Tax is something you must save money for. Saving will allow you to plan payments beforehand and be able to make ends meet without any trouble. There are so many expenses to get ready for, that taxpayers that are in retirement often forget about some tax payments. Not only can your Social Security retirement benefit be subject to state taxes, but also to federal income taxes.
Not all Social Security retirement beneficiaries will have to pay the same amount of money in taxes. It will depend on your earnings and personal situation the amount you have to pay. The first tax payment you should be aware of is the Federal one. It has to do with provisional income. The amount of money you receive from other additional sources affects your SSA benefits.
What is the maximum percentage subject to federal taxes of my SSA retirement benefit following the Internal Revenue Service rules?
According to the Social Security Administration, you may have to pay tax on up to 85% of your benefit only. This is so, following the guidelines from the Internal Revenue Service. For instance, for those individuals that file a return and earn more than $34,000 up to 85% of their Social Security benefit could be taxable. It could be up to 50% of your retirement benefits if your income is between 25,000 and 34,000 dollars.
On the other hand, if you are married and you decide to file your return jointly, you have different thresholds. Exceeding the limit of $44,000 will mean paying more since up to 85% of your check could be taxable. Those who earn between 32,000 and 44,000 dollars, will have to pay less in taxes. In this case, you will have to pay up to 50% of your retirement benefits.
What if my earnings are below 25,000 dollars annually and I am single?
If your total earnings are less than 25,000 dollars a year and you are a single filer, you will not have to pay tax on your benefit. What is more, if you are a couple that is married and you decide to file jointly, your limit is higher. You could both earn less than 32,000 dollars. In this way, just like single filers, married couples filing jointly will have to pay no taxes for their benefits.
Moving on to state taxes, there are about 38 states that do not have tax on Social Security benefits. Nevertheless, if you live in West Virginia, Vermont, Utah, Rhode Island, New Mexico, Nebraska, Montana, Missouri, Minnesota, Kansas, Connecticut, or Colorado you will probably have to pay some money on your Social Security benefit. Luckily, you might get an exclusion and may not pay anything at all. Check your state taxes to make sure your benefit is tax-free.