• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The Potter Law Firm

North Carolina and Kentucky Estate Planning Attorneys

phone iconNC (704) 944-3245
KY (606) 324-5516
Attend A Free Seminar - KY Attend A Free Webinar - NC/SC THIS IS AN ADVERTISEMENT

  • Home
  • About Us
    • About Our Firm
    • Attorney and Staff Profiles
  • Practice Areas
    • Asset Protection & Business Planning
    • Elder Law & Medicaid Services
    • Estate and Gift Tax Figures
    • Family-Owned Businesses & Farms
    • Incapacity Planning
    • IRA & Retirement Planning
    • Legacy Planning
    • Pet Planning
    • Probate
    • SECURE Act
    • Special Needs Planning
    • Trust Administration
  • Elder Law
    • Coping With Alzheimer’s
    • Emergency Medicaid & Nursing Home Planning
    • Guardianship & Conservatorship
    • Hospice Care
    • Medicaid Planning
    • Nursing Home Planning
    • Veterans Benefits
  • Communities We Serve
    • Kentucky
      • Boyd County
        • Ashland
        • Florence
      • Kenton County
        • Covington
        • Fort Mitchell
        • Independence
    • North Carolina
      • Mecklenburg County
        • Charlotte
        • Davidson
        • Huntersville
  • Resources
    • Definitions
    • DocuBank
    • Elder Law
      • Elder Law Links
      • Elder Law Reports
      • Local Elder Law Resources
        • Ashland Elder Resources
        • Covington Senior Resources
        • Huntersville Elder Law Resources
        • Independence Senior Resources
    • Elder Law Reports
    • Emergency Legal Documents
    • Free Estate Planning Seminars
    • Free Estate Planning Worksheet
    • Frequently Asked Questions
      • Estate Planning
      • Frequently Asked Questions for Families Without an Estate Plan
      • IRA & Retirement Planning
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Medicaid
      • Pet Planning
      • Trust Administration & Probate
    • Is Your Estate Plan Outdated?
    • Kentucky Probate Resources
      • Ashland, Kentucky Probate Resources
    • Newsletters
    • North Carolina Probate Resources
      • Huntersville, NC Probate Resources
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Elder Law Reports
      • Estate Planning for Niches
      • Trust Administration
  • Contact Us
  • BLOG
Home » Retirement Planning » Will You Pay Taxes on Retirement Income?

Will You Pay Taxes on Retirement Income?

October 15, 2021 by Pamela Potter

retirement planningWhen you are planning for retirement, you may consider moving to another state for one reason or another. If you are making this decision, you should certainly take taxation into consideration, and there are some potentially significant taxes that you may overlook.

State Income Taxes on Retirement Income

In most states, you have to pay state-level income taxes on pension payments and 401(k) and individual retirement account income. However, there are nine states that do not have state-level income taxes at all so there would be no tax to pay.

These states are Texas, Nevada, Florida, New Hampshire, South Dakota, Wyoming, Tennessee, Alaska, and Washington. There are state-level income taxes in Illinois and Pennsylvania, but they do not apply to pensions and retirement accounts.

People in Alabama and Mississippi pay taxes on 401(k) and individual retirement account income, but pension income is not taxable.

If you are going to move to a state that imposes an income tax on retirement income, you should consider the rate because there can be huge differences. For example, in California, the top marginal rate is 13.3 percent, but it is 3.07 percent in Pennsylvania.

There are relatively low rates in Kentucky and North Carolina at 5 percent and 5.25 percent respectively.

State-Level Estate Taxes

We have a federal estate tax that can be a factor for high-net-worth individuals in every state. It is only a factor for multimillionaires because there is currently an $11.7 million exclusion (though there are proposals in Congress to cut that in half). You can transfer this much tax-free before the estate tax would be levied on the remainder.

The rate of the tax is 40 percent so it can have a major impact on people that are exposed. You cannot give large gifts to avoid the estate tax because there is also a gift tax that is unified with the estate tax.

This $11.7 million exclusion that applies to lifetime gifts and your estate will remain intact indexed for inflation through 2025 if the law is not changed, but in 2026, it is scheduled to go down to $5.49 million.

In addition to the federal estate tax, there are state-level estate taxes in a total of 12 states at the present time. We do not have estate taxes in Kentucky and North Carolina, but if you own property in another state that has an estate tax, it would apply to your estate.

These are the states that have state-level estate taxes:

  • Massachusetts
  • New York
  • Connecticut
  • Vermont
  • Maryland
  • Illinois
  • Hawaii
  • Maine
  • Minnesota
  • Rhode Island
  • Oregon
  • Washington

Of course, the property’s value would have to exceed the exclusion in the state that it is located in. The state-level exclusions are lower than the federal exclusion, and the lowest exclusion is $1 million in Oregon and Massachusetts.

Inheritance Taxes

An inheritance tax is not the same as an estate tax. This type of tax can be levied on individual distributions to each person who is receiving an inheritance that is not exempt.

