Everyone deserves to love where they live, especially in retirement. Every state offers different tax and finance impacts to consider.

We are here to help you plan and maximize your retirement goals, as they relate to real estate.

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Oregon

Biggest City: Portland

Fastest Growing City: Happy Valley

Hidden Gem: Eugene

Luxury: Lake Oswego

Oregon Coast: Neskowin

State Sales Tax: None

Personal Income Taxed: Yes

Medical/Dental Deduction: Full only for age 59 or older, if itemized. Oregon allows a tax credit on long-term care insurance premiums. The credit is the smaller of 15% of premiums paid or $500.
Federal Income Tax Deduction: $5,000 ($2,500 if married filing separately)

Retirement Income Taxes: Most retirement income is subject to Oregon tax when received by an Oregon resident. This is true even if you were a non-resident when you earned the income. However, you may subtract some or all of your federal pension income from Oregon income, and there is a retirement-income credit up to $6,250 for seniors with certain income restrictions. The state does not tax Social Security or Railroad Retirement benefits. Depending on your age and income, you may be entitled to a retirement income credit on your Oregon return. If you receive a U.S. government pension, you may be entitled to subtract part or all of that pension on your Oregon Individual income tax return.

Retired Military Pay: Federal retirees, including military personnel, may be able to subtract some or all of their federal pension income. This includes benefits paid to the retiree or to the surviving spouse. The subtraction amount is based on the number of months of federal service before and after October 1, 1991. Retirees can subtract their entire federal pension if all the months of federal service occurred before October 1, 1991. If there are no months of service before October 1, 1991, retirees cannot subtract any federal pension. If service included months before and after October 1, 1991, retirees can subtract a percentage of their pension income.

Military Disability Retired Pay: Retirees who entered the military before Sept. 24, 1975, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax. Most military retired pay based on service-related disabilities also is free from federal income tax, but there is no guarantee of total protection.
VA Disability Dependency and Indemnity Compensation: VA benefits are not taxable because they generally are for disabilities and are not subject to federal or state taxes.
Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax. Check with state department of revenue office.

Property Taxes
The Oregon Homestead Exemption allows a property owner to exempt up to $40,000 of his or her real property, or a floating, manufactured, or mobile home. Married couples may exempt up to $50,000. If a homestead is located outside of town or city limits, a property owner may protect up to 160 acres. If it is located within town or city limits, a property owner may protect up to 1 city block.
Oregon tax rates are set by the counties and any special considerations are levied by county officials. Homeowners 62 or older may delay paying property taxes based on certain income criteria. The state offers a Property Tax Deferral for Disabled and Senior Citizens Program, which allows qualified taxpayers to defer payment of their property taxes on their homes. The state pays the taxes to the county, maintains the account, and charges 6% simple interest, which also is deferred. Taxes are owed when the taxpayer receiving the deferral dies, sells the property, ceases to live permanently on the property, or the property changes ownership.

To qualify for the program, the taxpayer must live on the property and have a total household income of less than $44,000 for the year before application. Participants may remain on either program as long as their federal adjusted gross income does not exceed that amount. If a participant’s income exceeds the $44,000 limit, part of the taxes still may be deferred. Participants can come in and out of the programs if their income changes. In addition to meeting the income limitation and property ownership requirement, disabled persons must be receiving or be eligible to receive federal Social Security Disability benefits to qualify. Residents must be 62 years old or older to qualify for the Property Tax Deferral for Disabled and Senior Citizens Program. Call 800-356-4222
or visit the Oregon Department of Revenue website. If you are thinking of moving to Oregon, click here.

Inheritance and Estate Tax
The laws governing Oregon’s inheritance tax have changed. First, the name of the tax changed from an “inheritance tax” to an “estate tax.” This is consistent with the majority of states and the federal government which defines an estate tax, as a tax on an entire estate while an inheritance tax is defined as a tax assessed against only certain beneficiaries of an estate.
In addition, while the estate tax exemption of $1,000,000 remains in effect, the tax only applies to the value of an estate in excess of $1,000,000. Under current law, once an estate exceeds $1,000,000, the tax applies to the entire estate and the rates change such that the majority of estates valued between $1,000,000 and $2,000,000 will pay slightly less in taxes on estates valued over $2,000,000 will pay slightly more in taxes.
For further information, visit the Oregon Department of Revenue website or call 503-378-4988.
Note: Oregon has a statutory provision for automatic adjustment of tax brackets, personal exemption or standard deductions to the rate of inflation.

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Washington

Biggest City: Seattle

Fastest Growing City: Kirkland

Hidden Gem: Ridgefield

Luxury: Bellevue

Getaway: Lake Chelan

State Sales Tax: 6.5% (food and prescription drugs are exempt) Local taxes may increase total tax to 10.4%. Tax is 6.8% on sales and leases of motor vehicles.

No state personal income tax
Retirement Income: Not taxed.

Property Taxes
Property taxes account for about 30% of Washington’s total state and local taxes. Properties are appraised at 100% of fair market value. A property tax exemption program is available for persons age 61 or older, or persons unable to work due to a physical disability. The property, which can include up to an acre of land, must be owner/buyer occupied.

