In retirement, most seniors rely on Social Security payments to cover their expenses, but knowing how much they’ll receive isn’t always simple. There are a few things that influence this, such as when you file for benefits, your birth year, and your income throughout your career.
If you live in one of the following 12 states, you’ll also have to worry about Social Security Benefit Taxes stealing a portion of your pay. It’s usually possible to avoid these penalties, but not always. Here’s everything you need to know about saving as much money on your Social Security checks as possible.
The following 12 states levy a Social Security benefit tax.
The following twelve states tax some of their seniors’ Social Security payments:
- Colorado
- Connecticut
- Kansas
- Minnesota
- Missouri
- Montana
- Nebraska
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Even if you live in one of these states, you may not owe anything. Each state has its own regulations determining who is responsible for Social Security benefit taxes. Your yearly compensation or adjusted gross income (AGI) usually must exceed a certain level. In Kansas, if your AGI is less than $75,000, your Social Security payments are exempt from taxation automatically.
Check to see whether you are in danger of owing these taxes. You should double-check this before retirement as well. In some states, future legislation may modify or eliminate the Social Security benefit tax.
The federal government also takes a cut of your Social Security payments.
Even if you don’t reside in one of the above-mentioned states, you may still be required to pay federal Social Security benefit taxes. It all boils down to your provisional income. which is your AGI plus all nontaxable interest and half your yearly Social Security benefit.
The thresholds for these benefits and deductions can vary from year to year, so double-check them every few years and before signing up for benefits to ensure you understand what you’ll owe.
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