Will My Social Security Benefits Be Taxed?
Money Talks News’ recent article entitled “These 13 States Tax Social Security Income” says the federal government can tax plenty of types of retirement income — including Social Security benefits.
The taxation doesn’t necessarily stop with the federal government because there are a number of state governments that also expect a cut from your Social Security income. In fact, there are 13 states that tax Social Security benefits:
- New Mexico
- North Dakota
- Rhode Island
- West Virginia
Whether your Social Security retirement benefits are subject to federal income taxes is determined by your tax filing status and what the U.S. Social Security Administration calls your “combined income.” This is your wages and self-employment income, interest and dividends and other taxable income. If your benefits are subject to federal taxes, the federal government will tax up to 85% of your benefits.
States that tax Social Security benefits do so according to their own rules, which can vary from state to state and differ from the federal tax code. Therefore, even if your benefits aren’t subject to federal taxes, they could still be subject to state income taxes — or vice versa. It depends on how a state taxes income and whether it offers any tax breaks that apply to Social Security income.
For example, Connecticut offers some residents a full exemption from state income tax for benefits. These residents pay no taxes on Social Security income, if one of the following situations applies: (i) their federal filing status is single or married filing separately, and their federal adjusted gross income is less than $50,000; or (ii) their federal filing status is married filing jointly, head of household or qualifying widow/widower and their federal adjusted gross income is less than $60,000.
BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning and asset protection.
If you liked this article, “Will My Social Security Benefits Be Taxed?” read these additional articles: When Should a Trust Be Reviewed? and Does a Trust Protect You From a Lawsuit? and Will I Be Ready for Long-Term Care? What to Do with an Inherited IRA?
Reference: Money Talks News (Sep. 22, 2021) “These 13 States Tax Social Security Income”