The state offers a senior property tax exemption program for those whose household income does not exceed $40,000. If your household income is between $40,000 and $45,000, you may qualify for the state’s deferral program. The qualifying applicant receives a reduction in the amount of property taxes due. The amount of the reduction is based on the applicant’s income, the value of the residence, and the local levy rates. For more information, call 800-647-7706.

The state’s tax deferral program works in conjunction with the exemption program. A senior citizen or disabled person may defer property taxes or special assessments on their residence if they meet certain age, disability, ownership, occupancy and income requirements. The state pays the taxes on behalf of the claimant and files a lien on the property to indicate the state has an interest in the property. The deferred taxes must be repaid to the state plus 5% interest when the owner dies, sells or moves from the home, or doesn’t have sufficient equity in the property. Qualified people may participate in both or one of these programs.

For information on the property tax deferral program for homeowners with limited income, click here.

For information on the property tax deferral program for seniors and disabled persons, click here.

For information on property tax exemptions for senior citizens and disabled persons, click here.

For more details on property taxes, click here or call 800-647-7706.

Inheritance and Estate Taxes
Washington replaced the inheritance tax in 1982 with an estate tax. Effective Jan. 1, 2009, the Washington State filing threshold is different from the federal filing threshold for completing the estate tax return. If the decedent has a gross estate or a taxable estate plus taxable gifts of $2,193,000 ($4,386,000 for married couples) or more, the estate is required to file a Washington State estate tax return.

For further information, visit the Washington Department of Revenue site or call 800-647-7706.

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Idaho

Biggest City: Boise

Fastest Growing City: Meridian

Fastest Growing City: Couer D’Alene

State Sales Tax: 6% (prescription drugs exempt); Some Idaho resort cities, counties and auditorium districts have a local option sales tax in addition to the state sales tax which could add an additional 3%.

Personal Income Taxed: Yes

Medical/Dental Deduction: Federal amount
Federal Income Tax Deduction: None
Retirement Income Tax: Generally, all income received by an Idaho resident, regardless of the source, is subject to Idaho income tax. Idaho does not tax social security benefits, benefits paid by the Railroad Retirement Board or Canadian social security benefits (OAS or CPP). Idaho does offer a retirement benefits deduction if you are age 65 or older, or if you are disabled and age 62 or older, and receive qualifying retirement benefits. Persons using the “married filing separate” filing status are not eligible for this benefit. The following are the types of benefits that qualify for this deduction (PERSI does not qualify for this benefit):

Civil Service Employees: Retirement annuities paid by the United States to a retired civil service employee or the un-remarried widow of the employee if the recipient is age 65 or older, or disabled and age 62 or older.
Idaho Firemen: Retirement benefits paid from the firemen’s retirement fund of the state of Idaho to a retired fireman or the un-remarried widow of a retired fireman if the recipient is age 65 or older, or disabled and age 62 or older.
Policemen of an Idaho city: Retirement benefits paid from the policemen’s retirement fund of a city within Idaho to a retired policeman or the un-remarried widow of a retired policeman if the recipient is age 65 or older, or disabled and age 62 or older
Servicemen: Retirement benefits paid by the United States to a retired member of the U.S. military service or the un-remarried widow of such member if the recipient is age 65 or older, or disabled and age 62 or older.
The amount deducted must be reduced by retirement benefits paid under the Federal Social Security Act and the Federal Railroad Retirement Act. The maximum amount that may currently be deducted is:

Married filing jointly (age 65 or older): $48,366
Married filing jointly (age 62 or older and disabled): $48,366
Single (age 65 or older): $32,244
Single (age 62 or older and disabled): $32,244
Retired Military Pay: Follows federal tax rules.
Military Disability Retired Pay: Retirees who entered the military before Sept. 24, 1975, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax. Most military retired pay based on service-related disabilities also is free from federal income tax, but there is no guarantee of total protection.
VA Disability Dependency and Indemnity Compensation: VA benefits are not taxable because they generally are for disabilities and are not subject to federal or state taxes.
Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax. Check with state department of revenue office.
Military Spouses Residency Relief Act: The earned income of qualifying spouses of Idaho service members is no longer subject to Idaho income tax due to the federal Military Spouses Residency Relief Act (SR 475, HR 1182) passed in November of 2009.

You are married to a service member who is serving in Idaho and has registered in the military with another state as a home of record; and
You have located to Idaho with the service member and you have the same domicile (permanent residence) as the service member’s home of record.
For specific tax information that applies to military service members and their families, click here.

Property Taxes
Taxable property is assessed at its full market value. A general property tax is imposed for local purposes and is limited to 1% of market value. The state property tax is suspended as long as the sales and use tax are in effect. There is no intangible personal property tax. A homeowner’s primary residence is eligible for an exemption of 50% of the assessed value of the home, up to a maximum of $100,000. If you are a qualified Idaho homeowner, you may be eligible for the circuit breaker program. To qualify you must own and occupy the home as your primary residence, you must meet income requirements and must be either age 65 or older, a widow(er), blind, former POW, fatherless or motherless minor, or a qualifying disabled person. This program may reduce property taxes on your home and up to one acre of land by as much as $1,320. For more information on property and other taxes, click here or call 208-334-7733 or 800-972-7660.

Idaho has a property tax deferral program. For details, click here.

Inheritance and Estate Taxes
At the current time Idaho does not have an inheritance tax, gift tax or an estate tax.

For further information, visit the Idaho State Tax Commission site.