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Question about State Income Tax

Question about State Income Tax

Old Sep 6th 2014, 5:10 am
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Default Question about State Income Tax

I've been living in Florida for the past 14 years, and FL is one of the few states that doesn't collect a State income tax. I'm toying with the idea of moving to Colorado where they have a state income tax. My question is, is state income tax fully deductible from your federal tax return?

I'm over the heat, humidity and bug's (amongst other things) of Florida, and would like to move somewhere with less humidity and that actually has 4 seasons. I've spent time in CO and really liked it, but would consider other states too, but my OH keeps banging on about this state tax thing. I need a good argument to put to him to try and persuade him to consider a move.

Thanks for any help.
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Old Sep 6th 2014, 5:57 am
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Default Re: Question about State Income Tax

Until your total deductions (state income tax, property tax, mortgage interest, etc.) exceeds the standard deduction, the deductions are worthless. However if you plan to have more than enough deductions to exceed the standard deduction without the state income tax deduction, then adding the state income tax deduction will be a tax savings at your highest federal marginal tax bracket. It is a deduction from income and not tax.
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Old Sep 6th 2014, 6:07 am
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Default Re: Question about State Income Tax

Originally Posted by Michael View Post
Until your total deductions (state income tax, property tax, mortgage interest, etc.) exceeds the standard deduction, the deductions are worthless. However if you plan to have more than enough deductions to exceed the standard deduction without the state income tax deduction, then adding the state income tax deduction will be a tax savings at your highest federal marginal tax bracket. It is a deduction from income and not tax.
Also worth noting that there are limits on the amount of your itemized deductions so, if you already have very high income you may not get the full benefit of deducting state taxes and that state taxes are not deductible for AMT purposes so, once again, if you are close to having to pay AMT, state taxes will not help.

Last edited by md95065; Sep 6th 2014 at 6:10 am.
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Old Sep 6th 2014, 12:15 pm
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Default Re: Question about State Income Tax

Have you considered New Hampshire?
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Old Sep 6th 2014, 12:57 pm
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Default Re: Question about State Income Tax

Originally Posted by nun View Post
Have you considered New Hampshire?
Good idea, they have five seasons over there!
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Old Sep 6th 2014, 1:09 pm
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Default Re: Question about State Income Tax

You realise that state taxes are a deduction from your gross income, not a credit against federal taxes, don't you?

If you have income of $100,000 and state income tax of $5,000 your adjusted gross income for federal income would be $95,000. I.e. you don't just knock $5,000 off the money you owe the Feds.
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Old Sep 6th 2014, 2:50 pm
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Default Re: Question about State Income Tax

Thanks for the info everyone. Nun, New Hampshire is too far north, the OH thinks Orlando is north. :/
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Old Sep 6th 2014, 3:50 pm
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Default Re: Question about State Income Tax

Originally Posted by beachgal21 View Post
Thanks for the info everyone. Nun, New Hampshire is too far north, the OH thinks Orlando is north. :/
CO is also long way north of Orlando you know.
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Old Sep 6th 2014, 5:12 pm
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Default Re: Question about State Income Tax

Perhaps try Scotland so you can pay Scottish income tax?
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Old Sep 6th 2014, 5:40 pm
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Default Re: Question about State Income Tax

Originally Posted by Cook_County View Post
Perhaps try Scotland so you can pay Scottish income tax?
That's a very pertinent question. I might well move from the US to Scotland and if the Scots vote for independence what happens about the tax treaty. Would the current UK treaty be adopted? According to the SNP there would be no immigration issues for UK citizens, but how would Scotland tax US investments and retirement accounts?

Last edited by nun; Sep 6th 2014 at 5:42 pm.
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Old Sep 6th 2014, 6:18 pm
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Default Re: Question about State Income Tax

State tax is probably the last thing I would consider when deciding where to move to.
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Old Sep 6th 2014, 7:08 pm
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Default Re: Question about State Income Tax

Originally Posted by Sally Redux View Post
State tax is probably the last thing I would consider when deciding where to move to.
Yes Sally, totally agree, but OH is one of the "all tax is theft" brigade ... (please don't say it, believe me I know it backwards, forwards and upside down), there's no telling him
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Old Sep 6th 2014, 7:11 pm
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Default Re: Question about State Income Tax

Originally Posted by Cook_County View Post
Perhaps try Scotland so you can pay Scottish income tax?
6 weeks ago I was packing and making plans to move back to the UK until I had the rug pulled from under me. Believe me I'd opt for Scotland in a heartbeat
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Old Sep 6th 2014, 7:15 pm
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Default Re: Question about State Income Tax

Originally Posted by beachgal21 View Post
Yes Sally, totally agree, but OH is one of the "all tax is theft" brigade ... (please don't say it, believe me I know it backwards, forwards and upside down), there's no telling him
Wesley Snipes?
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Old Sep 6th 2014, 7:24 pm
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Default Re: Question about State Income Tax

Originally Posted by Sally Redux View Post
Wesley Snipes?
lol... he's not gone so far as to refuse to pay yet, but jeez he's a nightmare from New Years through to April
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