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Insurable Interests

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Insurable Interests

Vol. 9, Issue 4December 2013

FINANCIAL INTERESTS

Tax-Unfriendly States for Retirees

You know that taxes can have a huge impact on the amount of money you get to keep from your salary or savings. And when you retire, that can make a big difference in how long you can live comfortably on your retirement nest egg.

Using data from a variety of sources, CNBC released a list of the 10 most tax-unfriendly states for retirees. In alphabetical order, they are:

California. At 13.3 percent, California’s top state income tax rate is one of the nation’s highest. The state sales tax rate is a hefty 7.5 percent. And high property tax rates combined with high home costs also take a bite out of retirement income.

Connecticut. Connecticut is one of only 14 states that tax Social Security income. It also has a progressive estate tax rate that goes up to 12 percent, with a $2 million exemption. And it has high property tax rates, coupled with high home costs.

Iowa. While you might have suspected California and Connecticut of having high taxes, you probably are surprised that the Hawkeye State is also tax-unfriendly. But since most of the state’s income comes from agriculture, it relies heavily on personal taxes. Its top income tax rate is 8.98 percent, and its inheritance tax can get as high as 15 percent. And it taxes at least part of Social Security payments for people at higher income levels.

Maine. Maine also has high income taxes, with a top bracket of 8.5 percent. Its high property taxes and its top estate tax rate of 12 percent are additional concerns for retirees.

Nebraska. The Cornhusker State includes some Social Security income in its personal income tax rate, which goes up to 6.84 percent. In addition, property taxes are the sixth-highest in the nation, though there are exemptions for people aged 65 and over, based on income.

New Jersey. The state has the nation’s highest property tax rate, and its income tax rate tops out at 8.97 percent. The top bracket for both estate and inheritance taxes is 16 percent, though there are exemptions. And the state sales tax is a whopping 7 percent.

New York. The Empire State has a top income tax rate of 8.82 percent, and some localities tax additionally. Property taxes also are high, and the estate tax tops out at 16 percent, with a $1 million exemption.

Minnesota. Minnesota has a top income tax of 7.85 percent, and it taxes Social Security and pension income. Sales tax rates also are high, though food, clothing and medicine are not taxed. And property taxes are steep, although there is an income-based exemption for seniors.

Rhode Island. The state taxes most forms of retirement income, including Social Security, in full, and its top income tax rate is 5.99 percent. It also has high property, sales and estate taxes.

Vermont. Most retirement income sources are included in the state’s personal income tax, which has a top rate of 8.95 percent. Other taxes – including sales, estate and property – are also among the nation’s highest.

This article was created by Osmosis Digital Marketing for use with permission by The Bensman Group.

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