As of the commence of September, nearly 54 million Americans received Social safety superannuation benefits. For many, Social safety is their main superannuation turnover source, making it one of the country’s most significant and effective social programs.

There are a lot of valid critiques of Social safety, but it should be straightforward to appreciate the monetary lifeline it provides for millions.

Unfortunately, like other forms of turnover, Social safety benefits are subject to levy rules. However, there’s excellent and impoverished information for retirees. Let’s receive a look at both.

Most retirees can avoid Social safety state taxes

The excellent information about Social safety taxes is that most states do not levy Social safety benefits. Here are the 41 states (and Washington, D.C.) that currently do not:

1. Alabama
2. Alaska
3. Arizona
4. Arkansas
5. California
6. Delaware
7. Florida
8. Georgia
9. Hawaii
10. Idaho
11. Illinois
12. Indiana
13. Iowa
14. Kansas
15. Kentucky
16. Louisiana
17. Maine
18. Maryland
19. Massachusetts
20. Michigan
21. Mississippi
22. Missouri
23. Nebraska
24. Nevada
25. recent Hampshire
26. recent Jersey
27. recent York
28. North Carolina
29. North Dakota
30. Ohio
31. Oklahoma
32. Oregon
33. Pennsylvania
34. South Carolina
35. South Dakota
36. Tennessee
37. Texas
38. Virginia
39. Washington
40. Wisconsin
41. Wyoming

States’ Social safety levy rules are fluid, so if you’re living in one of the nine states that currently levy benefits, be sure to keep up with your state’s rules each year because they can transformation. In 2024 alone, three states (Missouri, Nebraska, and Kansas) did away with their Social safety levy.

Unfortunately, federal levy rules still apply

Now, it’s period for me to be the bearer of impoverished information: Regardless of your state’s specific levy rules, federal levy rules still apply to everyone. The IRS uses your “combined turnover” to compute your levy statement. It includes the following:

• Adjusted gross turnover (AGI): Your total turnover from all non-Social safety sources.
• Nontaxable earnings: earnings turnover not subject to federal levy, such as U.S. Treasury and municipal bonds.
• Half of your Social safety benefits: 50% of your total Social safety benefits for the current year.

Once your combined turnover is calculated, Social safety uses the following rules to decide how much of your benefits are eligible to be taxed.

Social safety benefits:Social safety COLA shrinks for 2025 to 2.5%, the smallest boost since 2021

Seeing federal Social safety taxes in action

Federal Social safety levy rules are not as straightforward as I’m sure most people would prefer (shock, shock), so let’s walk through how they work.

At first glance, some people view the above table and ponder their Social safety benefits will be taxed up to 85%. Luckily, that’s not how it works. Those percentages are not how much Social safety will be taxed — just how much is eligible to be taxed.

Let’s imagine you’re married and filing jointly, and the following are factual:

• You and your spouse’s AGI is $36,000
• You earned $1,000 in Treasury steady earnings earnings
• Your Social safety benefits for the year add up to $24,000

In this circumstance, your combined turnover would be $49,000 ($36,000 + $1,000 + $12,000). This means up to 85% of your benefits for the year ($20,400) are eligible to be taxed.

Social safety would receive the $20,400, add it to any other turnover you have, and then levy it at your regular turnover levy rate. If you’re in the 22% levy bracket, you’d owe $4,488 on the $24,000 you received in benefits that year. This outcome is much better than owing $20,400.

The more you comprehend how Social safety taxes work, the better you can schedule your superannuation finances.

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The Motley Fool is a USA TODAY content associate offering monetary information, analysis and commentary designed to assist people receive control of their monetary lives. Its content is produced independently of USA TODAY.

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