
Social Security benefits are an important source of retirement income, and no one wants to lose this money to taxes.
Unfortunately, some retirees do find themselves owing some of their retirement money to the IRS and to their state or local government.
On the federal level, you'll be taxed on up to 50% of benefits once provisional income exceeds $25,000 for single tax filers and $32,000 for married joint filers — and on up to 85% of benefits if provisional income exceeds $34,000 or $44,000, depending on filing status. Provisional income is half your benefits plus your adjusted gross income (AGI) plus nontaxable interest.
On the state level, though, the rules are different. A total of 41 states don't tax benefits, but nine do. If you live in one of them, you may need to make some plans to avoid owing money to the government.