Treavor Dodsworth CFP®, CPA, CKA®
#22 - Choosing Where To Live? Remember Taxes
In many parts of the country, changing your residence location by even just a few miles can have a dramatic impact on the amount of taxes you pay.
State income taxes, county income taxes, and property taxes are just a few of the taxes that may apply in your area and may differ depending on residence location.
For example, below are the county income tax rates for several of the counties in the Indianapolis area. I have also listed the county income tax you would pay if you had $150,000 of income subject to that county's tax. Please note, this doesn't include any property tax differences. Hamilton - 1.10% - $1,650 Boone - 1.50% - $2,250 Hendricks - 1.70% - $2,550 Madison - 1.75% - $2,625 Hancock - 1.94% - $2,910 Marion - 2.02% - $3,030
I am not suggesting that you “let the tax tail wag the dog.” There are several reasons why taxes should not be a top factor in choosing where to live. For example, tax rates can change. Also, money is just a tool and not something that we should allow to have control.
I personally just find it interesting that living in one suburb vs. the one across the street could result in different taxes.
Unfortunately, factoring in taxes can be a difficult task. In some parts of the country, you have to add in city income taxes, school taxes, sales tax, etc. In addition, sometimes the taxes are not based on where you live but on other aspects- like where you work for example.
It is best to work with a tax expert if you believe it is worth taking into account these taxes.
Interesting Article(s) or Video(s)
Compound Advisors - 20 Rules for Markets and Investing
Charlie makes several excellent points about investing. Great read for both new and experienced investors.
The Hill - IRS Audits Drop to Lowest Point in Decades
The IRS is auditing fewer and fewer returns as their resources diminish. The IRS "audited just 0.45 percent of individual filers last year."
Thank you for reading! Do you think taxes should be factored into choosing where to live?