For many retirees, choosing a location to spend your golden years is largely influenced by your financial health. In some states, heavy taxation and a relatively high cost of living can quickly drain pension funds, leaving some feeling perpetually stressed about their financial longevity. With that in mind, choosing a "pensioner-friendly" destination may help maximize the efficiency of every dollar saved and every penny earned throughout a fruitful career.
The state of Florida has long been considered one of the most tax-friendly states for seniors due to its zero income tax policies. With that in mind, pensioners living in Florida can spend their retirement savings as they see fit without having to pay portions of this money back to the federal government.
Since Florida has no state income tax requirements, pensions are not taxed at the state level.
Generous Taxation Policies
A lack of state income tax generates a number of beneficial tax outcomes not only for individuals of retirement age but the population in general. With regards to Florida taxes for retirees, however, there are very few locations across the country which provide as generous a tax code. These benefits apply not only to the years of life while a retiree lives in Florida, but also in the time following their passing. Heirs of a retiree will not be forced to pay any form of inheritance tax, nor will they see the funds due to them depleted by estate taxes. Generally speaking, a Florida pension tax is non-existent.
That being said, it is also important to remember that retirees may still be required to pay federal income taxes even though they are free from state taxation. With that in mind, it is always worth undertaking an extensive planning session in order to determine what, specifically, should be done to ensure financial longevity over the long term.
Looking For Appropriate Documentation
When it comes time to file a state tax return in Florida, retirees will not be required to report their income. This is simply due to the fact that no income tax is required by the state. However, this should not be interpreted as a sign that retirees can receive a blanket exemption from all taxes. Other common taxes related to adult homeowners, such as property taxes, are still required. Fortunately, Florida is not only one of the most generous tax-friendly states for seniors, but it also features a relatively low property tax rate that sits close to the national average.
Each year, pensioners must submit the popular IRS Form 1040 with full documentation of retirement income. Although taxation is inevitable, Form 1040 also creates numerous opportunities for valuable deductions which can help reduce the overall tax burden of a pensioner. Depending upon your specific assets and activities, it may be worth consulting with a professional accountant or tax preparer in order to determine what specific deductions you may be eligible for as a pensioner.
Ryan Cockerham is a nationally recognized author specializing in all things business and finance. His work has served the business, nonprofit and political community. Ryan's work has been featured on PocketSense, Zacks Investment Research, SFGate Home Guides, Bloomberg, HuffPost and more.