10 states that could ruin your retirement
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10 states that could ruin your retirement
On this Queer Money®, we’re sharing ways to help you retire fabulously without the taxman crashing your party and taking your last dime.
On Queer Money® episode #486, we talked about how your income will determine whether your benefits are fully taxable, partially taxable or not taxed at all. The US News & World Report Survey surveyed 3,500 people over the age of 45 and 16% listed taxes as their top concern in retirement. This was tied for third with quality of healthcare. The first one is affordability, and the second one is happiness. Taxes are up there for being a stressor for retirees. Maybe you might want to avoid these ten states or at least be crystal clear on what their taxes are. The information is confusing due to the laws keep changing. We tried our best to gather accurate information as much as possible. The caveat is definitely talk to your account about any of this and how this would apply to your personal situation.
These states are in alphabetical order not by ranking. The first one we will discuss is Colorado. Per AARP, anyone over the age of 65 doesn’t pay any taxes on Social Security Income. The ages between 55 and 64 won’t pay any tax on Social Security Income if you’re single, have an adjusted gross income of $75,000, or married, filing jointly with an adjusted gross income of $95,000. If you have adjusted gross income above $75,000 or $95,000, you will pay Social Security Income taxes.
The second state is Connecticut. Per Kiplinger, you won’t pay any tax on Social Security Income if you’re single with an adjusted gross income of $75,000 or married filing jointly with an adjusted gross income of $100,000. If your adjusted gross income is more than the threshold amount, you will be taxed on no more than 25% of your Social Security Income.
The Third state is Kansas. Per the kansas.gov website if your federal adjusted gross income is $75,000 or less, regardless of filing status, social security benefits are exempt from income tax. The exemption applies only to the extent the benefits are included in your federal adjusted gross income.
The fourth state is Minnesota. Per Kiplinger, Social Security Income is considered taxable by the federal government. Some Minnesota retirees qualify for what they call a Social Security Income subtraction. A taxpayer’s subtraction is reduced by 10% for each $4,000 over the threshold. Married filing jointly filers are fully tax-exempt at $105,380 or less. Married filing separately is fully tax-exempt at $52,960 or less, and the head of household and single filers are tax-exempt at $82,190 or less.
The fifth state is Montana. Per AARP, this follows federal guidelines for taxing Social Security Income. See Queer Money® episode #486. The Income tax rate is 5.9% on income over $41,000 for joint filers and $20,500 for single filers. The federal requirements are single filers with income between $25,000 and $34,000, half of their Social Security Income benefits are taxable. If they earn over $34,000, 85% of Social Security Income benefits are taxable.
The sixth state is New Mexico. Per Kiplinger, only taxable Social Security Income for single filers with incomes over $100,000 and joint filers with incomes over $150,000.
The seventh state is Rhode Island. Per Kiplinger, joint filers with an adjusted gross income of $119,750 or above are taxed. For all other filing statuses, only retirees with federal adjusted gross income less than $95,800 pay state taxes on Social Security Income.
The eighth state is Utah. Per Kiplinger, all Social Security benefits are taxed at 4.55%, but some retirees qualify for a Social Security benefits credit. Please see the Social Security Credit Worksheet on Utah’s state website.
The ninth state is Vermont. Per tax.vermont.gov, Vermont allows full exemption on your Social Security Income from state taxes for retirees who meet income requirements. Joint filers are exempt if their adjusted gross income is $65,000 or less. They qualify for a partial exemption if their adjusted gross income is between $65,001 and $74,999. There is no exemption over $75,000. Single and separate filers are exempt if the adjusted gross income is $50,000 or less. Between $50,001 and $59,999, there is a partial exemption and no exemption of over $60,000.
The tenth state is West Virginia. Per AARP, West Virginia is phasing out the taxation of Social Security Income. In 2024, you’ll pay income tax on 65% of Social Security Income. In 2025, you’ll pay income tax on 35% of Social Security Income. In 2026, you won’t pay any tax on Social Security Income.
Recent changes in Missouri mean that adjusted gross income will no longer be taxed after January 2024. Recent changes in Nebraska mean that the Social Security tax exemption in Nebraska’s Legislative Bill 873 will phase out the state income tax on benefits by 2025. Starting January 1, 2025, you will no longer tax Social Security Income.
Again, as always, please discuss your situation with your accountant regarding anything related to taxes.
What are your thoughts on these states? Would you consider living in any of these? Why or why not? Please share your thoughts in the comments on YouTube, TikTok, or Spotify. Also, DM us on YouTube, Instagram, or LinkedIn. You can always Email us at [email protected].
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