in KY 1st $41k of annual IRA withdrawal is not taxed

[ngmoore]

I love FRP and tell everyone to get it!

I am moving to KY, a retiree-friendly state. SS is not taxed, and the first $41K I withdraw from my retirement accounts each year is also tax free.

The SS is easy enough to add in, but Is there any way to account for the lack of taxes on the $41K?

[jimr]

Like all tax stuff, the best way to handle the exemption may be to just try to guestimate the impact and use a blended average tax rate. I assume you're already doing this to build the combined state and federal income tax rate.

Another approach that can work if you know you'll always withdraw at least $41k, is to use an income tax rate that ignores the $41k exemption completely. Then, rebate the exemption amount back as a tax free income cash flow. That may sound complicated, but it just means adding one extra income cash flow in additional inputs. It'll be a fixed amount of the state tax rate times $41k (assuming that's indexed for inflation).