Social security is unlikely to provide you with the kind of income you might have hoped for. Recently, the average monthly retirement benefit was actually $ 1,665 – equivalent to about $ 20,000 a year.
This news is bad enough, but here’s some worse news: a bunch of states are taxing some or all of the citizens’ social security income. Fortunately, most states do not. Here’s a look at which states tax and do not tax social security – plus some insurance, even if your state do tax it.
Where social security is taxed
Let’s start with the bad news first. Here are the 13 states that tax social benefits:
- New mexico
- North Dakota
- Rhode Island
- West Virginia
People also read …
The 37 states that do not tax your social benefits
You can now use the elimination process to see which states do not tax social security, but here is a handy list to save you the hassle:
- New Hampshire
- New Jersey
- New York
- North Carolina
- South Carolina
- South Dakota
You can also add Washington, DC to this list.
Go ahead and breathe a sigh of relief if you live in one of the states above (or Washington, DC) – but remember to keep the big picture in mind. Many states may not tax your retirement benefits or any earned income – but they still need income to keep the lights on. So in general, while a state may not tax income, it is likely to compensate for it through other taxes, such as on property and / or sales. If you are ever going to compare or make decisions based on a region’s tax rate, be sure to take all taxes into account.
Good news – even if you live in one of the 13 states
In the meantime, if you do living in one of the 13 states that tax social security, you may still be in the clear, or may face a rather small tax bite. Most of the 13 states do not tax particular benefits, and they are all different in how they approach social security taxation. To find out what the tax information is, where you live, look up the information for your state.
As an example, here’s what the state of Kansas says about the case: “If your federally adjusted gross income is $ 75,000 or less, regardless of your application status, your social security benefits are exempt from Kansas income tax. in your federally adjusted gross income. “
If you are hit by a tax, it will most likely be a single-digit tax rate and most likely a low single-digit tax rate.
While you may be exempt from state taxation of your social benefits, you may not escape federal taxation. Uncle Sam does tax some pension incomeincluding social security.
Up to 85% of your benefits can actually be taxed. The table below shows the tax limits. Note that your “total income” is your adjusted gross income (AGI) plus non-taxable interest plus half of your social security benefits:
|Filing as||Total income||Percentage of taxable benefits|
Between $ 25,000 and $ 34,000
Up to 50%
Married, files together
Between $ 32,000 and $ 44,000
Up to 50%
More than $ 34,000
Up to 85%
Married, files together
More than $ 44,000
Up to 85%
If you find yourself hyperventilating and think you’ll have to give over 50% or 85% of your benefits, take it easy. It is up to 50% or 85% of your benefits that may be affected by tax, which means that between 15% and 50% will not be affected. And on the part that is taxable, your rate can be 12% or 22%, for example.
So do not worry too much about getting your social benefits taxed. But spend some time learn more about social security. The more you know, the more you may be able to wriggle out of the program, and it may make your retirement more secure.
The $ 18,984 Social Security bonus completely overlooks most retirees
If you are like most Americans, you are a few years (or more) behind with your retirement savings. But a handful of little-known “social security secrets” could help secure a boost in your retirement income. For example: one easy trick could pay you as much as $ 18,984 more … every year! Once you’ve learned how to maximize your social security benefits, we think you can safely retire with the peace of mind we all seek. Just click here to find out how you can learn more about these strategies.
The Motley Fool has one disclosure policy.