Brighter Outlook for Social Security Beneficiaries in Massachusetts
According to statistics, Social Security benefits are not taxed in 38 of the 50 states, providing a much-needed reprieve for people who are considering retirement.
I think it’s a Wonderful thing that seniors with lower and moderate incomes are exempt from paying any taxes. Nonetheless, if your income above a particular threshold, you can get a deduction on the federal half; this deduction, however, is not excessive. It all relies on how much money you made in the working world in the past.
Would you prefer to forgo paying any taxes on your Social Security benefits? If so, take into account your location since we have some Excellent news for you if you reside in the immediate, three-state area.
Two of the 38 states—Massachusetts and New York—will not impose any additional taxes, which is good news for beneficiaries. Included in the mix is neighboring New Hampshire, which has no state income tax. Yet, two states in our area WILL tax your Social Security benefits.
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Retirement Tax Planning
Although Connecticut and Vermont are NOT covered by this benefit, we expect that they will be on the list of the 2 additional states that eventually join this venture. Some beneficiaries receive a break from the Green Mountain state, but you should research this before moving up north.
Also, you can reduce your tax liability by using the following strategies: Selecting a jurisdiction with favorable tax laws is not the only way to reduce your tax liability in retirement. Consider making contributions to tax-advantaged accounts during your working years if you want to benefit from the tax advantages without paying any taxes up front.
A Roth IRA OR Roth 401(k) is an excellent choice to invest in because your retirement withdrawals won’t be taxed, even though you won’t pay less in taxes in the year you contribute. The alternative is to make significant payments to assist protect your future benefits from taxes, in which case this income won’t be counted against you for Social Security purposes.
If you have a high-deductible health plan, you might also want to think about opening a health savings account (HSA), as the money in an HSA rolls over from year to year if you don’t use it, and withdrawals are never taxed if they go toward an eligible medical bill.
This is a reminder that withdrawals from non-Roth retirement accounts are subject to regular income taxes.
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Source: WSBS
