You can do anything you want to accomplish as soon as you're retired. But penny-pinching where possible is a necessity because you will be living on a fixed income. The taxes you pay the IRS are no exception. You can either claim every possible deduction that you can claim legally, or move to any of the nine income tax-free states. You can even move to the five sales tax-free states if that is not enough.
Alaska is among the states that fall in to both of these criteria. Alaska is the perfect state to move to considering these two requirements. Obviously, the weather is a big change for most people. The 49th state might seem like the perfect rea to retire in if you can get over the climate. Actually, Alaska isn't as completely tax-free as it appears to be at first look, and could likely cause IRS issues, or simply a financial problem.
A few of Alaska's boroughs charge property taxes, though the state does not collect sales tax. Only your initial $150,000 will be exempted if you are at least 65 years old. Moreover, if you're concerned about the inheritance that you will be leaving your children, you should be aware that Alaska also has an estate tax.
Obviously, you could be making a considerable mistake if you are picking a place to live simply because of the local tax law because retirement is so much more than that. However, income and real estate taxes are what many people are worried about. The problem with these 2 types of taxes is that when you retire, they essentially function in an opposite fashion. While your income reduces, your real estate taxes often increase. So while you will be receiving less money, you'll be required to pay more taxes on your home and property. If you're doing home renovations, you will want to determine how that will increase your property taxes. For retirees who are living on a fixed income, this could lead to a serious financial issue, or even lead to IRS problems.
You can avoid the burden of property taxes by opting to live in an apartment instead. But if you receive considerable income from other sources like pensions, you might end up needing to pay higher income tax rates. This is because of where your money comes from, not where you opt to live.
States like New Hampshire, Alaska, Tennessee, Florida, Wyoming, Nevada, South Dakota, Washington, and Texas do not charge income tax. But some states such as Tennessee and New Hampshire collect taxes on income made from bonds or stocks. These are 2 income sources that many retired people get funds from once they leave their regular jobs.
