While you may be eyeing a move to a sunnier spot to spend your retirement years, experts say you need to consider a lot more than warm weather before choosing a new state to live in – tax laws, for one.
According to Rodger Friedman, founding partner and wealth manager at Steward Partners Global Advisory and author of “Forging Bonds of Steel,” “different states have different tax laws and other regulations that can have a major impact on your retirement funds. You need to be aware of these as you plan for where you want to live and how you want to live.” Here are a few tips for planning ahead:
New state – new income tax rules. Get to know them!
Familiarize yourself with the tax laws of the state you’re considering for your new home. Two of the top five on Bankrate’s list of best places to retire – South Dakota and Wyoming — have no state income tax, along with five others: Nevada, Texas, Washington, Florida and Alaska.
Also, an itemized deduction in one state may not be an itemized deduction in another. If you use the long form (1040) to file federal income taxes, hire a reputable, experienced CPA for guidance.
Look into how your new state taxes retirement income. States differ on taxing interest income from tax-free municipal bonds. Some states give tax credits; treat public and private pensions differently; or offer federal, military or blanket exclusions.
The following states are community property states: Idaho, New Mexico, Texas, California, Arizona, Wisconsin, Nevada, Louisiana and Washington.
If you’re married, are you moving to a community property state?