After working for decades, many people can begin drawing Social Security benefits. While it would make sense for these benefits not to be taxed, the IRS still classifies them as taxable income. Fortunately, the state of Massachusetts is among 37 states who believe recipients are entitled to keep as much of this money as possible.
What this means for recipients is that they will not owe taxes to the state of Massachusetts on benefits received from the Social Security Administration. Even though the IRS considers these benefits taxable, some people will not owe federal income taxes either. Individuals who make less than $25,000 a year or married couples who make no more than $32,000 a year pay zero tax.
Some individuals will owe taxes on half of their Social Security income if they make between $25,000 and $34,000 a year. Similarly, married couples who earn between $32,000 and $44,000 per year will also owe taxes on 50% of their Social Security benefits. Above these amounts, individuals and married couples pay taxes on 85% of their benefits. This could have a significant impact on the standard of living some retirees enjoy.
Looking into tax strategies that allow them to keep more of their Social Security income from the IRS could help recipients keep more of their income. Of course, the best time to look into these options is well in advance of receiving Social Security benefits, but it may still not be too late to do something. A thorough review of a individual’s financial circumstances with an experienced tax attorney could prove invaluable.