Residence in no income tax state??

[pb4uski]

We are going through this right now.... have become FL residents. We have had properties in FL and VT for about 4 years but decided to become FL residents this year.

For us, the big $ differences were lower state income taxes ($0 vs a lot), much higher auto insurance in FL (284% than insurance for the same car in VT), ~13% lower Medigap costs in FL and different homesteading property tax benefits (but pretty much a wash less than 2% different).

The net benefit was good... certainly not life changing, but enough for a very nice dinner for two out weekly.... now, if there were only a plethora of nice places to go out to dinner!.

 

[teejayevans]

You’ll need to be selective with health insurance if you need to go out of network.
Pennsylvania tried to tax me just because I used my parents PA mailing address temporarily.
Most states have become very aggressive. States are running out of money, they’re getting desperate.
Florida property taxes run around 1%, twice as much as some lower tax states.

 

[Koolau]

Many, many Florida residents, including the most (in)famous one, have homes up north;

I know Mickey has a home in Cali, but didn't know he had one "up north." YMMV

 

[FLSUnFIRE]

I think insurance is the biggest jump that most people experience when moving to FL. Property rates are set to spike again as the reinsurance costs are increasing after the Irma payouts and people are getting double digit increases this year. Property insurance can be mitigated by the property you choose and the location but it isn't cheap and sometimes you will find few companies willing to even write a policy depending on their risk exposure. I finally got back with USAA after years with some sketchy companies.

 

[RunningBum]

That doesn't square with my observation. Many, many Florida residents, including the most (in)famous one, have homes up north; most spend all summer there and reappear when hurricane season is over. Their cars bear Florida plates and their Florida homes are homesteaded. If you have two homes, and want to homestead in Florida, you'll have to give up any homestead exemption on the other house. But I never was told that you have to sell the other house.

While it would be ideal to break all ties, including selling your house, you don't necessarily have to sell your house. It isn't unusual for someone to keep a vacation property and perhaps even a car in their old home state. DM and some friends are TX or FL residents but keep a home and a car in Vermont, and perhaps even a bank acount with a nominal balance to have access to an ATM, but that is it... driver's licenses, voting registration, homestead exemptions, financial accounts, direct deposits of pensions or SS, and the like are all addressed to their home state.

Yep, I'll concede that it's not a hard requirement to sell the house in the old state. Perhaps it was a precaution advised for someone about to exercise 7 figures worth of stock options in the near future rather than just liquidating their investments over a long period.

 

[audreyh1]

I think in a case of a new retiree looking to relocate from a state where they have worked for years that is aggressive in tax collection like CA, making a clean break is a good idea.

Otherwise managing two houses in different states shouldn’t be an issue, but you want to make sure that drivers licenses, health insurance, most vehicles, homestead etc. are clearly set up in your desired domicile state.

 

[green night]

A little confused here. The traditional IRAs and 403Bs are 100% taxable (not just capital gains). Assuming that your invesments make at least 4% annually, why not just sell them a little at a time, and pay the tax? Assuming you'd pay 4.25% on $950K, that's only $40,375. Seems like buying a second property and going through all that hassle would cost you a lot more than $40K, and it wouldn't be worth it to me unless you REALLY want to live in FL part time.

Sorry ... I didn't give all my info. on the taxable account. Total balance is $1.6MM. I have the gains of $950K in it though. Also, the dividends that are referenced.

So, in total between the IRA / 403Bs and gains in my taxable account I have $2.45MM that potentially will get hit by my state's tax rate.

Thanks!!

 

[COcheesehead]

Don’t let the tax tail wag the dog. Live where you will achieve your retirement goals: quality of life, friends, family, recreation, medical, house style, COL....

 

[Chuckanut]

You have to look at your own situation. The States will get ya somehow, someway. See how each state you like compares to your own situation. Like others have said, not having a state income tax does not mean that state is some magical tax free place.

Truer words were never spoken.

 

[Dash man]

You’ll need to be selective with health insurance if you need to go out of network.
Pennsylvania tried to tax me just because I used my parents PA mailing address temporarily.
Most states have become very aggressive. States are running out of money, they’re getting desperate.
Florida property taxes run around 1%, twice as much as some lower tax states.

We’re Pennsylvania residents and considered changing to Florida. We have a condo down there on the beach. We learned that unless we sold our primary home, the state would likely consider us PA residents. We also didn’t want to change doctors and are pretty entrenched with our church and family here in PA. PA doesn’t tax retirement income and the tax rate isn’t high, so staying here isn’t so bad. The inheritance tax was one thing we were hoping to avoid, but that’s for the kids to worry about anyway.

 

[sengsational]

I run all the numbers, then do what DW tells me to do (stay here, at least for now). At least I see some retirees moving to NC, so in the scheme of things, it's probably not that bad. Getting the money out of tIRA and 401(k) has been, and is going to be expensive, it's cheaper than getting a new wife

 

[FANOFJESUS]

I have looked into moving. I think it does not pay if you live in the Midwest for most people. In most places the housing is higher. In some places the property taxes are a lot higher.

 

[MichaelB]

No, I don't think so. Most states you are either a resident or a non-resident most years... but you are a part-year resident ONLY in a year that you move into or out of a state. If you are not a resident you don't need to file a tax return unless you have income from assets sited in that state.

