COVID-19 has created chaos worldwide, as it has changed the socio-economic landscape around the globe. Due to the lockdown situation, most of the population of the world has been confined to their homes, as they can cause the spreading of the virus. So, in this situation, unemployment is hanging over the government’s heads like a dangling sword.
Now, unemployed people are looking towards their government, and up to a considerable extent, the government of the USA is meeting the expectations of people. Unemployment payments and Social Security benefits from the state and federal governments cause colossal convenience for people to live their lives.
Now, here comes a question in mind whether Social Security benefits are taxable, or are they exempt?
In answer to this question, we will tell you about 37 states that do not tax Social Security benefits. Let’s look over these states and see how they proceed.
What are 37 states that do not tax Social Security benefits?
Social Security benefits are serving millions of people in the USA who have no other source of income. Although these are meager benefits, their addiction to the other payments indeed causes a handsome amount. To have maximum benefits out of these Social Security benefits, people want these benefits to be free of taxes so that they could make maximum use of this money.
So, keeping in view the needs of people, 37 states have declared Social Security benefits as non-taxable income, and soon, one more state will join this number, and the total amount will be 38.
Let’s look over these states who do not demand any kind of tax on the payments gained from Social Security benefits.
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Mississippi
- New Hampshire
- New Jersey
- New York
- Nevada
- North Carolina
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- South Dakota
- Tennessee
- Texas
- Virginia
- Washington
- Wisconsin
- Wyoming
Apart from these 37 states, West Virginia is also in the pipeline to remove taxes on Social Security benefits. In 2020, these taxes will be cut by 35% of the total charges. In 2021, about 65% of the total tax will be deducted from the total tax. While, in 2022, the total tax on Social Security benefits will be uplifted in West Virginia.
Something that comes to mind is whether these people will keep on receiving non-taxable Social Security benefits for the whole of their lives?
How long will these people enjoy non-taxable Social Security benefits?
Living in any of these mentioned states, you don’t need to worry about the local government money that you have as a Social Security check. But it does not mean that these people will not be taxed by the federal government, as there are strong chances of federal taxes on such people.
For the sake of peoples’ welfare, these taxes only apply when your income meets a particular criterion; otherwise, below that value, your income will be a tax-free income.
Following are the possibilities for taxes:
- Single filers will have to face up to half of their benefits taxed if their income is ranging between $25,000 to $34,000. Meanwhile, for these filers, if their income is more than $34,000, they will be taxed 85% on their benefits.
- On the other hand, if we talk about a married couple, they will have to pay the tax up to 50% in case they are earning from $32,000 to $44,000. Meanwhile, if their earnings exceed $44,000, they have to pay 85% of the tax on benefits.
However, these are the ratios of taxes that people pay on their earnings. But these taxable earnings are not calculated, as they are computed along with half of your Social Security benefits and all other sources of income. Meanwhile, earning from non-taxable resources is also added in this calculation. So, this is how taxable income is concluded by summing up all other sources of income.
Moreover, if you still have a problem with calculating your taxable income, you can do using a calculator readily available on the internet.
Should someone move from one state to another to avoid taxes on its Social Security benefits?
As has already been said, 37 states do not charge any tax on Social Security benefits, and West Virginia is ready to get mainstreamed in this category in 2022. But the remaining states charge taxes on the Social Security benefits, and people appear to have questions in their minds whether they should move from one state to another or not to avoid paying taxes on their Social Security benefits.
Many benefits are counted in calculating the taxable income, and moving from one state to another might save you from local government tax, but you still have to pay your federal taxes. Therefore, you should carefully take this decision about whether you should do it or not.
Of course, you may get rid of paying your taxes to the state in the name of Social Security benefit taxes.
Final Words:
So, among the crisis of COVID-19, people are more concerned about the tax status of their Social Security benefits. But, fortunately, there is no adverse impact of COVID-19 over this issue. Moreover, the more significant benefit will be implanted to the residents of those 37 states which do not charge any tax on the Social Security benefits.
Moreover, West Virginia will also be among these states by 2022. So, if you are overly concerned about the tax status of your Social Security benefits, and you do not want to pay tax on these benefits, you might get your way to any of these 37 mentioned states, as you will not need to pay these taxes charged in your state.
