State and Local Taxes If You Spend Your Retirement Years in Georgia

With a wide variety of retirement communities for practically any budget and lifestyle, Georgia is becoming one of the most popular retirement destinations in the U.S. From the laid-back lifestyle in the mountains of North Georgia to Savannah and the sandy beaches of the South Georgia coast, there are many options to choose from. Depending on where you settle, you could find that the cost of living is lower than the national average.

Housing prices vary widely throughout Georgia, with a median home price of $136,921 in the state according to America's best places to retire. Top Retirements reports that the median home price in Atlanta is $173,000. In mid 2006, the mid price in the Augusta area was $137,500 and in Athens, $157,000, both significantly below the national median at that time. The overall cost of living index in Atlanta was 90 compared to the national average of 100. In terms of the overall state and local tax burden, the Tax Foundation ranked Georgia 16th among the 50 states in 2008. Despite this relatively high standing, there are some significant income and property tax breaks for seniors.

Georgia state income tax

The Georgia state income tax rate is 1% on the first $750 of taxable income, up to a maximum rate of 6% on taxable income over $7,000 for single taxpayers and over $10,000 for married taxpayers filing jointly. The standard deduction is $2,300 for single taxpayers and $3,000 for married taxpayers filing jointly. If you are over 65 you can claim an additional $1,300 deduction. The personal exemption is $2,700 each for the taxpayer and spouse, and $3,000 for dependents.

Social security benefits are exempt from the Georgia state income tax. If you are 62 or older, or if you are totally disabled regardless of your age, you can qualify for a $35,000 exclusion of retirement income. You and your spouse must qualify separately, and you could qualify for a total exemption of up to $70,000. Retirement income for this purpose includes military retirement pay, pensions and annuities, interest and dividends, net income from rental property, capital gains income, and income from royalties.

Georgia property taxes

Property taxes in Georgia are administered by the counties. Property is assessed at 40% of its fair market value. The millage rate is set by the counties each year. According to the Georgia Department of Revenue, the average county and municipal millage rate in the state is 30 mills. So, on a house with a fair market value of $100,000 the property taxes would be $100,000 x 40% = $40,000 assessed value x $30 per each $1,000 of assessed value = $1,200 per year. You can find a link to a breakdown of the millage rates by county on the Tax Digest Millage Rates page of the Georgia Department of Revenue website.

All Georgia residents can claim a $2,000 homestead exemption from state, county and school taxes on their primary residence. This $2,000 is deducted from the 40% assessed value of your home. Many counties also offer their own homestead exemptions, which are generally more beneficial than the state exemption.

If you are age 65 or older you are exempt from the state portion of the property tax, which is 0.25 mills, on your principal home and up to 10 acres of land. If the total income of you and your spouse for the prior year, excluding retirement income, is $10,000 or less, you can claim a $4,000 exemption from all state and county property taxes. Disabled veterans and surviving spouses of service members qualify for a $50,000 exemption from state, county, municipal and school property taxes.

If you are age 62 or older and your total household income does not exceed $30,000, you can obtain a floating, inflation-proof state and county homestead exemption based on increases in the value of your homestead.

Georgia sales tax

Georgia has a 4% state sales tax, and according to the Retirement Living Information Center, local sales taxes could add an additional 3%. Food, prescription drugs and certain medical devices are exempt from sales tax. You can find a list of sales taxes by county on the Georgia Department of Revenue website.

If you make purchases on the Internet or by catalog for delivery to a Georgia address, you are subject to Georgia sales and use tax, regardless of where the vendor is located. You would need to report and pay the tax using Form ST-3USE.

Georgia estate tax

There is no inheritance tax in Georgia. Georgia's estate tax is based on the amount allowed as a credit for state death taxes on the federal estate tax return. Since the federal estate tax law currently (2005 through 2010) does not allow a credit for state estate taxes, the requirement to file a Georgia estate tax return is repealed.

Sources:
Georgia Individual Income Tax Instruction Booklet - Georgia Department of Revenue
Bankrate - State Tax Roundup - Georgia
Property Tax Guide for the Georgia Taxpayer - Georgia Department of Revenue
Retirement Living Information Center - Taxes by State - Georgia
Tax Foundation - Georgia's State and Local Tax Burden, 1977-2008