Finding the perfect place to retire may seem daunting—there’s so much to consider from your family’s needs, to the ideal climate, to the location–whether you desire a rural or city environment, and of course the least fun thing to have to think about— your taxes. You may be part of the vast part of the US population researching states with lower cost of living, along with all the other essential financial components like a state by state tax comparison. If this is the case, you can find a cost savings when you take a good look at North Carolina taxes.
Did you know that ten thousand baby boomers each and every day find themselves approaching this exciting next chapter in their lives? Some decide to stay put in the familiar home or town they raised their families and built their careers, but others choose to pull up stakes and relocate, either to try some place new, settle near their precious grandchildren and family, or create a more healthy lifestyle.
In a listing of 25 Best Affordable Places to Live in 2017, three North Carolina locations made the grade by U.S. News & World Report. That’s pretty amazing—three out of 25! What are some of the factors you should keep in mind besides considering states with lower cost of living? We all understand the importance of easy access to affordable and top-notch health care–no matter our age. Of course there’s also the climate, air quality, and craving easy access to a broad variety of recreation to keep ourselves fit and healthy.
Our life expectancy is longer these days, so as a result we need to plan even smarter than the generations who came before us. So take the time, either on your own or with the help of a financial planner, and make sure you include a tax comparison of the northeastern states to educate yourself about the best possible locations–not just for the ideal environment that suits your fancy, but also to ensure your nest egg is properly protected and even given the opportunity to grow.
It’s essential to take into account each state’s income tax, real estate tax, and sales tax for starters. Here’s a little break down of some basics of five other states in the northeast as compared to North Carolina. How do North Carolina taxes rank? Not too shabby.
REAL ESTATE PROPERTY TAXES
In terms of property tax, North Carolina tax rates well for those who want to make sure their retirement dollars stretch far. The property tax in North Carolina is a locally-assessed county tax, based upon real property, personal property and motor vehicles.
Annual property taxes in Caldwell County are approximately $782 per $100,000 of property value verses $2,160 in Alpine New Jersey. On a $400,000 home, that’s an annual savings of $5,512 per year!
For more information, the North Carolina Department of Revenue’s website has made listings of all the state’s property tax rates going back nearly two decades. The beauty of North Carolina is its property tax exclusions, which provide breaks for the disabled, war vets, and also the elderly.
In New Jersey all real property and tangible personal property is subject to property tax unless exempted. The assessed valuation of real property is based on 100% of the fair market value. An individual’s property taxes are calculated by multiplying the general tax rate by the assessed value of the property. Real property taxes are assessed and collected by cities and townships. Personal property tax is administered by the state. There are several homeowner property tax relief programs available.
In Illinois, only real property or real estate is taxed by local districts, including counties, townships, municipalities, school districts and special taxing districts in two-year cycles. The first year is the assessment, the second year payments are collected. Most property in Illinois is assessed at 33.33% of its market value, except for farmland—which is assessed on the income it produces. Homestead exemptions are available for seniors, disabled veterans, as well as improvement and general exemptions.
In Connecticut all real and personal property is taxable unless specifically exempted. Each city and town administers its own property tax.
Real property in New York is taxed based on its value. Counties, cities, towns, villages, school districts and special districts each raise money through the real property tax to pay for local services. The amount of a property’s tax is determined by the property’s assessment and the tax rates of the jurisdiction. Each property in most municipalities must be assessed at a uniform percentage of value– 5%, 10%, 50% or any other percentage not exceeding 100%. In addition, the School Tax Relief, or STAR, program is a partial exemption from school property taxes for owner-occupied primary residences. The Enhanced STAR exemption is available for the primary residences of senior citizens with a household income not greater than not the state standard. Residents may be able to claim the real property tax credit for homeowners and renters.
Virginia has no state property tax. The taxes are set and collected at the local government. Real estate is taxed at the local level based on 100% of fair market value. Effective true tax rates on real estate vary and are set by locality. For example, property taxes in Alexandria Virginia are approximately $1,150 a year per $100,000 of a home’s value. On a $400,000 home, taxes would likely be $4,600 verses $1,955 for the same valued homes in Lenoir.
