Taxes And Retirement Costs In Washington State

Washington has favorable tax laws, especially for retirees, but it can still be an expensive place to live–especially if you long for the city life. Gain an awareness of the taxes and retirement costs in Washington state as you begin to plan your budget.

Tax Policies of Washington State
The state sales tax in Washington is 6.5 percent, however some local communities have tax rates as high as 9.5 percent. This tax is not applicable if you’re buying food or prescription drugs.

Washington state does not have an income tax, and taxes are not applied to pensions or social security benefits.

Property Taxes in Washington State
If you own property in Washington, the state collects a variable property tax rate that is determined by the collection of the previous year. Washington state follows the one percent property tax limit rule, which means that property tax collection by the state may not increase more than one percent annually.

Property tax exemption laws exist to protect households with an income of less than $35,000 per year, or who are over age 61. To receive the exemption, your home must be occupied, and the property cannot exceed one acre in size.

Other Retirement Costs to Consider
The cost of living in Washington state is approximately 9.92 percent above the U.S. national average. Seattle in particular is one of the more expensive cities, stacking up just below Boston and above Chicago (The Greater Seattle Datasheet, 2011).

Plan for the costs of food, clothing, apartment rental or mortgage payments and various entertainment expenses. As Washington state contains some of the most expensive property in the country, this cost could be significant.

One perk of choosing Washington state as a retirement destination is the Washington Prescription Drug Program (WPDP). Once you become a resident of Washington state, you will be able to take advantage of this restriction-free program. The WDPD can save residents up to 60% on generic drugs, and 20% on brand-name medicine.

Transportation costs are based on the current gas prices and could be significant. Major cities like Seattle offer public transportation in the form of rail and bus systems, although taxis are a more popular mode of transit.

While planning your retirement budget, make sure you account for the cost of health care when you’re retiring in Washington state.