TEMPLE, Texas — Congratulations, you live in Texas! The “Lone Star” State was just named the 10th most tax-friendly state by U.S. News and World Report, for retirees. For why that is and a look into the numbers, we talked to Certified Financial Planner Neil Vannoy in this all new Money Talks!
"You often hear a state described as 'high tax' or 'low tax', but it's important to see how a state's tax system would impact you, personally," Vannoy told 6 News. "Texas is one of the nine states without an income tax."
That means that if you retire in one of those nine states without an income tax, like Texas, you'll keep more of your money.
"In general, the lack of an income tax is great for retirees since it means that your social security, pension benefits and withdrawals from pre-tax accounts like 401(k)s and traditional IRA’s will escape taxation," Vannoy continued.
Ok, so you won't be taxed on income, but does that mean that everything else will be more expensive?
"The lack of an income tax is great for high-income individuals and retirees alike, but keep in mind that the state still needs to raise money," Vannoy explained. "That's why our sales taxes and property taxes tend to be higher here than in other states, and this can be difficult for retirees on a fixed income."
Remember, in Texas, you never really own your house, because if you don't pay your property taxes, the county it's in will take it.
"The recent property tax cut will help, but if you're a retiree with a large, expensive home, your property tax bill will likely be higher than it would be in other states.” Vannoy said. “On the other hand, if you live in a modest-sized home – especially outside of some of the large cities with higher tax levels – your annual property tax could be reasonable."
Another major upside for Texas is how you will leave things to your heirs after you are gone!
"Unlike many states, Texas doesn't have an estate or inheritance tax," Vannoy said. "That makes it great for retirees that would like to pass on more of their hard-earned money to their heirs."
Tennessee, Florida, South Dakota and Nevada are also in the top 10. The 10 worst states on the list were Hawaii, California and most of the New England states due to high taxes.
More Money Talks from 6 News: