Financial Focus: New York’s High Taxes Drive Outmigration

Anthony RivieccioFinancial Focus: Should you be thinking about moving to a lower “tax” State?

by Anthony Rivieccio, MBA, PFA

During this time of the year (tax preparation) many people again realize that New Yorkers are the highest taxed individuals in State and nation.

The total taxes on New Yorkers are so high that many people seriously consider moving.

So, for example, if you are single making $ 50,000 or Married about $75,000, is there a place where one can have a quality place to live without having to pay 40% in Federal State and City taxes? And let’s not forget State property taxes, inheritance State taxes,  interest and dividend taxes! This can actually make the total tax burden closer to 60%

Since choosing where is half the battle, the roster of tax-friendly states invariably includes several states that do not levy general State personal income taxes. Three are warm (Florida, Nevada and Texas), and four are a tad cooler (Alaska, South Dakota, Washington and Wyoming.)

Thirty-five states and the District of Columbia have a graduated income tax, while eight states have a flat tax. Many states do not tax Social Security benefits and some don’t tax pension income or retirement plan distributions.

New Hampshire and Tennessee tax only dividend and interest income. Cities, counties, or municipalities in fourteen states have their own income taxes.

While estimating your income taxes in a new state isn’t too difficult, it’s only a start. Comprehensive analysis must also include sales and property taxes. Sales tax rates vary, as well as what’s subject to the tax. Five states — Alaska, Delaware, Montana, New Hampshire and Oregon — do not impose statewide sales taxes, though some do permit local sales taxes.

It’s harder to compare property taxes between states. Each jurisdiction calculates them differently. However, New Jersey and Illinois imposed the highest effective average property tax, according to the Tax Foundation. Hawaii and Alabama had the lowest.

Fourteen states and D.C. impose estate taxes and six states have inheritance taxes. Maryland and New Jersey have both. Measuring inheritance, estate and gift taxes can be as important as evaluating the different income tax rates for wealthier clients.

Wyoming is the lowest-tax option for a single taxpayer earning $50,000 in taxable annual income, according to recent calculations by Forbes. Alaska, South Dakota, Texas and Louisiana rounded out the top five. These states are among the lowest for wealthier individuals as well.

uncle-sam-pay-your-taxes1Choosing a tax-friendly state for your clients will depend on specific circumstances, New York and California are particularly unfriendly across all income brackets.

But is it really worth moving- just to save money on State Income Taxes?

With NY residents, generally, out of their total 40% combined in taxes, 60% of that is federal-related. So, in short, it won’t matter where you live — Uncle Sam will be there to get his cut.

So is it worth it to relocate to save the other 40% or 16% in State and City Taxes?

That $50k single individual could save $8,000 a year! Should you save or invest it  — and make up that 16%? Probably not at that interest rate and in this economic environment.

Excluding other economic or quality of life factors –which should be factored in– in making such a major decision, you should consult your tax planner. At this time of the year, tax planner and tax preparers pull double-duty as travel and relocation advisers.

 

Anthony Rivieccio is the founder & the CEO of The Financial Advisors Group, celebrating their 20th year as a fee only financial planning firm specializing in solving one’s financial problems. Anthony, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News12 The Bronx, Bloomberg News Radio, Bronxnet Channel 67 TV, The Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News and The Bronx Chronicle.

For financial assistance or a FREE COPY of a 2015 Income Tax Guide, Anthony can be reached at (347) 575 5045 .

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