State taxes for FIRE [United States]

[CanuckExpat]

Interest post at Reddit: State taxes for FIRE

I thought it might be of interest here
It's for a specific situation, but one that might be common for those FI/RE: "state income taxes would be with a FIRE strategy of doing Roth conversions up to the standard deduction + personal exemption limit, then long-term capital gains up to the top of the 15% bracket, for $0 in federal income tax."

The possible state income taxes were larger than I thought, ranging from zero to over $7,000.
Check the original post for exact numbers and details. I took a quick screen shot for the lazy (including myself, since I'm too lazy to make a table):

[tarheeldan]

Nice, thanks for sharing!

Here it is sorted:
https://docs.google.com/spreadsheets/d/1ZkHIb8fgajLJkDGyQW7zxQdSVmtYNojdd-bcETS3QZE/edit?usp=sharing

Top 10, sorted by income tax:
Wyoming (d)
Nevada (d)
Tennessee (h)
Washington (d)
Florida (d)
Alaska (d)
South Dakota (d)
Nebraska (g)
Texas (d)
New Hampshire (h)

[CareCPA]

I would have to say it is more nuanced than this table makes it.
PA for example, sales tax is 6% across the state, and two specific small areas add surcharges, so an average is not overly helpful.
You also pay state income tax on 401k/IRA contributions when made, since we don't tax retirement income. So if you are doing traditional to Roth conversions in PA, you would be able to reduce that state taxable amount by the amount you've already paid tax on (and I *believe* you can do all contributions first, so you wouldn't be paying tax on conversions until you ran through all your original contributions and hit your gains. Don't quote me on this yet as it is not very common here).

[cwenger]

I would have to say it is more nuanced than this table makes it.
PA for example, sales tax is 6% across the state, and two specific small areas add surcharges, so an average is not overly helpful.
You also pay state income tax on 401k/IRA contributions when made, since we don't tax retirement income. So if you are doing traditional to Roth conversions in PA, you would be able to reduce that state taxable amount by the amount you've already paid tax on (and I *believe* you can do all contributions first, so you wouldn't be paying tax on conversions until you ran through all your original contributions and hit your gains. Don't quote me on this yet as it is not very common here).

This table takes into account Pennsylvania's (and other state's) taxation of retirement account income. You start with the federal adjusted gross income of $96,000 and subtract $20,700 (Roth conversions) and you get Pennsylvania taxable income of $75,300. $75,300 x flat tax rate of 3.07% = $2312, as shown in the table.

[CareCPA]

Yea, my bad. Not sure what line I was looking at. Thanks for the correction!