It can be hard to know how much you will get from Social Security in retirement. Your age, birth year, and income all affect this.
You have to worry about Social Security benefit taxes if you live in one of the 12 states listed below. Sometimes it is possible to avoid these. Keep as much of your Social Security check as possible.
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Some of their seniors' social security benefits are taxed.
It's not a guarantee that you'll owe anything if you live in one of these states. Social Security benefit taxes are paid by people in each state. Your annual benefit amount or adjusted gross income needs to be over a threshold. Social Security benefits are not taxed in Kansas if your AGI is less than $75,000.
If you don't review the laws for your state, you may be in danger of owing these taxes. As you approach retirement, you should double check this as well. The Social Security benefit tax may be changed or eliminated in some states.
If you don't live in one of the 12 states, you still have to pay federal Social Security taxes. Depending on your income.
The table shows how much of your benefit the government can tax.
|
There is a percentage of Social Security benefits subject to federal taxes. |
There is income for single filers. |
There is income for married couples to file together. |
|---|---|---|
|
It was nil. |
Less than 25 grand. |
It's less than $30,000. |
|
Up to half. |
Up to $34,000. |
$32,000 to $42,000. |
|
It's up to 85%. |
More than 30,000 dollars. |
More than four figures. |
The data comes from the Social Security Administration.
It's possible these thresholds could change over time, so double-check this every few years and before you sign up for benefits to make sure you don't owe anything.
Some people are able to avoid Social Security benefit taxes. One of the best ways to avoid these taxes is to put money in a IRA. Unlike most retirement accounts, you have to pay taxes on your contributions when they are made. You'll get tax-free withdrawals later on. The federal government will not count the amount of money you take out when calculating your income.
You can use this if you have access to a 401(k) through your job. If you leave the job, you can roll your 401(k) over into aRoth IRA if you choose.
If you have a lot of money in traditional IRAs or 401(k)s, you might want to consider converting. You pay taxes on the amount you convert that year into tax-deferred savings. You need to be careful about doing this. For the year, it will raise your tax bill. If you convert too much at once, you could end up with a higher tax rate. You can convert the IRAs in successive years.
Limit your spending in retirement is one thing you can do to reduce your Social Security taxes. Reducing the amount you withdraw from traditional retirement accounts could be done by doing this. You can't always control how much you spend, so you shouldn't rely on this alone. Unexpected costs can make you withdraw more than you want to. If you're trying to reduce your tax liability, having some savings on hand is a good idea.
Even if you're not claiming Social Security, you should start thinking about it now. If you know how much you owe, you will not be surprised at tax time. If the rules surrounding Social Security benefit taxation change over time, be prepared to adjust.
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