Tool | September 2014
State-by-State Guide to Taxes on Retirees
State Sales Tax
6% (nonprepared food and prescription drugs are exempt). Prepared food items, food sold through vending machines and soft drinks are taxed at 6%. Some municipalities may add a local sales tax of up to 1%.
Income Tax Range
Low: 3% (on up to $10,000 of taxable income)
High: 6.5% (on taxable income of $60,000 or more)
Social Security benefits are taxed to the extent that benefits are taxed by the federal government.
Exemptions for Other Retirement Income
The beginning point for West Virginia taxation is federal adjusted gross income. Therefore, the amount of IRA distributions, pension income or Social Security benefits that is taxable and included in federal adjusted gross income is taxable on West Virginia's income tax return. Taxpayers 65 and older may exclude the first $8,000 of any type of retirement income ($16,000 for married couples) from West Virginia taxes. Out-of-state pensions qualify for the $8,000/$16,000 exemption, too. Residents can exempt $2,000 of civil or state pensions.
A Family Tax Credit is also available to income-eligible families to reduce or eliminate their West Virginia personal income tax.
Each county and municipality can impose its own rates of property taxation within the limits set by the West Virginia Constitution. Property is assessed at 60% of fair market value. The West Virginia legislature sets the rate of tax of county boards of education, which all of the state's county school boards use. However, the total tax rate for county boards of education may differ from county to county due to excess levies. The total tax rate is a combination of the tax levies from four state taxing authorities: state, county, municipal and schools.
Median property tax on the state's median home value of $94,500 is $464, according to the Tax Foundation.
Tax breaks for seniors: Senior citizens eligible for the Homestead Exemption Program may be entitled to a Senior Citizens Tax Credit for Property Tax Paid. The credit is based on the amount of property taxes paid on the first $20,000, or portion thereof, of the taxable assessed value over the $20,000 homestead exemption. (New residents have a two-year waiting period to qualify for the homestead exemption.)
The homestead program allows a $20,000 exemption against the total assessed value of single-family homes, including manufactured homes. So if the home's assessed value is $80,000, the homestead exemption allows the home to be taxed on the discounted value of $60,000. This is a benefit administered at the county level for those who are 65 or older or totally and permanently disabled.
If you still owe local property taxes on your home after the application of the homestead exemption and your federal adjusted gross income is no higher than 150% of the federal poverty guideline, you may qualify for the Senior Citizens Tax Credit. The tax credit for eligible homestead exemption participants equals the tax paid on the first $20,000 of taxable value. The federal poverty guideline is based on the number of people living in the home. So for the home assessed at $80,000, the homestead exemption and income tax credit allow the home to be taxed on the discounted value of just $40,000.
If your property taxes are more than 4% of your annual gross income, you could qualify for the Homestead Excess Property Tax Credit, which is equal to the amount of property tax that exceeds 4%. (Qualifying income includes federal adjusted gross income, nontaxable benefits and any other nontaxable sources of income.) The credit cannot exceed $1,000. Gross household income must be 300% or less of the federal poverty guideline. If you also qualify for the Senior Citizens Tax Credit, you must deduct that credit amount from property taxes paid when determining eligibility. If that net amount exceeds 4% of income, you may qualify for the Homestead Excess Property Tax Credit.
There is no inheritance tax or estate tax.
Editor's Picks From Kiplinger
- 6 Tax Factors to Consider When Picking a Retirement Destination
- Retirees, Watch Out for the State Tax Bite
- SLIDE SHOW: 10 Most Tax-Friendly States for Retirees
- SLIDE SHOW: 10 Least Tax-Friendly States for Retirees
- SLIDE SHOW: 10 Things You Must Know About Social Security
- SLIDE SHOW: 10 Things You Must Know About Traditional IRAs
- SLIDE SHOW: 5 Costly Retirement Surprises
- SPECIAL REPORT: Maximize Your Social Security Benefits
- ORDER: Kiplinger's Social Security Solutions
- TOOL: Kiplinger's State-by-State Guide to Taxes
- TOOL: Find the Best, Latest Mortgage Rates in Any State