How to Keep the Governor Out Of Your Pocket

The Josh Scandlen Podcast

If you live in one of the nine states in the US with no income tax you are free to skip this section. However, you may want to read on for a couple reasons:

1. If they incorporate an income tax at some point in your state. (I’m looking at you Washington state!)
2. You move to a state that has an income tax. For instance you move 50 miles south from Chattanooga to Georgia.

The rest of us will be faced with potentially paying income taxes on our IRA distributions. Now, be advised, many states have income deductions and exemptions for retirees that working stiffs don’t get. So, even if the state has an income tax, you still may not pay any.

Take Georgia for instance. If you’re over 64 years old, you pay NO tax on your Social Security income and you pay no tax on the first $65k of retirement income distributions, per person.

Essentially, even though there is a rather high state income tax, Georgia retirees can have a lot of income before they pay any state tax.

However, not all states are like that. Take Massachusetts where all IRA distributions are taxed at 5.15% as of this writing (July 2018).

Thus, if you’re a resident of Massachusetts and have a $50,000 IRA distribution, you’re going to pay $2,500 to the state and another $11,000 to the Feds if you are in the 22% bracket.

A $50,000 IRA distribution in Massachusetts nets you only $36,500!

Now if you had the Roth...well, well. That $50k distribution would net $50k spending money.

Some states are more favorable than Massachusetts. Some are less so. It’s up to you to figure that out. You actually might be surprised which states are tax favorable.

I have a video series on the state-by-state taxes for retirees plus my top eight states for retirees to live. Just go to www.youtube.com/heritagewealthplanning

Don’t just assume the states with no income tax are the most tax friendly. Believe it or not, Kentucky is ranked more tax-friendly than neighboring Tennessee for retirees even though Kentucky has a state income tax and Tennessee doesn’t.

Of course, if you have a Roth income tax won’t matter. Because a Roth is...

...you got it, tax free!

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