To help minimize taxes, first understand the tax rates, both Federal and State. Then, with qualified professional help, access your nest egg of wealth and pull from your accounts as advised. Taxes are complex and will change over time. You will never avoid paying taxes, but you can "play the game" of minimizing taxes based on good advice and knowledge of the IRS tax rules. And, upon your death, taxes will still come for you or your heirs.. so there are considerations too regarding passing on your wealth to your loved ones.
Still, there are things to consider.
And, don't forget. The wealth you have accumulated is yours to enjoy. If you don't want to be taxed, you might not ever want to withdraw it. And, since you can't take it with you, it is up to you to make the most of it, and/or pass it on to your heirs.. you get the idea.
Federal Tax Rates (2023)
Federal Tax Brackets and Rates
Long-Term Capital Gains Tax Rates
Additional Net Investment Income Tax
Standard Deduction and Personal Exemption
Taxpayers who are at least 65 years old or blind can claim an additional 2023 standard deduction of $1,500 per person. ($1,850 if using the single or head of household filing status)
State Income Taxes
State income taxes vary from state to state. The primary location of your permanent home, or domicile, determines the Tax State where income tax is paid. If you maintain multiple homes across different states, various state rules may apply that may trigger state taxation in those multiple states.
The precise definition of what constitutes domicile varies slightly from state to state, but states generally agree on two key concepts: that a domicile is a person’s fixed, permanent and principal home that they reside in and that they intend to return to and/or remain in; and that while a person can have multiple residences, they can only have one domicile.
A place to live
Generally, people tend to live where they have family, a profession, and prior life history. But choosing to live in another State with favorable tax laws is a popular option for FI minded individuals and for retirees. Of course relocating to a new location is much more involved than just the tax consideration. The various places one can live is as varied as the persons involved with their numerous criteria that define, for themselves, a good lifestyle.
States with no Income Tax
As of 2022, eight states—Alaska, Florida, Nevada, South Dakota, Texas, Tennessee, Washington, and Wyoming—levy no personal income tax. One other, New Hampshire don’t tax wages. New Hampshire does currently tax investment income and interest, but are set to eliminate those taxes soon. That will bring the number of states with no income tax to nine by 2025.
States with no tax on Capital Gains
As you would expect, the states with no State Income Tax do not tax Capital Gains. These include Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, New Hampshire, and Tennessee.
There are also a couple of states with an income tax that don't tax capital gains or offer a credit:
States that tax Social Security
Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia collect state income tax on Social Security payments to at least some beneficiaries. How they tax Social Security varies by adjusted gross income or other criteria defined by each state.
10 Highest Income Tax States
These ten states rank highest for their Income Tax rates:
10 Lowest Income Tax States
Of the States that have Income Tax, these ten states rank the lowest:
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