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home | Taxes | TAX BURDEN BY STATE

Ivan Gillis
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A key factor for retirement home location selection is the total State Tax Burden. While state taxes are a concern to everyone, they are especially important to retirees, as most retiree's income is fixed upon retirement.

Don't make the mistake of basing your decision on whether a state has a state income tax or not.  One must consider the total state tax burden, as a state's other taxes may negate not having a state income tax.


Typical State Taxes are:

·        Sales Tax

·        Fuel Tax

·        Tobacco Tax (Good Reason beside health to stop smoking)

·        Personal Income Tax

·        Property Tax

·        Inheritance and Estate Tax

·        Licenses and Registration Fees

Other Factors

·        Treatment of Retirement Income

·        Treatment of Retired Military Pay

·        Treatment of Social Security and Railroad Retirement

·        Personal Deductions

·        Medical and Dental Deductions

·        Federal Income Tax Deduction


Determining the total State Tax Burden is a key factors in planning your retirement.  It is very easy to give yourself at least a 10% raise by choosing a retirement home location with a low State Tax Burden.

The following links are provided, so you can check the tax burden of any location you might be considering:

States are listed alphabetically in three sections:
Alabama-Iowa, Kansas-New Mexico, New York-Wyoming

I have included the data for California below, so you can see your publisher pays through the nose for privilege of living in Paradise.



Sales Taxes
State Sales Tax: 7.25% (food and prescription drugs exempt.  Tax vary according to locality.  Can be as high as 8.75%)

Gasoline Tax: * 40.1 cents/gallon
Diesel Fuel Tax: * 41.9 cents/gallon
Cigarette Tax: 37 cents/pack of 20 plus an additional surcharge of 50 cents per pack, bringing the total to 87 cents.

Personal Income Taxes
Tax Rate Range:  Low - 1.0%; High - 9.3%
Income Brackets: * Lowest - $6,319; Highest - $43,468
Number of Brackets:  6
Tax Credits:  Single - $85; Married - $170; Dependents - $265; 65 years of age or older - $87
Standard Deduction:  Single - $3,254; Married filing jointly - $6,508
Medical/Dental Deduction: Same as Federal taxes
Federal Income Tax Deduction: None
Retirement Income Taxes:
Social Security and Railroad Retirement benefits are exempt.  There is a 2.5% tax on early distributions and qualified pensions.  All private, local, state and federal pensions are fully taxed.
Retired Military Pay: Follows federal tax rules.
Military Disability Retired Pay:

Disability Portion - Length of Service Pay; Member on September 24, 1975 - No tax; Not Member on September 24, 1975 - Taxed, unless combat incurred.  Retired Pay - Based solely on disability: Member on September 24, 1975 - No tax; Not Member on September 24, 1975 - Taxed, unless all pay based on disability and disability resulted from armed conflict, extra-hazardous service, simulated war, or an instrumentality of war.

VA Disability Dependency and Indemnity Compensation: Not subject to federal or state taxes
Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax.  Check with state department of revenue office.

Property Taxes
Property is assessed at 100% of full cash value.  The maximum amount of tax on real estate is limited to 1% of the full cash value.  After taxes have been paid, homeowners 62 and older who earn $35,051 or less may file a claim for assistance on 96 percent of property taxes, up to $34,000 of the assessed value of their homes.  Call 800-852-5711 or
visit for details.  Homestead exemptions are handled at the county level.  Under the homestead program, the first $7,000 of the full value of a homeowner's dwelling is exempt. The state has a property tax postponement program that allows eligible homeowners (seniors, blind and disabled residents) to postpone payments of property taxes on their principal place of residence.  Interest is charged on the postponed taxes.  For more information, contact the California State Board of Equalization Office -- 1-800-


Inheritance and Estate Taxes
There is no inheritance tax.  However, there is a limited California estate tax related to federal estate tax collection.

For further information, visit the California Franchise Tax Board or the California State Board of Equalization.

* Does not include 1 cent local option.
** For joint returns, the taxes are twice the tax imposed on half the income.



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