Social Security is taxed at the Federal level. I show you how in this video: https://youtu.be/pntSF1F4C68
But did you know Social Security is also taxed in some states as well?
In fact, it’s quite amazing, if you ask me, the level from which Social Security is taxed in a couple of these states. For instance, there are definitely marriage penalties when it comes to how much retirement income a married couple has which is taxable as compared to a single tax payer.
Keep in mind though that in some states, looking at you Nebraska, a single taxpayer with income over $43,000 pay taxes on Social Security. Remember, this is Adjusted Gross Income too! Not Taxable income.
I can not stress the difference between the two. AGI (Adjusted Gross Income) is before any exemptions or deductions you have. In fact, it gets worse because the taxing authorities typically will use MAGI (Modified Adjusted Gross Income) which includes any tax-exempt interest you received as well. Now, by no means, am I saying you should not look to these states as your retirement destiny.
There are other tax consequences to consider; property tax, sales tax, investment tax, personal property tax etc. But at least if you watch this video and read the Kiplinger’s article you won’t be blindsided when it comes to file your state income tax return.