[vc_row][vc_column width=”2/3″ el_class=”section section1″][vc_column_text]Will you be required to pay taxes on retirement income?
It depends on what sources of income you have and where you live.
For most retirees, Social Security is their primary source of income, and in the majority of the U.S., your state will not tax you on it. The federal government, however, may. This depends on how much you earn.
Thirty-seven states in the U.S. do not tax Social Security benefits. No matter how much your interests are, or what other forms of income you may be receiving, they will not tax you. While Washington, D.C. isn’t a state, they also do not impose on Social Security benefits.
You can relax and enjoy your social security benefits free of state taxes if you live in:
• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Delaware
• Florida
• Georgia
• Hawaii
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• Illinois
• Indiana
• Iowa
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Nevada
• New Hampshire
• New Jersey
• New York
• North Carolina
• Ohio Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• South Dakota
• Tennessee
• Texas
• Virginia
• Washington
• Washington D.C.
• Wisconsin
• Wyoming.
If your income is more than a certain amount, you may still end up paying federal tax on your benefits. Income to define if you’ll need to pay federal tax equals the sum of all your taxable income from other sources, some non-taxable income, in addition to half your Social Security benefits.
By that definition, if your income is at least thirty-two thousand dollars if you are married and are filing jointly or $25,000 for all other filing statuses, up to fifty percent of your Social Security benefits may e subject to taxation by the federal government. For married joint filers, if the combined income escalates to $44,000 (or $34,000 for others) up to eighty-five percent of benefits may be taxed. There are also some states that do not tax pensions.
It is extraordinarily rare for workers to retire with a pension providing a guaranteed income from an employer (also known as a defined benefit pension) many government employees, usually members of the military, and some private sector workers will receive retirement income from it.
For those of you receiving a pension, states who do not tax pensions are:
• Alaska
• Florida
• Illinois
• Mississippi
• Nevada
• New Hampshire
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming
Taxes in some states are limited on pensions. Or are sometimes certain types of annuities are exempt from tax, such as military or government pensions. These include:
• Alabama
• Arkansas
• Colorado
• Delaware
• Georgia
• Hawaii
• Iowa
• Kentucky
• Louisiana
• Maine
• Maryland
• Michigan
• Missouri
• Montana
• New Jersey
• New Mexico
• New York
• Ohio
• Oklahoma
• Oregon
• South Carolina
• Utah
• Virginia
• Wisconsin
You may grant a breaks, but the IRS typically taxed some or all money from a pension. If you did not contribute to the pension or annuity pension payments are fully taxed. If your employer did not withhold contributions from salary, and you received tax-free contributions to the pension your pension will be imposed. You are not taxed on returns on your after-tax contributions because pension payments are only partially taxable if you made contributions using after-tax dollars.
Veterans’ disability retirement benefits are not subject to federal tax, but military retirement pensions based on length of service can be.
Some states do not want tax withdrawals from retirement accounts
The money you take out of your statement isn’t subject to tax if you have a Roth 401(k) or Roth IRA. Depending on where it is that you live, your state may or may not tax this income.
You will not be taxed on distributions from retirement accounts if you live in
• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming
These states don’t charge any state income tax, so the absence of a state income tax also explains why Social Security benefits and pension are not subject to tax in these states…
Tennessee and New Hampshire, don’t charge taxes on wage income but do enforce a tax on some types of investment income.
There are areas where they treat distributions from retirement accounts differently than they treat other income, while some places charge no tax on that income and others allowing for exemption of high amounts of money.
Illinois, Mississippi, and Pennsylvania will not tax on distributions from your retirement accounts. But in Colorado, Georgia, Kentucky, Michigan, Oklahoma, South Carolina, Virginia, and West Virginia, you can exempt an extensive amount of income from taxes.
As a senior, if you have a choice in where you live, it would make sense to choose a tax friendly state. When you are living on a fixed income from investments, social security benefits, or a pension, there is no reason to give more of that money to the government than you have to.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”34708″ img_size=”292×285″ style=”vc_box_shadow”][/vc_column][/vc_row]
