Doing taxes today as a VITA volunteer which is why I'm thinking about this. My state allows individuals to exempt retirement income up to a certain dollar amount from state tax (pensions, IRAs, military retirement). Meaning that a portion of retirement income isn't subject to state tax. This is per individual NOT per return which is why I'm making this post.
So for example a married filing jointly couple with 30k in retirement income would be subject to state tax on only a portion of that 30k:
Scenario 1
Spouse1: 15k retirement, allowed to exclude 10k: only 5k is subject to state tax
Spouse2: 15k retirement, allowed to exclude 10k: only 5k is subject to state tax
Scenario 2
Spouse1: 30k retirement, allowed to exclude 10k: 20k is subject to state tax
Spouse2: 0k retirement, no exclusion
With the exact same income Scenario 1 will tax 10k (state) while scenario 2 will tax 20k (state). Scenario 2 is a potential outcome if one spouse works and one spouse stays home for their lives together.
My personal situation is that all of our tax-deferred retirement savings are in my name. My stay-at-home spouse has a Roth IRA but if we ever get to the point where we can max my TSP and still have extra $ to throw into a Traditional IRA we will open one in his name rather than mine.
Of course, this is all moot if you are smart enough to move to a state with no income tax during retirement.
