Yesterday I was speaking with someone of significance, who told me that two individuals, whom we shall describe as tenants, were moving out and relocating. I started to think, have they considered which state would provide them with the best tax benefits? Perhaps you may be thinking of relocating or are close to retirement and want to relocate. Where should you consider moving in order to stretch your money?
The Three Headed Monster
There are at least three critical factors to consider. Property tax of your new location, income tax and the sales tax. For example, if you are a shop-a-holic, then sales tax would be important to you given your spending habits. Conversely, if you don’t plan to purchase a property in your relocated jurisdiction, don’t sweat it since property taxes may not be an issue for you. Except, the landlord may increase your rent annually, to cover property tax increases.
Calling all shoppers! This may be paradise. Delaware has no sales tax. Additionally, State income tax can range from 2.2 percent to 6.6 percent according to Kiplinger Personal Finance. Furthermore, the annual estimated property tax bill for a home valued at $250,000 is $1,405 and for a home valued at $350,000 the estimated property tax would be $1,967. In addition, if you are retired, up to $12,500 of your income is excluded from state income tax. Sounds like a worthy consideration. Depending on your perspective, lower taxes may compensate for winter weather.
Unlike paradise, the average state and local sales tax in Nevada is 8.23 percent according to Kiplinger Personal Finance. The good news is that there is no state income tax rate and the property tax rate is the fourth lowest median amount in the country. If married and your house were valued at $250,000, then your estimated property tax would be approximately $1,333. Maybe not a bad deal since you have the best of both worlds, very hot or cold weather. A small price to pay for being tax frugal.
Tennessee is home to the National Civil Rights Museum. And while there is no state income tax and property taxes are well below that of the national average, I have some concerns about some of the other taxes. The average state and local sales tax is 9.55 percent. But that’s not my only concern! My major concern is that in Tennessee, groceries are taxed at 4.00 percent or even higher. Did you get that? If the groceries and food you need is being taxed at that rate there might not be enough Elvis in Tennessee to get me to relocate there.
Texas, I’ve visited several times. But would I relocate there? Well there is no income tax and that’s wonderful! The average Texas state and local sales tax is 8.19 percent. But what about property taxes? The property tax rate in Texas is the seventh highest in the entire country! Big house, higher property tax. That said, a couple with a property having an estimated value of $250,000 may pay an estimated $4,230 in property taxes each year.
Furthermore, there are several states that may be favorable to retirees such as Hawaii, District of Columbia, and South Carolina to name a few. On the other hand, some of the least favorable for retirees are New Jersey, Connecticut and Kansas according to Kiplinger Personal Finance. Wherever, you decide to live, we all have to evaluate relocation through the lens of the three headed monster of property tax, sales tax and income tax.
I have decided to add a new section to Money Monday’s called “what’s up!” Here I share something very important that I think you should know that may or may not be unrelated to the main article. Today’s “what’s up” is about the FHA extending its foreclosure and eviction moratoria for all FHA-insured single family mortgages through July 31, 2021. This automatic extension is a one-month additional safeguard for those who are struggling to remain in their homes.
Additionally, the deadline for the first legal action has been extended for 180 days after July 31, 2021.
Finally, FHA is extending the time period for homeowners who, due to COVID-19, have fallen behind on their mortgages to request or start a new forbearance plan through September 30, 2021. And that’s what’s up!