2023-01-23 08:00:00
Social Security benefits are subject to federal income tax as long as total income exceeds the limit set by the federal government. According to the Social Security Administration (SSA), recipients will pay tax on 50 or 85 percent of payments, depending on their amount of income.
Those who file as “individuals” will pay income taxes on up to 50 percent of their benefits if their combined income is between $25,000 and $34,000. If filing jointly with the spouse, the combined income rises to between $32,000 and $44,000.
The percentage goes up to 85 percent of benefits if the combined income exceeds $44,000. However, there are certain states that tax some or all of their residents’ retirement benefits regardless of the amount of income; while others simply don’t.
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Tax Return 2023: Which states do not tax retirement savings and why?
State tax policies on retiree benefits vary widely, with each state having the right to determine whether to follow federal rules for determining how much income is taxable or not.
Currently, there are 39 states in the American Union that do not levy taxes on Social Security benefits. These states are: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire , New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin and Wyoming. The District of Columbia also gets on the list.
As for retirement savings or other types of pensions, only nine states do not tax, which are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
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