When you retire, there are good chances that you are counting on your social security checks to help you cover your costs after your paychecks end. But did you know that where you live can affect whether you keep all the income that these benefits provide?
How does your choice of pension locations affect your social security payments? Here’s what you need to know.
Living in these 37 states means you do not have to worry about losing benefits to your local government
The reason why some retirees are going to keep more of theirs Social security check than their peers are because there are 37 states that do not impose taxes on these benefits – and 13 states that do. That 37 states where you do not have to worry about your state government taking a cut of your pension checks include:
- New Hampshire
- New Jersey
- New York
- North Carolina
- South Carolina
- South Dakota
In these places, you are able to bring in as much income as you want without worrying about state taxes on Social Security checks – though federal taxes can still be an issue.
The IRS may end up reducing the amount of benefits you receive by taxing you up to 50% of the benefits at the federal level when your provisional income exceeds $ 25,000 for single tax registrars or $ 32,000 for married, joint records. And up to 85% of benefits may be subject to federal tax with a provisional income of $ 34,000 for single files or $ 44,000 for married shared files. Provisional income is half of social benefits, all taxable income and part non-taxable income.
What if you live in the other 13 states?
If you live in the other 13 states as a retiree, it can be frustrating to discover that your choice of residence could potentially leave you with less social security income than seniors living across the state border in another location.
But the good news is, no all living in one of these 13 places will end up being hit by a big tax bill. How much you owe and whether you will be taxed at all will depend on the rules of where you live and the amount of income you have. This is because many Americans with lower incomes are exempt from state taxes on benefits, even when taxes are calculated on higher incomes.
Your state’s tax office is a great resource to help you determine if you’re likely to be taxed on Social Security checks. If you are in the group that will owe a state tax bill, you should prepare for this when making pension plans. Specifically, your benefits will not stretch that far, so it is a good idea to set a higher savings goal to help you make ends meet.
You can also consider moving to one of most places where your benefits are yours to keep without your state taking a cut – but you should consider many factors, including the cost of living and how other pension income is taxed, when deciding if this is the best move.