When it comes to planning one’s estate and retirement, a change of location becomes a part of the plan for many American retirees. For example, some states levy more extreme inheritance and/or estate taxes than other states — and some states do not levy any such taxes whatsoever. Income tax is another thing to consider during the retirement and estate planning process. Those who plan to work through their retirement may wish to seek out one of the few states that does not tax income.
When comparing how different states tax their residents, Texas offers some specific advantages and disadvantages– depending on one’s situation. For example, if one plans to work during his or her retirement, the retiree should be aware that Texas will tax the income received. It will also tax the income received on interest and investment dividends.
On the other hand, some states, like Florida, do not tax income from wages and investments. Texas, like Florida too, does offer the benefit of not taxing Social Security Income. This could represent a boon for low-income retirees who are heavily dependent on their Social Security earnings.
Considering these and many other tax factors relating to estate planning and inheritance, Texas is considered to be a tax-friendly state overall. There could, however, exist a state that is even more tax friendly, depending on one’s needs. For most who are creating a location-based estate and retirement plan, finding a state that provides the most comfortable balance of climate, taxes and other amenities (like family and friends) is the ultimate goal.
Source: kpbj.com, Most tax-friendly states for retirees, Robert Powell, March 5, 2014