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2018 changes to federal income taxes exposed state and local taxes as potentially unreasonable.   Many of us probably think that it's federal taxes that are the most onerous when in fact, your combined tax burden at the state and local level may be greater than federal income taxes.  Now we know, it is all about hidden state and local taxes: your tax burden is exposed.

According to the Tax Policy Center, about 48% of all taxes collected are by state and local government agencies. 

High-tax state bureaucrats and legislators are still complaining about how the 2018 federal tax rates will cost their residents more money.  When the 2018 tax reforms went into effect, they saved the average taxpayer on their overall tax bill.  States that have the highest income, property, and other tax rates were exposed.  Their residents had a higher tax bill.

It was possible before 2018 to write off most real estate taxes and mortgage interest on primary and secondary residences including interest paid on lines of credit. Along with these nearly unlimited write-offs were unlimited state and local income tax write-offs.  

Your tax burden exposed

The 2018 federal tax law has replaced those unlimited deductions with a fixed $24,000 maximum for a couple (higher if one or both are over 65) which includes about everything that most people were itemizing in the past. 

The crux of the tax issue is that for the first time high tax states and local governments who for years told people to write off the higher costs had to change their pitch.  No longer could a person buying that high-cost home fully deduct the mortgage interest, taxes, or insurance.  The new limit is a maximum of $10,000.  If that was not bad enough, it also included any government taxes such as state income tax and local taxes.  

The $10,000 limit was a drop in the bucket.  A person who owned a tract home in Orange County, CA worth about $850,000 would have a tax bill of about $10,000 per year.  They would probably owe state taxes of about $15,000 or more than pay upwards of $30,000 in mortgage interest.  $55,000 with only a $10,000 deduction.  Think some residents realized what was going on?
You should not be obligated to pay ever-higher taxes

As you move toward retirement or at least plan for it, it's time to think outside of the box. You probably donated to causes all of your working careers, paid your taxes, and were otherwise an upstanding member of your community. You made your investment, you should not be obligated to pay higher taxes if you choose not to. 

Consider this

Consider this:  You can afford to live where you do and pay all of those taxes because you have a great job making lots of money. When you retire the economics change.  Why wait?  Every year that you rationalize paying 35% more by living in a high-cost state, that's 35% you could be saving for retirement.  I have spoken to many in their 40s and 50s that admit they can not afford to retire in for example California.  So why wait? 

Should you consider moving to the Mississippi Gulf Coast, you may want to visit the Logan-Anderson, Gulf Coastal Realtors website for more articles and to view available homes. Please read other articles on our site that relate. Two of our most popular articles are: "Why I decided to retire in Ocean Springs, Mississippi" and "Why you need to retire on the Mississippi Gulf Coast."