Things to consider when choosing a home state; terrific ability-accessible trips; and great showers that use less water.
By Janet Groene
Two questions top the list of queries that I receive from FMCA members. Everyone wonders how much it costs to live full-time in a motorhome, and where to establish a home base.
There is no easy answer to the cost question. It’s like asking whether it would cost more to live on a farm or an island. The cost of any lifestyle depends on who, what, where, and how. I just heard from a young, single man who is setting off in a 26-foot boat with 50 cans of spaghetti and ravioli. He’ll probably boondock, comb the beach in bare feet, and have a wonderful life for almost nothing, at least for a while. Other full-timers live in $500,000 motorhomes and stay at RV golf resorts where gourmet meals are delivered from nearby restaurants. Many, many cost decisions are yours alone.
Choosing a home base involves more variables. Your home address determines the cost of your health insurance, vehicle insurance, and taxes. It also affects voting, driver’s license requirements, and legal rights regarding marital status, inheritance, crime and punishment, consumer issues, and much more.
You could skirt the issue of your legal residence, but consequences of not being truthful range from fines to jail time. You also could see insurance claims denied for fraud. Today, computers and the Internet make it much harder to hide yourself, your motorhome, and your assets. State governments are trading more and more information, and the federal government is amassing data at an unprecedented pace.
Financial magazines frequently cover topics such as the best hometown for raising a family, the regional cost of living, housing costs, and the best places to retire. In fact, Where to Retire magazine covers these topics extensively, year in and year out. However, these publications do not address issues specific to full-timers. Nor did the piece “Picking a Place to Retire,” which appeared in the May 5, 2012, issue of the Wall Street Journal. While the article was interesting, it focused primarily on taxes.
Taxes are just one piece of a big puzzle. The taxes you are required to pay can depend on whether you’re in the state temporarily while buying a new motorhome; are registered there permanently; are subject to state income tax; or are just visiting for the season. Read more about taxes below. The bottom line is that full-timers must choose a home base according to different metrics than homebuyers.
Climate doesn’t matter, because full-timers can move with the seasons. Quality of life issues such as the school system or cultural options don’t count, because full-timers can take their entire household where they want to be when they want to be there. It is not as important whether your “home” state ranks high for outdoor recreation, culture, or medical care, because you can have your annual physical done at the Mayo Clinic in Rochester, Minnesota; go to Tanglewood in Lenox, Massachusetts, for the concert season; and travel to Crested Butte, Colorado, in time for ski season.
According to U.S. Census data, most Americans retire near their hometowns. However, full-timers might not choose that as a home base even though they spend a lot of time there with family and friends. Instead, they may choose to establish legal residence in another state that has lower taxes or other benefits. Even the most loyal natives of high-tax states may opt to have their home addresses in low-tax states such as Texas or Florida.
States with the highest state sales tax (as of January 1, 2012) include California, Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee. City and county levies can raise the total take to 9 percent or more in other states, too. According to the nonprofit Tax Foundation, Tennessee has the highest total state and local sales tax rate with a top combined rate of 9.45 percent (as of January 1, 2012).
Looking at combined state and local sales tax rates, the next highest are Arizona, Louisiana, Washington, Oklahoma, Arkansas, New York, Alabama, Kansas, and Illinois. Property taxes are another matter but have little effect on full-timers. More important are exemptions from sales tax, such as food. No matter what the budget, everyone eats. See how complicated this becomes?
Pension income is an important factor to retired full-timers. Communities court pensioners, especially those on generous government retirement incomes, because they have a stable income. As a result, many states charge income tax but exempt retirement income. Tennessee, for one, does not tax Social Security, wages, IRA payouts, or pensions. So, despite having a high combined (state and local) tax rate, Tennessee’s bite on retirees may be far lower than other states.
Tax costs are a giant question mark, but they are only part of the big decision. Tax avoidance shouldn’t be the sole reason for choosing one address over another. Remember, too, that your choice doesn’t have to be carved in stone. In this rapidly changing economy, full-timers can stay aware and nimble. One way to keep up with economic trends and changing state tax policies is to check the Pew Research Web site (www.pewstates.org/states).
Younger people are full-timing and working as they go. If you work in a state that has state income tax, money will be withheld even if you’re not a resident of the state. Keep records. You may be able to get a partial refund later. Volunteers also are feeling the sting in states where benefits such as a free campsite are being taxed as income at fair value.
Here is a brief list of things to consider as you select your home base:
- Look at each state’s taxes according to how they will affect you. The tax rate you pay will depend on your source of income and the duration of your stay in a particular state. Even if your legal address is elsewhere, some states allow you to be there for only 90 or 120 days before you’re subject to their tax or license.
- Vehicle insurance costs depend on your city or county address. Costs can vary greatly from one end of a state to another.
- For now, medical insurance also depends on your “home” address. Beware of low rates that apply only to treatment within a regional health network. If your travels take you far away from your region, you don’t want to have to rush back for medical care.
- Jury pools can be chosen from the rolls of real estate owners or registered voters, or from the list of people who hold driver’s licenses. You may not own property in a certain place, but you could still be on the list of potential jurors. In some states, “traveling” is not an acceptable excuse to miss jury duty.
- Get legal advice about contracts, wills, and other matters of law in your home state. If you die without a will, state laws determine who inherits what, and it may not be in line with your desires. Same-sex or common-law marriages may not be recognized in your home state, and your rights in any marriage could be different from what you had at your prior address.
- Don’t cheat. Lying about your address could void your health or vehicle insurance.
Choosing a home base is a moving target, and it’s moving faster and more elusively in this difficult economic climate. Only by looking at the entire picture can you choose the right state for you and yours.
For guidance, you may want to check out Choosing Your RV Home Base, 2nd edition ($18.95, Roundabout Publications). Be aware when reading this 2012 publication that things may have changed since it was published. State-by-state tax information can be found at www.retirementliving.com/taxes-by-state. |
