Each state has its own set of rules for how retirees are taxed based on their income.
Below are a few southern states and their general rules for taxing retirement income:
Georgia
The majority of retirement income is taxed by the state of Georgia, but some decent exclusions apply. Those aged 62 and up can exclude upwards of $35,000 from their retirement income. Those 65 and older can exclude as much as $65,000.
Social Security is not taxable, pensions are partially taxable, 401(k) and IRA distributions are partially taxable, and taxable income is taxed at a flat rate of 5.49%. More here.
Florida
There’s a reason so many retirees spend their golden years in Florida and it’s not because of the sunshine and warm weather. Florida has no state income tax regardless of age, so your pensions, social security, 401(k)s and IRA distributions will be tax-free. Estate and inheritance taxes don’t apply either. More here.
Alabama
Retirees aged 65 or older are tax-exempt on their first $6,000 in income or distributions from retirement accounts in the state of Florida.
Taxable income is taxed at 2% for the first $500 (single filers) or $1,000 (joint filers) on the lowest end and at a high of 5% on more than $3,000 (single filers) and $6,000 (joint filers).
Social security and pensions are not taxable and 401(k)s / IRA distributions are partially taxable. More here.
South Carolina
Retirement income in South Carolina is tax-exempt up to $10,000. Taxable income beyond the first $10,000 will be taxed as income in accordance with the general population and rules.
Taxable income is taxed at a low 0% for the first $3,200 and at a high of 6.4% for taxable income beyond $16,040.
Social Security is not taxable in SC while pensions and 401(k) / IRA distributions are partially taxable. More here.
Tennessee
Like Florida, there is no state income tax in Tennessee. There are also no estate or inheritance taxes. More here.
North Carolina
Like Georgia, most retirement income is taxed, but a low flat income tax rate that is expected to continue decreasing over the next few years offsets this.
The 2024 flat rate for income tax is 4.5% and will lower to 3.99% by 2027.
Social security is not taxable in NC but pensions and 401(k) / IRA distributions are taxable. More here
Tax Season and Financial Professionals
Tax Season comes with a lot of stress and uncertainty. Knowledgeable and experienced financial professionals can remove some of the tax-season pressure as they are able to assist with ensuring you have the right documents from your investments and are in the best, most tax-efficient position as each spring comes around and for the tax-year ahead.
To schedule a complimentary financial review with Moore’s Wealth Management, click here or call our office at 770-535-5000, where a staff-member is awaiting your call Monday through Friday, 9AM to 5PM.
Sources:
[1] https://www.kiplinger.com/state-by-state-guide-taxes/georgia
[2] https://www.kiplinger.com/state-by-state-guide-taxes/florida
[3] https://www.kiplinger.com/state-by-state-guide-taxes/alabama
[4] https://www.kiplinger.com/state-by-state-guide-taxes/south-carolina
[5] https://www.kiplinger.com/state-by-state-guide-taxes/tennessee
[6] https://www.kiplinger.com/state-by-state-guide-taxes/north-carolina
[7] https://www.kiplinger.com/retirement/602202/taxes-in-retirement-how-all-50-states-tax-retirees
This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. Diversification and asset allocation do not assure or guarantee better performance and cannot eliminate the risk of investment loss. As with any investment strategy, there is the possibility of profitability as well as loss.
All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.
This article may contain links to articles or other information that may be on a third-party website. Advisory Services Network, LLC is not responsible for and does not control, adopt, or endorse any content contained on any third-party website.
Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation.
