Do you plan to retire in California or move elsewhere in retirement? Strategizing when to take Social Security Income (SSI) benefits and how they will be taxed once you start claiming them is a component of a successful retirement plan. SSI benefits are a valuable part of retirement income. These benefits provide dependable, inflation-protected income for life for qualifying retirees and their surviving spouses. Because they play such a significant role in retirement, optimizing your SSI benefits and safeguarding them from tax liability is critical. Let’s explore the potential impact on your SSI benefits if you plan to retire in California or move to another state.
Does California Tax Retirement Income?
Fortunately, if you live in California, you will not pay state taxes on SSI benefits. Like other income sources, benefits are subject to federal taxes but only up to 85% depending on your income. However, what happens to Social Security taxes if you retire outside of California? Does moving to another state or country affect how your SSI benefits are taxed?
What Happens to Social Security Taxes When You Move Out of California?
If you plan to move to another state within the United States, researching how the new state’s tax laws affect your SSI benefits is essential. Tax laws, including those related to SSI benefits, may change, so staying informed and planning ahead is important. Consult a tax professional familiar with the laws in your new state of residence to understand how to calculate taxes, assess their implications, and identify any deductions or credits that may help offset a portion of the liability.
Do Some States Tax Social Security Income?
The majority of states do not tax Social Security income benefits but a few still do (as of 2024): Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
Can You Avoid Social Security Taxes by Moving to a No-Tax State?
Yes, you can avoid state income taxes on Social Security benefits by moving to a state that does not tax SSI. You should also take a comprehensive approach to tax planning in your chosen state, evaluating how property taxes, income taxes, and state taxes fit into your overall financial plan.
Consult an advisor to understand the various strategies available to avoid or reduce your tax liability, such as reducing your taxable income, charitable giving, and more.
What Happens to Social Security Benefits If I Retire Out of the Country?
If you plan to retire abroad, it’s important to understand international tax laws and residency requirements. In most cases, if you’re still a U.S. resident, SSI benefits are taxed the same in the new country as they are here, with some exceptions. Due to tax treaties and other factors, some countries don’t tax SSI benefits. Consult a tax professional to understand international tax requirements and how to avoid or minimize double taxation.
Ready to Plan Your Retirement? Get Expert Advice on Taxes and Social Security
Whether you decide to retire in California, another U.S. state, or abroad, Blankinship & Foster is here to help. We can guide you through various scenarios to find locations with favorable tax treatments, minimize your liability, and understand any exemptions or restrictions that may apply to your SSI benefits. Contact our team if you’d like to learn more about how we can help inform your decision before you move.