It can be tough to make ends meet in retirement, especially if you don’t have a significant amount in savings. Fortunately, Social Security benefits can help bridge the gap between what you have saved and what you need to pay the bills.
The bad news, though, is that taxes can take a chunk out of your benefits in retirement. Although you’ve been paying Social Security taxes throughout your career, your monthly checks may still be subject to both state and federal income taxes.
State taxes will depend on where you live, and there’s a good chance you may already be off the hook for them. And there’s one simple way to avoid paying federal taxes on your benefits, too.
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How taxes will affect your benefits
Whether you’ll owe state income taxes on your benefits depends on where you live. Currently, only 13 states tax benefits — including Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia. If you don’t live in one of these states, you’re off the hook for state taxes on Social Security.