Where you live in the U.S. in retirement as a senior citizen determines to a large extent how much you keep as your social security benefit.
While social security income is depended on by senior citizens to cover their cost of living during retirement, a careful selection of the state to live during retirement is important as some states take a cut from social security benefits.
The 13 states that tax social security benefits include:
- Colorado
- Connecticut
- Kansas
- Minnesota
- Missouri
- Montana
- Nebraska
- New Mexico
- North Dakota
- Rhode Island
- Utah
- Vermont
- West Virginia
Most of these states offer exemptions for lower (and in some cases, moderate) earners that take taxes on benefits out of the equation. And so you shouldn’t necessarily rule out these states as your retirement home because they’re on this list. Some, in fact, may offer a lower cost of living than the other states you’re considering.
Whether that’ll happen or not hinges on your provisional income. Provisional income is essentially your non-Social Security income (including tax-free interest income you collect, such as that paid by municipal bonds) plus 50% of your annual Social Security benefit.
Read More: Kroger May Not Survive 2022. Here’s Why?
Federal taxes on Social Security begin to apply when singles have a provisional income of $25,000 or more, and when married couples filing joint tax returns have a provisional income of $34,000 or more.
Clearly, these thresholds aren’t very high, which means a lot of seniors risk having a portion of their benefits taxed. And so it doesn’t necessarily pay to go out of your way to avoid a state that taxes benefits when you might fall victim to that fate anyway.