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Florida and Arizona are major hubs for retirees. Aside from the perfect weather, are there any tax perks or other financial incentives to calling these states "home" later in life?


I'm not sure if the weather in Florida is all that perfect - there's a reason they say it's not the heat, it's the humidity - but if you have an aversion to paying taxes and don't mind the hothouse surroundings, this state could be for you. There's no income tax, whether from wages or payments from retirement plans. Sales tax is a moderate 6 percent; local jurisdictions can add 3.5 percentage points on top of that, but food and drugs, big expenditures for many retirees, are exempt. The formula for figuring property taxes in Florida is only slightly easier to fathom than quantum mechanics and relativity. There are numerous exemptions used to calculate a property's value, as well as several credits dished out based on an owner's personal circumstances; widows get a break, for instance. All in all, though, Florida is a very low-tax state.

If you're a fan of plain English, you may not like Arizona. They call their sales tax a "transaction privilege tax" for some reason. By any other name, it's 6.5 percent plus up to 1.125 percentage points more depending on the county. There is an income tax ranging from 2.59 percent to 4.54 percent, but medical and dental expenses are fully deductible. Property tax varies from county to county in Arizona, although, as in Florida, it's hard to tell just how much it is. The websites for the counties where Phoenix and Tucson are located are worse than opaque when it comes to spelling out the liability.

Social Security income is exempt from tax in both states, although income from other pension plans is generally taxed in full in Arizona. Aside from taxes, there is a key financial advantage these days to moving to Arizona or Florida: Home prices have plunged more in the two states than in many others, so you may be able to find a bargain if you move soon.

-Conrad de Aenlle