Many people planning to retire use the presence or absence of a state income tax as a litmus test for a retirement destination. This is a serious miscalculation since higher sales and property taxes can more than offset the lack of a state income tax. The lack of a state income tax doesn’t necessarily ensure a low total tax burden. States raise revenue in many ways including sales taxes, excise taxes, license taxes, income taxes, intangible taxes, property taxes, estate taxes and inheritance taxes. Depending on where you live, you may end up paying all of them or just a few. Following are the taxes you can expect to pay if you retire in Washington:
State Sales Tax: 6.5% (food and prescription drugs exempt) Local taxes may increase total tax to 9.5%. Tax is 6.8% on sales and leases of motor vehicles. Gasoline Tax: 55.9 cents/gallon (Includes all taxes) Diesel Fuel Tax: 61.9 cents/gallon (Includes all taxes)
Cigarette Tax: $3.025/pack of 20
Personal Income Taxes
No state personal income tax Retirement Income: Not taxed.
Property taxes account for about 30% of Washington’s total state and local taxes. Properties are appraised at 100% of fair market value. A property tax exemption program is available for persons age 61 or older, or persons unable to work due to a physical disability. The property, which can include up to an acre of land, must be owner/buyer occupied.
The state offers a senior property tax exemption program for those whose household income does not exceed $35,000. (http://dor.wa.gov/Docs/Pubs/Prop_Tax/SeniorExempt.pdf
). If your income is between $35,000 and $40,000, you may qualify for the tax deferral program. If your annual income for the application year does not exceed $35,000 your home will be exempt from all excess and special levies approved by voters. If your household income is between $25,001 and $30,000, you are exempt from regular levies on $50,000 or 35% of the assessed value, whichever is greater (but not more than 70,000 of the assessed value. For more information, call 360-570- 5867. For senior exemptions and deferrals, refer to http://dor.wa.gov/Content/FindTaxesAndRates/PropertyTax/IncentivePrograms.aspx
The state’s tax deferral program works in conjunction with the exemption program. A senior citizen or disabled person may defer property taxes or special assessments on their residence if they meet certain age, disability, ownership, occupancy and income requirements. The state pays the taxes on behalf of the claimant and files a lien on the property to indicate the state has an interest in the property. The deferred taxes must be repaid to the state plus 5% interest when the owner dies, sells or moves from the home, or doesn’t have sufficient equity in the property. Qualified people may participate in both or one of these programs. For more information refer to http://dor.wa.gov/docs/forms/proptx/forms/sencitdisprsnsproptxexdeffprogs.doc
Refer to http://dor.wa.gov/Docs/Pubs/Prop_Tax/LimitedIncomeDef.pdf
for information on the property tax deferral program for homeowners with limited income.
Refer to http://dor.wa.gov/docs/Pubs/Prop_Tax/SeniorDefs.pdf
For information on the property tax deferral program for seniors and disabled persons
Refer to http://dor.wa.gov/Docs/Pubs/Prop_Tax/HOmeOwn.pdf
or call 800-647-7706 for more details on property taxes.
Inheritance and Estate Taxes Washington replaced the inheritance tax in 1982 with an estate tax. Effective January 1, 2009 the Washington State filing threshold is different from the federal filing threshold for completing the estate tax return. If the decedent has a gross estate or a taxable estate plus taxable gifts of $2,000,000 or more, the estate is required to file a Washington State estate tax return.
For further information, visit Washington Department of Revenue website http://dor.wa.gov
or call 800-647-7706.
Apr 2013 ++]