Are there more taxes in retirement that are dreamt of in your estate plan? When we talk about planning for our golden years, we talk about sources of income and how to plan for emergencies. Many of us have sat through difficult dinner table conversations about additional care needs and how we want our final illness handled.
We also want to find ways to keep our income tax obligations to a minimum, whether for our own benefit or as a way to protect our assets for the next generation. Estate planning isn't just about the next generation. We need to make sure our own expenses are covered, too.
Crain's Wealth newsletter has pointed out that we may be overlooking a tax category that has a direct impact on our retirement: sales tax. The Tax Foundation has provided some insight in its recent analysis of state and local tax rates, and the results may not surprise anyone in the Bay Area.
Yes, California has the highest state income tax in the country.
Fortunately, when local taxes are added to the mix, California is not even in the top five. We fall to eighth place with a combined rate of 8.44 percent. We are well behind first place Tennessee and its 9.45 percent combined rate.
Only 45 states have state sales taxes, and they are a seemingly disparate group: Alaska, Delaware, Montana, New Hampshire and Oregon. Of those, Delaware, Montana and Oregon have no local sales taxes, either.
Of course, the state tax is just part of the picture. We'll continue this in our next post.