Tangible personal property, such as such as machinery and equipment, furniture, fixtures, and automobiles, is taxed at the local level and is based on a percentage of original cost.
STATE INCOME TAX
The North Carolina state income tax is currently 5.75%. As of 2014, the state eliminated progressive income tax rates. Since 2015 every state taxpayer pays a consistent rate of 5.75%. North Carolina verses New Jersey state income taxes on income is basically the same. The benefit of tax savings takes place beyond $75,000 in income where New Jersey rates climb to over 8%.
Illinois state income tax is imposed on every individual, corporation, trust and estate who earn or receive income. The tax is a flat percentage of a taxpayer’s federal adjusted gross income, so it takes a bit of math to calculate living there.
Connecticut assesses an income tax of 6 brackets, from 3% to 6.99%.
The New York state income tax rates range from 4% to 8.82% over 8 income brackets.
New Jersey levies state taxes from 1.4% to 8.97%, and these rates are assessed by progressive income brackets.
Virginia’s tax rates range from 2% to 5.75%– assessed over 4 income tax brackets.
The sales tax in North Carolina dropped a percentage point in July of 2011 to 4.75%. Most sales and purchases are subject to state and local taxes too; the rate is typically 2% but in some counties is 2.75%. The North Carolina Department of Revenue has a complete list of tax rates county by county. Sales tax in Caldwell County is 6.75% verses 6.87% in New Jersey. Sales tax is pretty much the same if you’re moving from New Jersey.
Illinois has a sales tax of 6.25% for general merchandise; this rate may be adjusted in January or July of each year. Food, drug and medical appliances have a 1% rate. In addition to liquor, gas and cigarettes, aircraft and watercraft use, as well as food and beverages, are taxed.
Connecticut’s sale tax is 6.35% on sale, lease and rental of most goods. The luxury sales tax is 7.75%–motor vehicles valued over $50,000; jewelry valued over $5,000; apparel, footwear, handbags, luggage, umbrellas, wallets and watches valued over $1,000. Airport valet parking, yoga instruction, motor vehicle storage and towing, spa treatments, pet grooming, boarding and obedience services are all taxable. Home weatherization products are taxable as well. Local jurisdictions do no impose additional sales tax.
New York’s tax rate is 4%. Taxable property and services within the state vary. Local sales taxes may also exist. Clothing and footwear with value less than $110 is exempt.
New Jersey’s sales tax is 7%. All retail sales are taxable unless specified. A compensating use tax is imposed when the sales tax is not collected or is at a rate lower than the state’s sales tax.
Virginia’s sales and use tax is 4.3% with an additional 1% local tax; the combined sales tax is typically 5.3% on most purchases. Northern Virginia and Hampton Roads has an additional 0.7% tax, bringing the rate to 6%. In addition there is a consumer use tax on purchases more than $100 annually of untaxed goods from online, mail order, or television purchases, in addition to tax-free items from out of state.
Being informed is the best way to prepare for your retirement. Understanding taxes and how they impact your finances is an essential part of retirement planning and maintaining control over your budget.
North Carolina is one of the states with lower cost of living. Boomers save money on taxes, housing, medical care, fuel and food. Perhaps you’ve already done your homework, performed a tax comparison and seen how well North Carolina’s taxes rank. Perhaps you’ve sold your home and are ready to create a new life in the perfect setting–like the gorgeous landscape of The Coves where you can develop your hobbies as well as dive into the variety of outdoor recreation—golf, fishing, kayaking, horseback riding, biking and hiking—whatever your heart desires.
North Carolina has exceeded Florida as a leading place to retire, largely due to affordability and because of mild four season weather. Retirees also like that fact that family left behind are likely less than a days drive to visit or Charlotte and Asheville airport are easily accessible.
Lenoir, with its strong sense of community and charm, is a sweet choice for settling into your new mountain home where you can be surrounded by caring neighbors and still enjoy the serenity and peace of your idyllic mountainside property all year long.
Tax rates are complex and change all the time. Be sure to check with your tax professional to review the total cost savings of moving to the beautiful state of North Carolina.