Some states cost more to live in than others. California is almost legendary for high taxes, but California is also legendary for providing a great quality of life for its residents. Nearby access to major cities, beaches, mountains or other attractions are valuable. In California, this value has long been recognized with above average property prices and above average taxes.
According to the Tax Foundation, the top tax rate on personal income taxes in California is more than 10 percent, while the state sales tax is 7.25 percent. Local sales taxes and property taxes add to those costs. In total, the Foundation estimates that California’s 2009 state and local tax burden averaged about 11.8 percent of income. Nationwide, the average spends about 9.8 percent of their income on state and local taxes. In dollar terms, Californians pay $4,910 per capita in state and local taxes.
How local/state taxes can impact retirement income
Some retirees choose states where they will not have to pay income tax. There are seven states where there is no income tax – Alaska, Wyoming, Washington, Nevada, Florida, Texas and South Dakota.
Alaska also has no state sales tax, either. However, its residents to face property taxes and other assorted charges to live there, although they are on average the very small. The Tax Foundation reports that Alaska’s average tax burden in 2009 (the latest year available for the data) was 6.3 percent of income. Alaskans pay $2,973 per capita in state and local taxes.
Taxes should be only one factor in determining where you live in retirement. It could make sense to seek out low taxes, if you would enjoy living in that location. While Alaska has a low tax rate, the weather can be colder than it is in California and there is less immediate access to many common amenities.
If access to hunting and fishing is a priority, then Alaska could offer the perfect retirement destination.
If taxes are something you would like to factor into your retirement planning, the Tax Foundation website (Click Here) offers a convenient map that shows the average tax rates by state. However, the location of family or access to the activities that you retired to enjoy could be more important planning factors for many people.
There are ways to finance a new home with a reverse mortgage. These programs could make it possible for you to own a home anywhere in the country that you choose to live.