:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/elcomercio/CZKQAJO33VFK5JJEHOGDHYJV2I.jpg "How do you know if you must pay taxes on your Social Security pension? | MIX")
Income Taxes for Retired US Citizens: What You Should Know
If you retired and have income other than your U.S. Social Security pension, you may have to pay taxes on some of these payments. A total of 66 million Social Security pensioners receive payment from the Social Security Administration (SSA), which indicates that 40% of people who receive their pension must pay federal taxes on their benefits.
The Social Security Administration (SSA) indicates that the retirement benefit is a monthly check that replaces part of your income when you reduce your hours or stop working completely. However, it may not replace all of your income, so it’s best to identify other ways to pay your monthly expenses as you age. Most financial advisors suggest that to live comfortably in retirement, you will need about 70% of your pre-retirement income, this includes your Social Security benefits, investments, and personal savings.
About 40% of people who receive Social Security must pay federal taxes on their benefits. In what cases does this happen? When a person has substantial other income in addition to their benefits from the Social Security Administration. Substantial income includes wages, self-employment earnings, interest, dividends, and other taxable income that must be reported on your tax return, the SSA indicates on its website.
Social Security retirement payments are subject to taxation when they are above certain income limits, according to Internal Revenue Service (IRS) regulations, but no retiree will have to pay taxes on the total of its benefits. For individual filers, if the combined income is between $25,000 and $34,000, taxes may apply to 50% of the benefits. For combined incomes over $34,000, up to 85% of the benefits may be taxed. Married taxpayers filing jointly have different limits, and if they earn more than $44,000, up to 85% of their benefits may be taxed.
If you must pay taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits. You can get more information by contacting the IRS.