Being retired should be a state of rest, relaxation, and enjoyment for all people, regardless of their socioeconomic position and the savings they have been able to coin in their life, and that is what many envision when they are approaching retirement age. However, in today’s harsh reality, the pleasures once dreamed of often turn into disappointments. Seniors are confronted with limitations, financial strains, and societal pressures, leaving little room for the idyllic joys of retirement.
Although for this reason in the United States we have a fairly robust and trustable Social Security system, which provides a financial network for those citizens who have already contributed a lot to the nation, there are circumstances in which money is taken from these people, such as tax obligations.
Tax Rules Set to Trim a Part of Retirements Check in These States
Although the news of the phasing out of Social Security taxes in several states may sound encouraging to some, the reality is that there are still 10 states where this exemption has not been fully fleshed out. These states include Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont and West Virginia. For beneficiaries residing in these regions, the complexity of state regulations adds one more layer of confusion and concern.
Each state has its own rules and conditions regarding how Social Security income is taxed. For example, let’s take a quick look at the state of Connecticut: although it is possible to deduct 100% of Social Security income subject to federal taxes, in that state, this deduction is conditional on an adjusted gross income (AGI) that does not exceed $75,000 for singles and $100,000 for married couples filing a joint return.
On the other hand, let’s see the case of Kansas, where any AGI over $75,000 carries a tax liability, regardless of the taxpayer’s filing status. In addition, in Utah, a flat tax rate of 4.65% is applied to all income, which affects not only Social Security but other income as well.
Most of Your Social Security Check Is Not Taxable
Wondering if the majority of your Social Security check is not taxable? Not so fast! Although that statement might sound comforting at first glance, the reality is much harsher. While it’s true that a significant portion of your Social Security check is not taxable, there is one ominous asterisk that recipients should be aware of.
The truth is, depending on several factors, a significant portion of your Social Security benefit may be taxable. Complex tax rules and regulations make it difficult to determine with certainty how much of your Social Security income will be affected by additional tax liabilities.
The percentage of your U.S. Social Security income that is taxable depends on your overall financial situation. The Social Security Administration (SSA) sets the following guidelines for the year 2024:
- No taxes: If your “combined income” is less than $25,000 as a single, head of household, or qualifying widower, or $34,000 if you file a joint return with your spouse, you won’t have to pay taxes on your Social Security benefits.
- Partial taxes: If your “combined income” is between $25,000 and $34,000 (for singles, heads of household or qualified widowers) or between $34,000 and $44,000 (for joint returns), up to 50% of your Social Security benefits may be taxable.
- Total Taxes: If your “combined income” exceeds $34,000 (for singles, heads of household, or qualifying widowers) or $44,000 (for joint returns), up to 85% of your Social Security benefits may be taxable.