percentage of young folks, but some of it is countered by other folks moving in, as I did in MA several decades ago...

Would not be surprised. I've lived in a lot of places over my adult life - both in the US and outside the US. Some high tax places are the best we ever found. Some were not. Same with lower tax places. A lot of variation.

 

[Sunset]

I live in the MO side and MO just quit taxing SS- so KS had to follow! KS recently stopped applying state sales taxes to food, which has been true on the MO side since I moved here. If you're in the KC area it's pretty easy to choose your state based on taxes and other factors. (MO is reputed to have lower-quality schools but also lower property taxes, for example.)

"There's nothing to do here" may also be a reflection of job opportunities. They're mostly in the big cities and the suburbs.

You bring fond back memories, I live in both the KS side and the MO side of Kansas City. Moved just to be closer to work after it moved (was renting).

For the first year I was tempted to buy, but after a year, I realized it felt boring... and I don't know why.

 

[RetireBy90]

I didn’t see mentioned, but Virginia will tax you on partial year of residence. Got hit when I retired military and Nov and Dec no more claiming Nevada as my residence

 

[TheWizard]

You bring fond back memories, I live in both the KS side and the MO side of Kansas City. Moved just to be closer to work after it moved (was renting).

For the first year I was tempted to buy, but after a year, I realized it felt boring... and I don't know why.

Most people hit the mall when that feeling comes...

 

[Flieger]

(I once lived in Florida; I prefer Connecticut, even with the taxes.)

Was born and lived in Connecticut, and lived in Fernandina Beach, Fla. Would Take FLA all day. Every one has their own opinion of what is nice/important.

Flieger

 

[ychuck46]

When we left a high tax state 13 years ago and settled in TN (with no state income tax), I was still working and considered a high earner. The taxes saved were incredible for the four years I kept working, and still are as our retirement income is still pretty high. Couple that with some of the lowest property taxes in the country and consider us very happy campers, particularly since we love all the other aspects of this beautiful state as well.

 

[USGrant1962]

I didn’t see mentioned, but Virginia will tax you on partial year of residence. Got hit when I retired military and Nov and Dec no more claiming Nevada as my residence ��

Interesting that this was just published by Tax Foundation about non-resident taxes. They rate VA as one the better states in that area.

https://taxfoundation.org/data/all/state/nonresident-income-tax-filing-laws/

Anyway, not sure what you mean by "partial year of residence". Are you talking about say a summer home residence, or moving during the year? The latter is done by every state, and the former by most states after X days or some other criterion if you are working.

 

[zippy2020]

Just FYI for those interested in comparing various states you may be interested in:

Taxes on Retirees: A State by State Guide
See how each state treats retirees when it comes to income, sales, property, and other taxes.
https://www.kiplinger.com/retirement/600892/state-by-state-guide-to-taxes-on-retirees

As you scroll down there are links to their other charts/maps regarding taxes.

 

[TheWizard]

Just FYI for those interested in comparing various states you may be interested in:

Taxes on Retirees: A State by State Guide
See how each state treats retirees when it comes to income, sales, property, and other taxes.
https://www.kiplinger.com/retirement/600892/state-by-state-guide-to-taxes-on-retirees

As you scroll down there are links to their other charts/maps regarding taxes.

That link is semi useless.
It doesn't detail what purchases are subject to sales tax.
Here in MA, groceries and clothing are mostly exempt from sales tax.
Some other states actually tax those things...

 

[indiajust]

By extension, there are states where it is much easier to live when you are poor. I recall a detailed state by state look at lifestyle and income source, I think it was done by an investment bank. It covered stuff like pension only, where FICA is taxed by states, all sorts of income and expense variations. Then it broadly put the states into buckets for different life stages and life styles. Quite the eye opener. It attempted to present an arc of optimization during earning, accumulating, saving, and spending profiles. It tried to include COLA during those phases. Then there was discussion around the impact of doing it the "hard" way.

 

[Al18]

The Kiplinger link does a good job for NJ, listing the many state income tax exemptions for retirees 62 and older. The link also lists the Anchor property tax rebate available to most home owners, regardless of age