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Taxes are an unavoidable fact of life — even in retirement.
For example, Social Security benefits may be taxable. In fact, Uncle Sam can tax as much as 85 percent of your benefits.
Unfortunately, the taxation doesn’t necessarily stop there. Many states also tax Social Security benefits. Kiplinger has identified 13 such states.
State taxation of Social Security benefits
Kiplinger reports that the following states tax Social Security income in at least some situations:
- New Mexico
- North Dakota
- Rhode Island
- West Virginia
Keep this list in mind when you decide where to retire.
Federal taxation of Social Security benefits
Whether or not the federal government will tax your Social Security checks depends on your income tax filing status and your income itself.
According to the U.S. Social Security Administration, benefits are generally taxed only if you have “other substantial income” besides your benefits. This could include wages or self-employment income, as well as interest or dividends, for example.
The possible taxation of Social Security income is yet another factor that folks must account for when planning their retirement, lest they wind up with less retirement income than expected or needed. To learn more about making the most of your benefits, check out “Maximize Your Social Security.”
Would you retire to a state that taxes Social Security benefits? Sound off below or over on our Facebook page.