State income tax varies
- Thread starter Zardoz56!
- Start date
But you need to look at the whole picture, Texas is great for rich people with high incomes, and if that is what you are then you are benefiting. Basically Texas shifts the tax burden down onto the middle class.
Assumptions:
- Retired couple, income = $80,000/year (mix of IRA withdrawals, pensions, Social Security).
- Owns a $300,000 home (downsized).
- Spends $40,000/year on taxable goods/services.
- Married filing jointly.
- Social Security is not taxed federally if income is low enough, but some states (like New York) tax retirement income differently. California and Texas exempt Social Security.
Comparison: Retiree Household ($80k income)
Comparison: Retiree Household ($80k income)Texas
- State Income Tax: $0 (no tax on pensions, IRA withdrawals, or Social Security).
- Sales Tax (8.25% on $40k spending): ≈ $3,300
- Property Tax (~1.7% on $300k home): ≈ $5,100
- Total State + Local Taxes: ≈ $8,400
- Effective Burden: ~10.5% of income
California
- State Income Tax: Pensions and IRA withdrawals are taxable. Social Security is exempt.
- Effective ≈ 2% on this income ⇒ ≈ $1,600
- Sales Tax (8.82% on $40k spending): ≈ $3,530
- Property Tax (~0.8% on $300k home): ≈ $2,400
- Total State + Local Taxes: ≈ $7,530
- Effective Burden: ~9.4% of income
New York
- State Income Tax:
- Social Security is exempt.
- Pensions/IRA: NY exempts up to $20k per person age 59.5+, so if this couple splits withdrawals, much (or all) of their income could be exempt.
- Estimated: ≈ $0–1,000 depending on structure.
- Sales Tax (8.5% on $40k spending): ≈ $3,400
- Property Tax (~1.4% on $300k home): ≈ $4,200
- Total State + Local Taxes: ≈ $7,600–8,600
- Effective Burden: ~9.5–10.8% of income
Takeaways for Retirees
Takeaways for Retirees- At moderate retirement incomes, Texas isn’t always cheaper than CA/NY, because property taxes are so high.
- California’s Prop 13 keeps property taxes very low, which benefits retirees on fixed incomes.
- New York gives generous pension/IRA exemptions after age 59.5, so some retirees there pay less than in Texas.
- Texas benefits wealthy retirees (with big pensions/withdrawals) the most, but not necessarily middle-income retirees with modest homes.
Aunt Bea
SF VIP
- Location
- Near Mount Pilot
In New York State my income tax is about 2.5-3% of my gross income before deductions and adjustments.
Taxes are funny things, you really need to look at all of the taxes and fees that states and local governments charge to raise revenue.
Income tax may be low or non existent but sales tax, personal property taxes, gas tax, etc… may make up for it.
Taxes are funny things, you really need to look at all of the taxes and fees that states and local governments charge to raise revenue.
Income tax may be low or non existent but sales tax, personal property taxes, gas tax, etc… may make up for it.
jujube
SF VIP
No state income tax here in Florida, but they make up for it in other ways. Somebody's gonna have their hand in your pocket......
Lethe200
Senior Member
- Location
- San Francisco Bay Area
As my old boss, an independent CFP, liked to say, "Don't let the tax tail wag the dog!"
It's interesting to look at this state-by-state summary, which is regularly updated by Kiplinger:
US states tax map
It's interesting to look at this state-by-state summary, which is regularly updated by Kiplinger:
Taxes on Retirees: A State by State Guide
See how each state treats retirees when it comes to income, sales, property and other taxes.US states tax map
mathjak107
Well-known Member
- Location
- bayside ,queens , ny
we pay so little in new york state and new york city taxes that despite a six figure retirement income , the 1600 dollar tax credit we get each year from our long term care plan has to be carried over because we don’t pay enough in taxes
Murrmurr
SF VIP
- Location
- Sacramento, California
Doesn't TX get a lot of revenue from oil, though? I've always thought that's why there's no state tax.