Not all states have the same tax laws regarding retirement income.
Were you a federal employee?
If so, you should choose where you retire wisely.
Some states will exempt your federal government pension from taxes.
Others will not.
According a recent Kiplinger article titled “States That Tax Your Federal Government Pension the Most,” this decision could save or cost you thousands of dollars each year in taxes.
What destinations should you avoid?
These states tax all pension income:
- North Dakota
- District of Columbia
Although Wisconsin levies significant taxes on most retirees, this state does provide exemptions for federal employees of the Public Health Services, the National Oceanic and Atmospheric Administration and military veterans.
Some states like Montana, Ohio, Utah and Arizona tax exemptions for pensions, but they are limited.
Montana would only allow for $4,110 to be exempt if your adjusted grow income is below $34,260.
Arizona has no income limit, but the exemption is a low $2,500.
Both Ohio and Utah have income limitations and tax credits are low—$250 for Ohio and $450 for Utah.
Some states will offer military or railroad retirement benefits or special exemptions.
Do thorough research before you decide on a place to retire.
Seeking advice from your estate planning attorney and financial advisor can help you make the best decision for your situation.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Kiplinger (May 16, 2017) “States That Tax Your Federal Government Pension the Most”