Should You Relocate to Trim Taxes in Retirement?
Relocating for retirement and trimming the budget line for taxes are among the many tasks preretirees and retirees have on their to-do lists. Many people consider checking off both items by moving to a state with low taxes or tax breaks that specifically benefit older residents. And these days, people affected by tax reform's squeeze on the federal deduction for state and local income taxes (SALT) are feeling increased pressure to make such a move.
No doubt moving from a high-tax state to a low-tax state can produce savings. For instance, a taxpayer in California who pays the top state income tax rate of 13.3% can move to Florida and cut that tax rate to zero.
Yet a quick fix can be much more complicated than it seems. Yes, you'll improve your bottom line, at least at first. But your overall tax savings may not be as great as you anticipated. Relocate to cities such as Dallas or Seattle and you could find higher property taxes cutting into your expected savings. In Texas, residents pay an average of $1,993 in taxes per $100,000 of assessed home value, which is on the higher end of property taxes nationwide.
And the tug of your old hometown may cost you, too. Will you end up with higher travel expenses weighing down your budget, as you fly back and forth to visit family and grandchildren in other parts of the U.S.? Will you actually be willing to put down roots in
