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Retiring? Relocate To Florida or Alaska To Avoid Additional Taxes
By Darrin Mish
Once retired, you can do anything you want to do. But penny-pinching where possible is a necessity because you'll be thriving on a fixed income. This includes the taxes you pay to the IRS. You can either relocate to one of the 9 states that do not collect income tax, or claim every legal deduction possible. You can even move to the five sales tax-free states if that is not enough. One of the states that fit into both of these categories is Alaska. Alaska is the perfect state to move to using these two requirements. Of course, the climate is a big change for numerous people. So if you can adjust to the wild weather in the 49th state, it might seem like the ideal area to retire and pay less in taxes. In reality, this could possibly lead to an IRS issue as Alaska is not as tax-free as it seems to be at first glance. While the state doesn't charge local sales taxes, there are particular municipalities that actually do collect sales taxes locally. There are a few boroughs, which are essentially counties and cities, that charge property taxes. However, your first $150,000 will be exempt if you're 65 or older. Also, there's an estate tax in Alaska. This can be a serious problem if you are concerned about not only what you will be able to leave your children, but also what they'll actually get after the government takes its share. Obviously, you could be making a substantial error if you are picking a place to live simply because of the local tax law because retirement is beyond that. But most people are typically only concerned with real estate and income taxes. They issue is these 2 types of taxes basically function in an opposite fashion when you retire. Your real estate taxes normally increase while your income decreases. So you'll be asked to pay more in taxes on your property and home while you'll also be getting less money. If you are doing home renovations, you'll want to determine how that will increase your property taxes. This could lead to IRS issues for retirees thriving on a fixed income. Indeed, most people decide that they would rather not fret about the upkeep and maintenance of a large house and instead, opt to live in a small apartment. Picking this option means that they will not be required to pay any property taxes, but if they're receiving a significant income from pensions and other sources, they may end up needing to pay considerably higher income tax rates. This is mainly decided not by where you opt to live, regardless if it's Florida or Alaska, but exactly where your money comes from. States such as New Hampshire, Alaska, Tennessee, Florida, Wyoming, Nevada, South Dakota, Washington, and Texas don't collect income tax. However, income made from stocks or bonds are charged with taxes in states like New Hampshire and Tennessee. These are two income sources that most retired people get funds from once they leave their daily jobs.
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