Washington, D.C. – As the holiday season comes to an end, Americans are now turning their attention to the less exciting tax season. For many workers, filing taxes is a straightforward process. However, for retirees, navigating tax season can be more complex, especially when it comes to tax-deferred retirement income and Social Security benefits.
Many retirees will have to pay taxes on their tax-deferred retirement income and any income from a job. Additionally, they could potentially owe taxes on their Social Security benefits. As we enter the 2023 tax season, it’s important to understand how different states handle these taxes and the federal government’s approach to taxing Social Security benefits.
It’s worth noting that there are 40 states that do not tax Social Security benefits. This is good news for retirees residing in these states, as it means they can potentially keep a larger portion of their benefits. However, there are 10 states that do tax some portion of seniors’ Social Security benefits. Understanding how each state’s unique rules impact benefit taxes is crucial for retirees.
Recently, Missouri and Nebraska joined the list of states that do not tax Social Security benefits. However, this change only went into effect on January 1, 2024, meaning that some seniors in these states may still owe taxes on their 2023 benefits. Despite this, it’s a positive development for retirees in those states moving forward.
When it comes to the federal government’s approach to taxing Social Security benefits, the rules are much stricter. Seniors with provisional incomes above a certain threshold are subject to paying taxes on a portion of their benefits. Understanding these rules and their potential impact is essential for retirees as they plan for their financial future.
It’s important for retirees to be aware of their options for potentially reducing their tax burden, such as adjusting their spending or utilizing Roth savings. Additionally, staying informed about any changes to tax laws in their state that could impact their Social Security benefits is crucial for retirees. Proactive financial planning can help retirees navigate tax season with confidence and minimize any potential tax obligations.