[vc_row][vc_column width=”2/3″ el_class=”section section1″][vc_column_text]Many retired U.S. Citizens rely on Social Security to get them through their retirement. The Social Security Administration state that almost 50 percent of married couples rely on their SS benefits for about 50 percent of their cash flow. 2 out of 5 couples rely on about 90% of their income to come from Social Security,
For those that are or will rely on these benefits to support their living expenses, it is essential to know about the taxes that can affect your retirement income. Depending on where you live, your income can be liable to taxes from the state and the federal government.
However, some states do not tax Social Security benefits, which may be quite beneficial in saving a lot of money if you retire in one of these states.
Currently, 37 states do not tax your Social Security Benefits, including:
Alabama
Alaska
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Arkansas
California
Colorado
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
South Carolina
South Dakota
Tennessee
Texas
Virginia
Washington
Wisconsin
Wyoming
There are seven states, which are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming, that do not have any taxes on state income, and SS payments are filed under state income taxes. The other states do have a state income tax. However, it is only dividends and investment income that are liable in those states. Most states that do charge income tax tend to have exceptions for SS benefits.
The state of Illinois may change its laws to start taxing Social Security income, as the state has financial troubles. There are proposals that want to start taxing SS to assist with the state’s finances. This is still very much in the talks, but those that live in Illinois may want to state updated on this issue.
Now, if you reside in one of these states, your income is still liable to federal taxes. Though you only have to pay federal taxes depending on your income, the income limit is very low that most beneficiaries will have to pay.
The Social Security Administration reviews yours combines income to calculate the taxes owed. Your combined income is made up of 50 percent of your entire annual benefit amount, along with any other income you may receive. For example, if the Social Security Administration pays you $20,000 a year, and you receive $25,000 from another retirement income, your combined income would be $35,000.
You might have to pay federal taxes on some of your benefits if you receive a retirement income over the minimum threshold.
For those that are single:
0 percent will be taxed if you receive a combined income under $25,000 annually.
Up to 50 percent can be taxed if you receive a combined income between $25,000 to $34,000 annually.
Up to 85 percent can be taxed if you receive a combined income of more than $34,000 annually.
For those that are filing jointly:
0 percent will be taxed if you both receive a combined income of less than $32,000 annually.
Up to 50 percent will be taxed if you both receive a combined income between $32,000 to $44,000 annually.
Up to 85 percent will be taxed if you both receive a combined income of more than $44,000 annually.
If you decide to move to one of these states for retirement to save money, this may be beneficial. However, make sure that you go over the cost of living and other taxes in the other states to see if the overall expenses and taxes are worth the move.
If your SS benefits are mainly what you rely on during retirement, make sure you calculate the taxes into your budget, so you know what to expect. The more you know what to expect, the fewer surprises there will be.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”37959″ img_size=”292×285″ style=”vc_box_shadow”][/vc_column][/vc_row]