15 Sep Tax-friendly states for retirees
Q. I didn’t realize the New Jersey retirement income exclusion has a cliff. What states are better tax-wise for retirees?
A. You’re right about the retirement income exclusion cliff.
That refers to qualifying for the exclusion. It’s an all or nothing proposition.
If your total income is more than $100,000, even if you’re the qualifying age of 62 or older, you can’t take the exclusion, said Maureen Jasper, a certified public accountant with Wilkin & Guttenplan in East Brunswick.
You’re not alone is thinking of leaving New Jersey for a fairer tax land.
But before you go, realize that New Jersey doesn’t tax your Social Security benefits — something some other states do. Be sure to know everything before you move, Jasper said.
States without an income tax include Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming, Jasper said. In addition, some states, such as New Hampshire and Tennessee, only tax investment income.
Jasper said it’s not uncommon for New Jerseyans who are older than 59 1/2 to hop over to Pennsylvania to take advantage of the fact that they do not tax retirement income.
In addition, as you noted with your retirement destination, Delaware residents 60 or over are entitled to a pension exclusion of up to $12,500.
“There are some other states that have other types of retirement income benefits as well,” Jasper said. “You may not always, however, want to base your home — domicile — on tax consequences, as sometimes being close to your family and/or your grandchildren is much more important than the tax bill.”
It’s always best to consider all aspects before moving out of state, she said.
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This post was originally published in September 2017.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.