Current:Home > NewsThese 13 states don't tax retirement income-VaTradeCoin
These 13 states don't tax retirement income
lotradecoin transaction processing speed View Date:2024-12-25 22:44:12
Taxes help pay for a lot of the daily services and infrastructure we get to enjoy. From public schools to road maintenance to healthcare, taxes ensure our communities have access to essential services. That said, it's fair to say that most people don't like paying taxes although they're a necessity today.
The bad news is that taxes aren't going anywhere, so the sooner you come to terms with them, the easier it is to accept them as part of American life. The good news, though, is that retirees in some states may find that their retirement income is exempt from taxes.
Some states don't tax any income at all
There are currently nine states in the U.S. that don't tax any income, regardless of the source or if you're retired:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Whether it's from a job, 401(k), IRA, pension or Social Security, retirees in these nine states won't have to worry about paying any state income tax. However, federal tax rules will still apply.
An important note for New Hampshire residents: Interest and dividend payments above $2,400 annually are taxed, but this rule won't apply beginning Jan. 1, 2025.
States where retirement income is exempt from taxes
The following four states don't tax any retirement income:
- Illinois
- Iowa
- Mississippi
- Pennsylvania
Retirement income is considered income received from a 401(k), IRA or pension and the criteria for this exemption vary by state. Generally, you just need to be a certain age. For example, you must be at least 55 years old in Iowa to qualify for the exemption.
Like the states without income tax, it's important to remember that federal tax rules still apply.
States where you could have to pay Social Security taxes
Social Security is a huge part of many retirees' finances, so we can't forget about that. Most retirees won't have to worry about their Social Security benefits being taxed, but there are nine states still holding on:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
If you live in one of the above states, check your state's specific rules regarding Social Security taxes, as they vary and can change at any time.
Everyone could possibly face federal Social Security taxes
I'm sure you've noticed the trend, but it's worth repeating: Federal tax rules apply regardless of state rules. To determine how much taxes you may be susceptible to, the IRS uses your "combined income," which includes half of your annual Social Security benefits, your AGI and all nontaxable interest you earn (such as Treasury bond interest).
Here's how much of your Social Security benefit could be subjected to taxes based on your combined income:
The above percentages show the amount of your Social Security benefits that are eligible to be taxed, not the exact percentage that is taxed. The eligible taxable benefits are added to your regular income and taxed at your income tax rate.
It's hard to avoid Uncle Sam
The common theme here is that regardless of your state's specific tax rules, the federal government's rules apply to everyone. Keep this in mind as you plan your retirement so you're not caught off guard by a tax bill.
Either way, catching a tax break for your state can be a great financial relief that leaves more money in your pockets to use toward whatever will make your retirement more fulfilling. Please don't take it for granted.
The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
The $22,924 Social Security bonus most retirees completely overlook
Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
View the "Social Security secrets" ›
veryGood! (96)
Related
- ParkMobile $32.8 million settlement: How to join class
- North Dakota police officer fired for injuring suspect gets probation after changing plea
- 'Breakfast Club' host DJ Envy is being sued for alleged investment fraud
- How SNL Honored Matthew Perry Hours After His Death
- What was 2024's best movie? From 'The Substance' to 'Conclave,' our top 10
- North Dakota police officer fired for injuring suspect gets probation after changing plea
- Google to present its star witness, the company's CEO, in landmark monopoly trial
- AP Top 25: Oklahoma slips to No. 10; Kansas, K-State enter poll; No. 1 UGA and top 5 hold steady
- Southern California forecast of cool temps, calm winds to help firefighters battle Malibu blaze
- Live updates | Palestinian officials say death toll rises from expanded Israel military operation
Ranking
- East Coast storm makes a mess at ski resorts as strong winds cause power outages
- 'Wait Wait' for October 28, 2023: With Not My Job guest Bernie Taupin
- Diamondbacks square World Series vs. Rangers behind Merrill Kelly's gem
- Thousands of Ukrainians run to commemorate those killed in the war
- Off the Grid: Sally breaks down USA TODAY's daily crossword puzzle, Follow Your Dreams
- NASCAR Martinsville playoff race 2023: Start time, TV, streaming, lineup for Xfinity 500
- Why is there a fuel shortage in Gaza, and what does it mean for Palestinians?
- Who Were the Worst of the Worst Climate Polluters in 2022?
Recommendation
-
Secretary of State Blinken is returning to the Mideast in his latest diplomatic foray
-
Watch as a curious bear rings a doorbell at a California home late at night
-
NC State coach Dave Doeren rips Steve Smith after Wolfpack win: 'He can kiss my ...'
-
Diamondbacks square World Series vs. Rangers behind Merrill Kelly's gem
-
Fewer U.S. grandparents are taking care of grandchildren, according to new data
-
Sephora drops four Advent calendars with beauty must-haves ahead of the holiday season
-
Colombian police continue search for father of Liverpool striker Díaz
-
Erdogan opts for a low-key celebration of Turkey’s 100th anniversary as a secular republic
Tags
-
lotradecoin leverage trading explained
lotradecoin trading tutorial for beginners
lotradecoin pricing
lotradecoin registration
lotradecoin pricing
lotradecoin crypto trading academy
lotradecoin developer API documentation
lotradecoin blockchain network compatibility
lotradecoin deposit and withdrawal fees