There is no federal inheritance tax, but there are five states that have inheritance taxes. Kentucky is one of them, but Class A beneficiaries are exempt. These are a surviving spouse, children, parents, grandchildren, siblings, and half-brothers and half-sisters.

Schedule a Consultation Today!

If you would like to work with a Charlotte, NC estate planning lawyer or Huntersville, NC estate planning lawyer to develop a plan for aging that leads to  effectively passing on your legacy, we are here to help. You can give us a call at 704-944-3245 to schedule a consultation appointment.

Our Ashland, Kentucky location can be reached at 606-324-5516, and our Florence, Kentucky location can be reached at 859-372-6655.  You can also use our contact form if you would prefer to send us a message

  • Author
  • Recent Posts
Pamela Potter
Pamela Potter
Owner and founder of the Ashland, Kentucky based Potter Law Firm, Ms. Potter concentrates her practice in the area of estate planning, estate administration, and elder law. Mrs. Potter’s goal is to help her clients plan secure financial futures for themselves and their families. To achieve that goal, her firm offers a wide range of estate planning services, including wills, trusts, and powers of attorney in addition to probate, estate administration, elder law, and Medicaid Planning services.
Pamela Potter
Latest posts by Pamela Potter (see all)
  • 2022 Estate Tax Exclusion Has Been Set - December 6, 2021
  • An Overview of 2022 Medicare Cost Increases - November 24, 2021
  • Elder Financial Abuse Is a Looming Threat - November 22, 2021

Filed Under: Retirement Planning Tagged With: estates taxes, inheritance tax, Retirement Planning

Other Articles You May Find Useful

Social Security reform
Social Security Benefit Increase Is Possible
SECURE Act IRA
IRA News: SECURE Act 2.0 May Become a Reality
retirement planning 3
What Is the 2021 Social Security COLA?
retirement planning
Understand Government Retirement Benefit Programs
The Potter Law Firm
Answering a Common Social Security Question
The Potter Law Firm
Mortgages Payments and Retirement

About Pamela Potter

Owner and founder of the Ashland, Kentucky based Potter Law Firm, Ms. Potter concentrates her practice in the area of estate planning, estate administration, and elder law. Mrs. Potter’s goal is to help her clients plan secure financial futures for themselves and their families. To achieve that goal, her firm offers a wide range of estate planning services, including wills, trusts, and powers of attorney in addition to probate, estate administration, elder law, and Medicaid Planning services.

Free Estate Planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

Texting Permission

Follow Us

  • Facebook
  • Instagram
  • LinkedIn
  • RSS
  • Twitter
  • YouTube

Subscribe to Our Blog

  • This field is for validation purposes and should be left unchanged.

Testimonials

default image

Overall The Potter Firm was very professional. They took what could of been a very complicated process and were able to break it down so it was a lot easier to understand. We are confident we now have made the right decisions in our estate planning. Good firm to work with.

DKS & KMS Client Review August 28, 2020

default image

John Potter has been a real pleasure to work with. He is very knowledgeable and explains things in a very simplistic manner so the average person can understand how/why the laws are written. He is very attentive and asks questions in such a way that not only helps him understand your goals, but also helps you think about what type of goals and expectations you should be considering. Exemplary client service.

David J. Client Review August 28, 2020

default image

My husband and I selected Ms. Potter to assist with our small business. She responsive and attentive every time I have a question or need assistance, and is extremely knowledgeable and able to answer any legal question I have had. I know I can count on Ms. Potter for all of my business legal needs and I would highly recommend her to anyone needing legal assistance with such.

Jillian Client Review August 28, 2020

<< Prev
Next >>

Where We Are

Ashland

ASHLAND
1620 Carter Avenue
Ashland, KY 41101-7631
Phone: (606) 324-5516
Fax: (606) 324-4766

Charlotte

CHARLOTTE
15720 Brixham Hill Avenue
Suite 300,
Charlotte, NC 28277
Phone: (704) 944-3245

Huntersville

HUNTERSVILLE
11330 Vanstory Drive
Huntersville, NC 28078
Phone: (704) 944-3245

Northern Kentucky

NORTHERN KENTUCKY
7310 Turfway Road
Suite 550,
Florence, KY 41042
Phone: (859) 372-6655

Office Hours

Monday8:30 AM - 4:30 PM
Tuesday8:30 AM - 4:30 PM
Wednesday8:30 AM - 4:30 PM
Thursday8:30 AM - 4:30 PM
Friday8:30 AM - 3:00 PM

Map/Location

potter_sidbr_map
potter law logo
  • Facebook
  • Instagram
  • LinkedIn
  • RSS
  • Twitter
  • YouTube

The information on this website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

Privacy Policy | Terms of Service | Disclaimer | Site Map | Powered by American Academy of Estate Planning Attorneys

© 2023 American Academy of Estate Planning Attorneys, Inc. THIS IS AN ADVERTISEMENT