For Mark Roberts’ Use: After working and paying taxes throughout your career, along with paying into Social Security for all of that time, it might surprise you to learn that your Social Security benefits can actually be taxed in retirement.
Depending upon your provisional income, you might owe income taxes to Uncle Sam. Currently, a single tax filer whose taxable income falls between $25,000 and $34,000 will pay taxes on up to 50 percent of their Social Security benefits. For married tax filers, those who earn between $32,000 and $44,000 will pay taxes on up to 50 percent of their Social Security.
Single filers who earn more than $34,000, or married couples who earn more than $44,000, will pay taxes on up to 85 percent of their benefits.
But that’s just at the federal level. States that impose an income tax might also tax Social Security at additional amounts.
Which states are those? The following currently include Social Security benefits as taxable income, although this could change in the future:
- New Mexico
- North Dakota
- Rhode Island
- West Virginia (but they’re phasing out this tax by 2022)
While state income taxes alone might not serve enough motivation to move, you might consider this factor when determining a retirement location. Once you’re free from the office and able to live anywhere you choose, you might decide to move to a more tax-friendly location. But before you do, remember to account for other factors that might impact your income, such as property taxes and sales taxes.
If you’re considering a move in the future, we can help you evaluate your retirement income. Let’s discuss the issue at your next appointment, evaluate your income potential, and decide if relocating might benefit your situation.