Are You Going To Retire? Move To Florida or Alaska To Steer Clear of Additional Taxes
Once retired, you can do anything you wish to do. But it also means you'll be existing on a fixed income, so penny-pinching where possible is a necessity. The taxes you pay the IRS are no exception. You can either move to one of the nine states that don't collect income tax, or claim every legal deduction possible. You can even move to the five sales tax-free states if that's not sufficient.
One of the states that fall into both of these criteria is Alaska. Considering these 2 requirements, Alaska would be the perfect to state to move to during your retirement. Obvious, a substantial change for numerous people is the weather. The 49th state might seem like the ideal area to retire in if you can get over the weather. Actually, Alaska isn't as totally tax-free as it appears to be at first glance, and could likely cause IRS issues, or simply a financial problem.
Though the state does not charge sales tax, a few of its boroughs actually collect property taxes. If you're at least 65 years old, only your first $150,000 will be exempted. Moreover, if you are worried about the inheritance that you will be leaving your children, you must know that Alaska also has an estate tax.
Obviously, you could be committing a substantial mistake if you're picking a place to live simply because of the local tax law since retirement is beyond that. But most people are typically only worried about real estate and income taxes. The problem with these two types of taxes is that when you retire, they actually work in an opposite way. While your income reduces, your real estate taxes generally increase. So while you'll be getting less money, you will be required to pay more taxes on your home and property. If you're doing home renovations, you will want to determine how that will increase your property taxes. For retirees who are existing on a fixed income, this could lead to a serious financial problem, or even lead to IRS problems.
You can choose to live in an apartment to avoid the hassle of property taxes. But you might end up having to pay higher income tax rates if you get a significant income from pensions and other sources. This is based not on where you choose to live, but on where your money comes from.
The states that don't collect income tax include Alaska, Florida, New Hampshire, Washington, Texas, Nevada, Tennessee, South Dakota, and Wyoming. Keep in mind, however, that states such as Tennessee and New Hampshire charge taxes if you're earning income from bonds or stocks.
About the Author
Darrin T. Mish (http://www.getirshelp.com) is a Nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. He can be reached at his website at http://www.getIRShelp.com
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