You’re right, I should have conditioned that statement. It depends on the state, the income, how clean of a break in tax residency is achieved.

 

[Sunset]

I have looked into moving. I think it does not pay if you live in the Midwest for most people. In most places the housing is higher. In some places the property taxes are a lot higher.

It pays if you live in IL, for many.

Property tax is 2.7% of value. So we pay just over $5K property tax on a $200K house.
Sales tax is 10% (State + County + city).
State income tax is 4.95%

The redeeming thing in IL is that pension/IRA money is not taxed (yet).

 

[OldShooter]

It pays if you live in IL, for many.

Property tax is 2.7% of value. So we pay just over $5K property tax on a $200K house.
Sales tax is 10% (State + County + city).
State income tax is 4.95%

The redeeming thing in IL is that pension/IRA money is not taxed (yet).

You'll probably consider all those numbers to be bargains after the state bankruptcy is settled.

 

[Rocket Man]

You'll probably consider all those numbers to be bargains after the state bankruptcy is settled.

I am from Illinois. That is what I worry about. I know the state is considering taxing retirement income and I expect they will in some fashion. I would love to get out now but DW is not on board. Sigh...

 

[Ronstar]

I am from Illinois. That is what I worry about. I know the state is considering taxing retirement income and I expect they will in some fashion. I would love to get out now but DW is not on board. Sigh...

+1. I just hope to get out before retirement income is taxed and before there is an exit tax.

 

[wrigley]

It pays if you live in IL, for many.

Property tax is 2.7% of value. So we pay just over $5K property tax on a $200K house.
Sales tax is 10% (State + County + city).
State income tax is 4.95%

The redeeming thing in IL is that pension/IRA money is not taxed (yet).

The military got me out of Chicago. My entire family still lives in parts of Illinois. They all constantly b^tch about the state's financial situation, but all of them will die in Illinois!


Mike

 

[sengsational]

+1. I just hope to get out before retirement income is taxed and before there is an exit tax.

From what I gather, there are many more likely things to worry about; no state has a true exit tax. There are things called exit tax that aren't (on the gains from sale of property in the state). That would be a great play, if you could get away with it, though: get domicile settled elsewhere, then sell real property in the former state that would have taxed you on the gain. But how many states tax you on the gains on your primary residence when you buy another residence? Seems like you keep rolling it forward and the last one you get an exclusion.

 

[Sunset]

I am from Illinois. That is what I worry about. I know the state is considering taxing retirement income and I expect they will in some fashion..... Sigh...

Same here..

I think a major thing holding back taxing retirement income is the flat tax, as it would tax everyone getting a pension/IRA so wildly unpopular.

IL big problem is every time they increase the tax rate, they just spend more, instead of paying off debts. They use to tax at 2.5% until 1988.

 

[kgtest]

Its all about your intentions matching the records. If you intend to be a full time resident the records would show that.

 

[meleana]

My brother sold his house in NY. He already owned a house in Florida. At that point he became a Florida resident. He now also rents a condo in NY for snowbirding.

 

[Retired Expat]

All of these discussions about one kind of tax in one place or another make me chuckle.... any discussion of costs has to be all encompassing and cover your full budget living somewhere for a year or is meaningless.

I retired to South America. My property tax was 1500 on a $325,000 dollar home and I pay virtually no other taxes except a VAT, like a sales tax. Of course I still pay Federal US taxes. But depending how you live it can be as expensive here as the Average cost in the US or only 60% of the cost of the US.

I do have a vacation home in CT that we also rent out sometimes on AirBnB. Nothing like stamps in your passport to prove non residency. A good friend recently moved to Florida and was extolling the virtues of living there. Based on our side by side comparisons our costs are quite similar, we just spend our money differently is all.

 

[papaof2]

Your calculations should include:

State and local sales taxes.
State income tax rates at your income level. (My state doesn't tax the first $64K of unearned income if you're over 65. The $3K in book royalties over the past 12 months falls into that category.)
Property taxes and insurance.
Medical costs.
Fuel prices and vehicle insurance costs if you drive.
Grocery costs - typically not much different in adjacent states but possibly major differences in a longer move.
Utility costs electricty, gas, water, sewer, internet, cable TV (and the quality of those services) - some places are much more expensive than others.

Add some value for people you know in the area, places you want to be in the area, etc. If you like opera and the only local entertainment is blue grass - or vice versa, you may not be happy there. Same for religion and other things.

 

[SpinDoctorTX]

I'll just add that you need to look at total tax burden and not just income tax. Items such as property tax, school tax, road tax or tolls, sales tax, vehicle reg fees, other taxes added onto utility bills, as examples. So while you may save on income tax, the new state may get you paying in other ways that there is not as much savings as you thought there would be.
In my opinion, all states will get something out of you. Each state has different methods to make that happen. Just some states take a bigger bite than others. Without getting on a political soapbox, you can do your own investigating. Just look at total tax burden.

This. Texas has no state income tax, but sales & property taxes can be high.

If I had my way, the use would go to a straight consumption tax for individuals and businesses- no exceptions- to fund the govt. including universal hc for all (we don't need but many do). That would capture the hidden $ (ppl working for cash- I know quite a few) on all purchases made by these folks. I"m not a mathematician, so I don't know how that could be accomplished- but I bet someone in these forums does , based on how much I've learned when surfing this site.