[ad_1]
Many people believe that once retired, taxes will become less of a problem. The reality, however, is that seniors are subject to taxes, just like working adults.
For example, if you have a traditional IRA or 401 (k), the withdrawals you withdraw from this account at retirement will be treated as ordinary income and will be taxed accordingly. Similarly, if you hold investments in a traditional brokerage account, you will have to pay taxes on the associated winnings.
In fact, many seniors are surprised to learn that even their social security benefits are taxed at the federal level. The only exception is for people with a minimum retirement income, ie elderly people living alone on social security. There are also states that apply a social security tax – 13 to be exact. The good news? There are 37 states that do not Forcing seniors to pay social security taxes at the state level, so if you live in one of these, you can keep a little more of your money.
SOURCE OF IMAGE: GETTY IMAGES.
States that do not tax social security
If you live in one of the following states during your retirement, you can rest easy, knowing that your social security benefits will not be taxed at the state level:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Mississippi
- Nevada
- New Hampshire
- New Jersey
- New York
- North Carolina
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Caroline from the south
- South Dakota
- Tennessee
- Texas
- Virginia
- Washington
- Wisconsin
- Wyoming
Keep in mind that some of the states on this list have no income tax. For example, Alaska, Florida, Nevada, South Dakota, Texas, Washington State and Wyoming do not tax income, and the Social security income falls into this category. In addition, although New Hampshire and Tennessee apply an income tax, it only applies to dividends and investment income. Social security is therefore not part of this category.
Remember though that it is not because you live in one of the states mentioned above that your benefits will not be taxed at the federal level. To find out if you need to pay federal social security taxes, you need to calculate your provisional income, which is essentially your non-social security income, plus 50% of the amount you receive in annual benefits. If your total is between $ 25,000 and $ 34,000 and you are a single filer, or between $ 32,000 and $ 44,000 as a common filer, then you can pay federal taxes on 50% of your tax revenue. Social Security. And if your provisional income exceeds $ 34,000 as a single filer or $ 44,000 as a joint filing couple, then you can pay federal taxes on 85% of your benefits.
In addition, there is talk that Illinois is changing its social security composition and imposing a tax on state benefits to help solve its financial crisis. The people of Illinois should therefore consider that they have been able to see their tax burden increase.
Of course, the decision to retire should not just be about whether your state is collecting taxes on social security. You will also need to consider other factors, such as the price of housing and the cost of living in general. In addition, the fact that your state does not tax social security income at the moment does not mean that it will not happen again. But for now, you can use the above information for retirement planning purposes and hope that things remain unchanged by the time your golden years actually start.
[ad_2]
Source link