Guide to Taxes on Retirees, 2009–2010: South Carolina
State tax data courtesy Retirement Living Information Center. Visit RetirementLiving.com.South Carolina extends its Southern hospitality to retirees: The Palmetto State does not tax Social Security benefits, and it allows residents 65 and older to deduct up to $15,000 per person ($30,000 per couple) of qualified retirement income when calculating their state income tax. Retired military personnel 65 and older may deduct up to $10,000 of military retirement benefits. Property taxes are very low and are based on 4% of fair market value; homeowners 65 and older qualify for a homestead exemption that excludes the first $40,000 of the home’s value.
STATE SALES TAX
6% (prescription drugs exempt). Twenty-five counties impose an additional 1% local-option sales tax; a number of counties impose a 2% sales tax. Seniors 85 and older pay 4%.
INCOME-TAX RANGE
3% – 7%
EXEMPTIONS FOR RETIREMENT INCOME
Retirement income is taxed, but Social Security is exempt. If you're younger than 65, $3,000 in pension income is exempt. You can take this deduction for income received from any qualified retirement plan. If both spouses receive retirement income, each is entitled to an individual deduction. At 65, the deduction is $15,000. The $15,000 deduction must be offset by any other retirement deduction that is claimed. A surviving spouse may continue to take a retirement deduction on behalf of the deceased spouse. Some taxpayers 65 and older may not have to file a tax return if they meet certain conditions.
PROPERTY TAXES
Property tax is assessed and collected by local governments. Both real and personal property are subject to tax. The market value of a legal residence and up to 5 acres of surrounding land is assessed at 4%. Other property is taxed at 6% of fair market value. Personal property is taxed at 10.5% of income tax depreciated value. For homeowners 65 and older, the state’s homestead exemption allows the first $50,000 of their property's fair market value to be exempt from local property taxes. South Carolina imposes a casual excise tax of 5% on the fair market value of all motor vehicles, motorcycles, boats, motors and airplanes transferred between individuals.
Not found on the state’s Web site is a reassessment provision called Point of Sale, introduced during the property-tax reform of 2006 that the General Assembly enacted. According to this provision, when a property is purchased, the assessed value of the property becomes the sale price. The South Carolina Association of Realtors and the state Chamber of Commerce are joining forces to lobby lawmakers for property-tax-assessment modifications in 2009. Nick Kremydas, chief executive officer of the state realtors’ group, says the Point of Sale Act is having a “devastating effect” on South Carolina’s economy. Each time property is transferred, it's being reassessed based on the sales price, which creates inequities in the real estate market. For instance, in the residential market, neighboring properties have big differences in property-tax obligations based only on the date of sale. As a result, longtime residents are wary of moving, while investors looking for property are scared away by the tax complications. Similarly, businesses looking to set up shop in South Carolina are getting cold feet and taking their business elsewhere once they learn of the property-tax burden the point-of-sale provision creates.
INHERITANCE AND ESTATE TAXES
There is no inheritance tax, and the estate tax is related to federal estate-tax collection.
Guide to Taxes on Retirees, 2009–2010: North Carolina
The Tar Heel State is a favorite destination for retirees: Social Security benefits are exempt from state income taxes, and retirement income from federal-, state- and local-government pensions may be excluded, up to $4,000. Out-of-state government pensions also qualify for the $4,000 exemption. Up to $2,000 in qualified private pensions, including IRA distributions, may be excluded from state income taxes; up to $2,000 in qualified military pensions is also exempt. Real estate and personal property are assessed at 100% of appraised value. Homeowners 65 and older may qualify for a homestead exemption of up to $25,000, subject to income eligibility, and a “circuit breaker” program limits property taxes to 4% of income.STATE SALES TAX
4.50% -- but rising to 4.75 after October 1, 2009. Prescription drugs and medical equipment are exempt. Food is subject to a 2% county tax. Counties have the option of adding their own sales tax and/or a land-transfer tax.
INCOME-TAX RANGE
6.0% – 7.75%
EXEMPTIONS FOR RETIREMENT INCOME
Social Security is exempt. At least $4,000 in exclusions for pensions from federal, state and local governments (depending on dates and length of service); an exemption of up to $2,000 for qualified private pensions, including IRAs. Out-of-state government pensions also qualify for the $4,000 exemption. State retirees with at least five years of creditable service as of August 12, 1989, will be permanently exempt from state income tax on their retired/retainer pay.
PROPERTY TAXES
All property, real and personal, is subject to taxation and is assessed based on 100% of appraised value. Taxes are collected by cities and counties. Under the homestead exemption, the greater of $25,000 or 50% of the appraised value of real property owned by a North Carolina resident and occupied by the owner as his or her permanent residence is excluded from the taxpayer's assessment if the following requirements are met: (1) The owner is 65 or older or is totally and permanently disabled. (2) The disposable income of the owner did not exceed $25,000 for calendar year 2008. The 2009 limit is $25,600. The income-eligibility limit is adjusted each year by the Social Security cost-of-living adjustment. The disposable-income limit amount includes all money received plus the disposable income of the applicant's spouse if they reside together. The state also has a "circuit breaker" property-tax-deferment program. Under this program, taxes for each year are limited to a percentage of the qualifying owner’s income. The qualifying owner must be at least 65 years old or be totally and permanently disabled. For an owner whose income amount for the previous years does not exceed the income-eligibility limit for the current year, which for the 2009 tax year is $25,600, the owner’s taxes will be limited to 4% of the owner’s income. For an owner whose income exceeds the income-eligibility limit of $25,600 but does not exceed 150% of the income-eligibility limit (which is $38,400 for the 2009 tax year), taxes will be limited to 5% of the owner’s income.
