Beware of hidden taxes in retirement
Your taxes in retirement may be a lot more complicated than taxes while you're working.
Here's what to expect when you hit retirement age:
SOCIAL SECURITY TAXES DEPEND ON 'COMBINED INCOME'
Whether and how much of your
Note that you won't lose half or more of your benefit to taxes. Instead, up to 85 percent could be subject to income taxes at your ordinary income tax rates. (There are currently seven tax brackets, ranging from 10 percent to 37 percent.)
STATE TAXES COULD TAKE ANOTHER BITE
In 13 states, you also could owe state income tax.
Seven states don't tax income:
Elsewhere retirement income may be exempt, partly exempt, offset by a credit or fully taxable. Sales, property and use taxes vary hugely as well. (Use taxes are imposed by counties and municipalities to fund public services such as libraries or fire protection.)
Anyone thinking of moving to a new state in retirement should thoroughly research the state's tax laws, or ask a tax pro for help, says
REQUIRED MINIMUM DISTRIBUTIONS MAY TRIGGER HIGHER TAXES
At age 701/2, you must begin withdrawing money from most retirement accounts. Required minimum distributions typically are taxed at your regular income tax rates. If you've been a diligent saver, these mandatory distributions could be big enough to push you into a higher tax bracket.
In some cases, it can make sense to convert some retirement funds to
HOME SALES CAN CAUSE UNEXPECTED TAX BILLS
Selling your home _ to downsize, free up equity or move to a new community _ may generate a tax bill. If you've lived in your primary residence for at least two of the five years prior to selling it, you can exempt up to
You also may owe a "depreciation recapture tax" if you took a home office deduction, rented out rooms or rented out the whole house. The depreciation you took or should have taken over the years is added back to your income in the year you sell and you'll pay a maximum rate of 25 percent on it, says
BEWARE OF STATE ESTATE OR INHERITANCE TAXES
Federal estate taxes aren't an issue for most people now that
(This column was provided to The Associated Press by the personal finance website
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