It looks like the flu has finally worked its way through our family. Everyone has mostly stayed holed up in their own rooms, trying not to share germs. My wife has been staying at another house to be extra cautious, since even a mild flu isn’t something you want to risk during radiation treatments. Thankfully, things seem to be settling down now.
When I lived in Pittsburgh, one of my favorite things was having a fire in the fireplace on cold days and nights. After moving to Florida, I’ve always missed that little luxury. Our new house does have a gas fireplace, but it only gets used a few days a year. With the recent cold snap, though, I had it running constantly. There’s just something about a real fire that’s hard to replace.
I don’t like taxes. Do you? Still, whether we like them or not, understanding how taxes work is empowering. The more you understand them, the less intimidating they become. Also, the more you understand, the more infuriating they are. You would be hard-pressed to find something that isn't taxed.
State Income Taxes
In addition to federal taxes, many states also tax income. Florida residents are fortunate, of course. Other states are far less friendly. New York’s top state rate is 10.9%, and California’s is 13.3%. Can you imagine living there?
Taxes on Retirement Distributions
One of the biggest tax issues in retirement is whether your IRA and 401(k) distributions are taxed at the state level
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Some states tax retirement distributions the same as regular income. Others don’t. Florida does not tax IRA or 401(k) withdrawals. Neither do Texas, Tennessee, Pennsylvania, or Washington, among a few others. But believe it or not, most states tax distributions from your IRA.
Property Taxes
Florida makes up for its lack of income tax with property taxes. Rates typically range from 1% to 3% of assessed value. Texas, Illinois, and New Jersey tend to be the highest. States like Alabama and West Virginia are closer to 0.6%.
Sales Tax
Florida’s sales tax is 6% at the state level, with local surtaxes that often bring the total to around 7%. Groceries, prescriptions, and many essentials are exempt. Florida lands somewhere in the middle nationally.
Texas averages about 8.2%, California 8.85%, and Tennessee 9.55%.
Five states have no sales tax at all: Delaware, Montana, New Hampshire, Oregon, and Alaska.
Gas Taxes
Gas taxes vary widely. California and Pennsylvania are among the highest at over 50 cents per gallon. Alaska is the lowest at about 8 cents. Florida sits near the middle at roughly 26 cents per gallon.
Tourist and Transfer Taxes
Florida raises significant revenue through tourist taxes on hotel stays, typically 2–6% depending on the county. I guess that seasonal traffic does have some good qualities. It keeps our taxes down.
Real estate transfer taxes also vary widely. Some states impose significant stamp or transfer taxes on property transactions, while others have none. Florida’s is relatively modest compared to high-tax states.
Final Observations
If you move to California, I believe they pick you up upside-down at the border and shake out all your change.
Compared to much of Europe, U.S. taxes are still relatively low, so I suppose there’s room for gratitude. I’m just not feeling particularly thankful about it today.
Be Blessed,
Dave