INHERITANCE AND ESTATE TAXES
There is no inheritance tax, and the estate tax is related to federal estate-tax collection.
Guide to Taxes on Retirees, 2009–2010: Georgia
The Peach State is a peachy tax environment for retirees . Social Security benefits are exempt and so are most types of retirement income--including pensions, annuities, rental income and investment income--up to $35,000 per person for residents 62 and older. Retirement income above the excluded amount is taxed at ordinary rates, which top out at 6%. Food and prescription drugs are exempt. Real estate taxes may include a combination of county, city, school and state taxes, depending on location. Full-time residents qualify for a homestead exemption of up to 40% of the fair market value of their house, and residents 65 and older may qualify for additional deductions.STATE SALES TAX
4% (food and prescription drugs exempt). But local taxes may add an additional 4%.
INCOME TAX RANGE
1% - 6%
EXEMPTIONS FOR RETIREMENT INCOME
Social Security is exempt. Taxpayers who are 62 years of age or older, or permanently and totally disabled regardless of age, may be eligible for a retirement income adjustment on their Georgia tax return. Retirement income includes income from pensions and annuities, interest income, dividend income, net income from rental property, capital gains income and income from royalties. For married couples filing joint returns with both members receiving retirement income, the maximum adjustment for the applicable year may be up to twice the individual exclusion amount. Retirement income exceeding the maximum adjustable amount will be taxed at the normal rate. The retirement income exclusion for tax year 2008 and beyond is $35,000.
PROPERTY TAXES
A homeowner may pay a combination of county, city, school or state taxes depending on location. Homeowners 62 and older who earn $10,000 or less, will find that up to $10,000 of their property's assessed value is exempt from school taxes. Persons 62 or older whose family income does not exceed $30,000 may qualify for an exemption from state and county property taxes equal to the amount by which the assessed value of the homestead exceeds the assessed value for the preceding tax year. For those 65 and older who earn $10,000 or less, $4,000 of their property's value is exempt from state and county taxes as well. The state offers homestead exemptions to persons that own and occupy their home as a primary residence. Many counties offer homestead exemptions that are more beneficial to the taxpayer than the exemptions offered by the state. Homestead exemptions are filed with the county tax commissioner or the county tax assessor's office. The homestead exemption is deducted from the assessed value (40% of the fair market value) of the home. Then the millage rate is applied to arrive at the amount of ad valorem tax due. Individuals age 65 and older get additional deductions.
INHERITANCE AND ESTATE TAXES
There is no inheritance tax and only a limited estate tax.
Guide to Taxes on Retirees, 2009–2010: Florida
The Sunshine State is very popular with retirees, not just because of its year-round sunshine but because of the lack of a state income tax. And it got rid of its pesky intangibles tax on certain types of investment income in 2007. Still, sales taxes that run as high as 9.5% in some Florida cities will nip you on virtually every dollar you spend, except food and prescription and nonprescription drugs. Real estate is taxed at 100% of assessed value. Permanent residents are entitled to a homestead exemption regardless of age.STATE SALES TAX
6% (food and prescription and non-prescription drugs exempt). There are additional county sales taxes that could make the combined rate as high as 7.5%.
EXEMPTIONS FOR RETIREMENT INCOME
Not taxed. Starting in 2007, individuals, married couples, personal representatives of estates and businesses are no longer required to file an annual intangible personal property tax return reporting their stocks, bonds, mutual funds, money market funds, shares of business trusts and unsecured notes.
PROPERTY TAXES
All property is taxable at 100% of its just valuation. In certain counties and cities, homeowners 65 and over can receive a homestead exemption from property tax of $25,000 if their household income, as defined by the federal tax code, is at or below $27,539 (single) or $30,917 (couples) per year (2008 figures). The income limitation is adjusted each year based on the cost of living index. In many instances the definition of household income excludes Social Security. Permanent residents may also be entitled to a homestead exemption regardless of age. Residents 65 and older are entitled to both exemptions ($50,000). The senior citizen's homestead exemption applies only to tax millage levied by the county or city, and does not apply to millage of school districts or other taxing authorities. The homestead exemption for all residents applies to all property taxes, not just city and county taxes. Annual increases in the assessment of homestead property are limited to 3% of the prior year’s assessed value, or if lower, the percentage change in the Consumer Price Index for the prior, as long as there was no change in ownership. A 2006 law provides a property tax discount on homestead property owned by eligible veterans. To be eligible, a veteran must have an honorable discharge from military service, be at least 65 years old, be partially disabled with a permanent service-connected disability, all or a portion of which must be combat-related, and must have been a Florida resident at the time of entering military service. This discount is in addition to any other exemptions veterans now receive. A 2007 law allows local governments to give those age 65 and above – with low incomes – an increased homestead exemption. Cities and counties have the option of doubling an existing homestead exemption on primary owner-occupied homes from $25,000 to $50,000. To qualify, taxpayers must have an annual income of $20,000 or less.
INHERITANCE AND ESTATE TAXES
There is no inheritance tax and only a limited estate tax.
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