Article Written by : Financial Resources 101

When it comes to tax planning, many of us concentrate only on Federal income tax. Beware that there is a tax bite that comes from the state too. Unfortunately state tax from state to state differs and it is hard to generalize. Still some common themes can be identified. They include how states treat retirement income, Social Security, inheritance and property taxes.

Certain states including Alaska, Nevada, South Dakota, Florida, Texas, and others do not tax retirement income. But 41 states and the District of Columbia have some form of tax including flat rates on retirement income. Many offer varying amounts of retirement income exclusions. Six states including California and North Carolina offer no tax breaks for retirement income.

The Federal government tax 85 percent of your Social Security benefits while many states do not tax them. In 13 states Social Security benefits are taxed to a certain level.

Most states do not levy an estate tax or inheritance tax while 17 states and the District of Columbia levy a tax on one or the other. The Federal tax on estates is 40 percent while maximum state tax is 16 percent. Many states are gradually levitating to match the Federal estate tax formula.