Georgia Personal Income Tax Calculation
Just about all retirees, as well as those close to retirement, ask themselves whether or not they have saved enough to live out their retirement years as they please. Does living in Georgia add or subtract from the equation? From a financial standpoint is Georgia a good state in which to retire? Are there any incentives provided by the state for retirees?
The answer is Georgia is a great place to retire because the state does not tax Social Security income, significant portions of retirement income, nor estate/inheritance. In addition, some cities and counties exempt portions of local taxes for seniors.
Social Security-Georgia does not tax social security. While parts of your social security could be taxed for federal income tax purposes, none will be taxable in Georgia.
Retirement Income-taxpayers who are 62 years of age or older, or permanently and totally disabled, may be eligible for an adjustment on their Georgia tax returns. These individuals can exclude retirement income of up to $25,000 for calendar year 2006. Retirement income for the purpose of this exclusion includes income from pensions (even from other states) and annuities, interest income, dividend income, net rental income, capital gains and royalties. Unemployment compensation, alimony, taxable Georgia income tax refunds and gains on disposition of business assets can also be included. In addition, up to $4000 of earned income is considered retirement income. Earned income includes wages, salaries, tips, and self-employment income.
The amount you can exclude will increase to $30,000 effective January 1, 2007 and $35,000 on January 1, 2008. These increases, up from $15,000 in 2005, are a good indication that Georgia’s legislature is serious about making this a great state to spend your retirement.
If you are married and filing joint returns, the maximum adjustment may be up to twice the individual exclusion amount if you are both receiving retirement income. Any amount over the maximum allowed is taxed at the normal rate. These amounts are prorated for nonresidents or part-year residents.
Estate/Inheritance- Georgia does not levy an estate or inheritance tax.
Local property tax exemptions-You might also be interested in learning whether it is less expensive for you to live in Atlanta or in some other city. Individual cities and counties have different sales and property tax rates with some local governments allowing exemptions for persons 50 years of age plus. The specifics of city and county tax rates and any incentives can be found by contacting the appropriate government office.
There are several websites (e.g., cnnmoney.com, bankrate.com) that allow you to make cost-of-living comparisons between different cities. Typically, you just select two cities and the program will show you the differences in how far your money will go in terms of healthcare, housing, transportation, utilities, groceries, etc.
So is Georgia a good place to retire? You bet. With its relatively low state income and sales taxes, its generous retiree tax incentives as well as tax exemptions offered by most cities and counties, you can’t go wrong. Whether you enjoy the big city life of Atlanta, the rural life of south Georgia, the waterfront communities along the coast or any of Georgia’s exceptional lakes, or the mountains of north Georgia, from a financial standpoint Georgia is for you!
For more information, check with the Georgia Department of Revenue via www.etax.dor.ga.gov or your tax advisor.
C. Michael Cauley
CPA, CFP®, CVA
Nichols, Cauley & Associates, LLC