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Remember, too, that living in a state that doesn't tax any retirement income won't mean no taxes. There's still the federal government, which does tax some Social Security benefits .
New Mexico taxes retirement income using state income tax rates, which range from 1.7% to 5.9% in 2024. Residents ages 65 and older can claim an $8,000 exemption to offset their tax burdens.
Nevertheless, with most state income tax rates ranging anywhere from 4% to 13%, avoiding these income taxes could save you hundreds if not thousands of dollars per year.
Image source: Getty Images. These 9 states tax Social Security benefits. Here are the nine states that do tax Social Security benefits:. Colorado. Connecticut. Minnesota. Montana. New Mexico
Note: New Hampshire levies taxes on income from interest and dividends, but the state government has repealed that tax, which will go into effect Dec. 31, 2024. These four states make exceptions ...
Percentage of Taxable Benefits Added to Income. Filing Single. Married, Filing Jointly. 0%. Less than $25,000. Less than $32,000. Up to 50%. $25,000 to $34,000
In addition to the nine states that simply don't impose any income tax on anyone, four more states don't tax retirement income from 401(k) accounts, IRAs, and pensions, even though they do still ...
Illinois charges a flat state income tax of 4.95 percent, but all retirement income is exempt from paying the tax. This includes pension payments as well as distributions from retirement plans ...