Georgia Retirement Tax Advantages

Georgia offers a variety of tax advantages to people 62 or 65 and older, which encourage retirees to live in Georgia. I've been researching this for several years since it is likely Georgia will be my state of residence during retirement.

This post does not include all of my research, but I am including some links at the end for those of you who would like to do more research. I recommend that you consult your financial or tax advisor before acting on any information here.

For the 2008 tax year, if you are 62 or older at any time during the tax year, you can exclude the following income (up to $35,000 for an individual or $70,000 for a couple) [GA 2008 income tax instructions]:

• Interest Income
• Dividend Income
• Alimony
• Capital Gains
• Taxable IRA Distributions
• Taxable Pensions
• Rental, Royalty, Partnership, and S Corp. Income
• Up to $4000 of Earned Income
  

Georgia does not tax Social Security income, so it is not included in the $35,000 exclusion. By 2013, this exclusion for those 65 and older will rise to 100%, while the $35,000 exclusion will remain for those 62-64. Obviously unless it is changed, the current law will provide a windfall tax advantage to wealthy retirees by 2013. The Georgia Budget and Policy Institute estimates that the state of Georgia will loose $142 million in annual tax revenues upon full phase-in by 2013 [Source].

I have a couple of retirement accounts. One is the 401(k) account I had with my former employer. It is well under $35,000 in this economy. If I remain unemployed for much or all of 2009, I may roll this money over into a Roth IRA, if I don't have to spend it first. I would have to pay federal income tax on the amount of the rollover, but I would pay no Georgia income tax. The advantage to rolling the money over in a year of low income is that I will fall into a lower federal income bracket. When I withdraw money from the Roth IRA later, none of the money is taxable.

There are other senior tax advantages available:

• Georgians 65 and older can claim a state property tax exemption, which applies to their primary residence and up to 10 acres. [Source]
• Georgians 62 and older who have an earned income of $10,000 or less can qualify for an exemption from all ad valorem taxes for educational purposes and to retire school bond indebtedness. [Source] You can apply for this exemption by April 1 of the year after you turn 62.
• Georgia does not have an estate or inheritance tax.
• Some individual Georgia cities and counties have certain tax exemptions for persons age 50 and older. Contact individual county and city tax offices for more information.

Additional links:

• Georgia Department of Revenue
• Retire in Georgia
• Why Head South?
• Retirement Living