Every working individual who is a citizen of the nation must pay taxes without fail. The provisions of taxation change once you reach the age of retirement. There are things you must know before you start filing taxes in retirement.
If you have any queries regarding any areas of Tax Preparation Services contact AATCA to resolve all your tax related doubts.
Income Tax
Even in when you retire, you need to pay state and federal income taxes. Unless you reside in one of the nine states without any income, you are exempt from state income taxes. Federal taxes on the other hand has to be paid which will be between 10% to 37% depending on the income you earn. Additional taxes like the tax on pension, annuity, traditional IRA, 401(k) and more needs to be paid.
Social Security Tax
On the social security income, you receive after you retire, tax has to be paid depending on you and your spouse’s total income. If you file joint tax returns, what your spouse receives must be included and if tax returns are filed separately, tax on social security will also be computed separately. The higher the income is, the taxable part of your income increases. To minimize you taxes or to have more deductions contact professional tax preparer Atlanta today for your assistance.
Pension Income
Tax is charged on pension and investment in other retirement plans such as traditional IRA, 401(k), annuities, etc. In the year in which you withdraw from these investments, tax is charged which means that taxes due reduce the amount of income left.
Pension income can be received as periodic payments or a lump-sum amount. Whichever method you choose, some part of the taxes will be withheld by your employer so at least some of the due amount is already paid.
Some states do not tax pension income which makes people to move their legal residence when they retire. You can check the state tax rules on pension income so that you can make a decision based on that.
Sales Tax
If the state you reside in charges state tax, it needs to be paid even in retirement. For those who live in one of the four states without a sales tax the same won’t be applicable. The average sales tax in the US is 7.12%.
Property Tax
On any house property you own, tax has to be paid. Some states even charge taxes on tangible property like boats and cars. Depending on the value of your home and land, property tax shall be charged. The average amount of property tax in the US is 1.1% of the average home value.
By considering all the tax provisions it is clear that there is a huge amount of taxes that need to be paid once you retire. However, certain retirement plans can help you save and ensure that all of your retirement income is not emptied by taxes.
Delay the collection of social security income as you won’t need them until your 80s or more. Hire a financial advisor who can analyze your income and suggest tips to save money. Earning some kind of passive income by letting out a house on rent, selling unused goods and others will be helpful at retirement.
Contact our Professional Tax Advisers for more information at +1 770-280-1082.