South Carolina a top state for retirees due to tax breaks, says Kiplinger
With low property taxes and generous income tax breaks for seniors, South Carolina has landed on Kiplinger’s list of Top 10 tax-friendly states for retirees.
The top 10
The 10 most tax-friendly states for retirees, according to Kiplinger:
9. South Carolina
The personal finance website Kiplinger.com ranked Alaska the most tax-friendly, due to its lack of a sales or income tax. South Carolina came in at No. 9, ahead of Florida.
“You beat Florida because Florida does not exempt as much income,” said Sandra Block, a senior associate editor at Kiplinger’s Personal Finance. “Alaska came in at No. 1, but I’m not sure how many retirees are going to move there.”
Most of the states that ranked highest for retiree tax-friendliness were in the South and West, while Northeastern states fared poorly, as did California and Oregon.
“Sometimes I feel like I’m an ambassador for people moving here from other states,” said Patrick Cobb, spokesman for AARP South Carolina. “They are always looking to our state because of all the (tax) exemptions.”
South Carolina scored well in Kiplinger’s ranking because, in addition to Social Security benefits being exempt from state income tax, each senior can deduct another $15,000 of income from any source starting at age 65, and that’s after counting their federal tax deduction. As a result, many seniors pay no South Carolina income tax.
In addition, homeowners at age 65 are exempt from property tax on the first $50,000 of the value of their legal residence, once they apply for the Homestead Exemption at their local county auditor’s office. And property taxes for homeowners are generally low in South Carolina, as legal residences are exempt from the property tax that funds public school operations.
“I hate to compare it to New Jersey, but I just talked with someone from there, and they could sell their house and find a comparable one here for less, and pay far less in property taxes,” Cobb said.
Throw in some other goodies, such as reduced vehicle-registration fees, discounted park passes and $9 lifetime hunting and fishing licenses, and seniors have a lot to like, financially, in the Palmetto State.
“When you talk about low-tax states, you do have to look at the trade-offs, like the quality of schools,” Block said. “But for retirees, some of those services aren’t very important.”
Most tax breaks South Carolina offers to seniors aren’t related to their ability to pay, as Strom Thurmond Institute Senior Fellow Holly Ulbrich noted while testifying about proposed property tax breaks before a state Senate committee in 2005.
“Elderly people are now less likely to be poor than younger families, in addition to which they get a lot of income tax relief in this state that younger families don’t,” Ulbrich testified. “Not all elderly people are on fixed incomes — most are not.”
State and local governments like to attract retirees because they stoke the real estate market and don’t typically demand much in terms of police, schools, and other local services.
Reach David Slade at 937-5552 or Twitter @DSladeNews.