Did you know that in Maryland, each flush of your toilet is tax payable? The average resident in Maryland pays 60 dollars per year on average, simply for flushing their toilet! Coupled with the “pole tax” in Texas, whereby adult entertainment services are taxed, one can see how taxes can be incurred anytime, anywhere at even the most unlikely of sources! Retirement can be financially draining to anyone, and hence having a clear picture of the tax friendliness of the state you retire in would be of utmost importance. Retirement should be stress-free, retire in a place with tax exemptions and lower tax rates and free yourself from the financial burden to focus entirely on your retirement. So, what is the tax friendliness of this state if you are looking at retirement in Oklahoma?
As a general overview, Oklahoma actually is a great choice for an affordable retirement, boasting one of the lowest costs of living out of all the US states. With a tax system being budget-friendly to all retirees, Oklahoma boasts full exemption for Social Security retirement benefits. Along with this exemption, a 10,000-dollar deduction towards other retirement incomes such as pension is enjoyed, making Oklahoma a popular choice for retirement. However, sales tax is fairly high in this state so spending should be monitored, though this tends to be largely offset by low property tax in this state. Hence, let us dive into the specifics of these tax exemptions in greater detail.
The main draw of retirement in Oklahoma is simple, social security is exempt from taxation, along with a deduction of 10,000 dollars across all other forms of retirement income. This is significant, as if you have plenty of income from alternative sources, up to 85 percent of your social security benefits can in fact be considered taxable income. If you keep into consideration the high costs of medical care in retirement, every cent counts and having enough money put aside on the occasion of a medical emergency should be of utmost importance. Just file schedule 511-A to subtract your social security benefits from your state income taxes, but do note that these benefits may possibly still be taxed federally.
The 10,000 dollar retirement income deduction on income sources includes a wide range of options such as IRAs, 401(k)s, 403(b)s, 457(b)s, along with public and company pensions. If the total retirement income exceeds this value, only the remainder would be subject to income taxes, but do note that you still have to file Oklahoma’s schedule 511-A to be eligible for this deduction.
Property And Sales Tax
Aside from the above exemptions, how about the major taxes you have to consider for your retirement in property and sales tax? Property taxes in Oklahoma are actually quite low, with the median annual property tax payment being just 1,278 dollars, well below the national median payment of 2,578 dollars. While this is partly due to the low home values of housing in Oklahoma, property tax rates are still very reasonable making Oklahoma an ideal location for retirement. Retirement is not entirely rosy however, as the average sales tax rate in Oklahoma is close to 9 percent. This includes costs for groceries and other daily essentials, although do note that low-income households are eligible for a tax credit to offset a portion of their food sales tax costs. Along with exemptions for clothing and prescription drugs, sales tax should still be at a fairly reasonable rate for retirees in the state of Oklahoma. Other than these taxes mentioned, there are no other major taxes you should be concerned about, and hence Oklahoma should be a state worth considering for retirement if finances are a serious concern for you!