7. Social Security benefits
It comes as no surprise that Social Security benefits are on this list since over 64 million people receive this type of benefits each month. More than 80 percent of recipients are seniors collecting their retirement income accumulated during 40 (or even 50) years in the workplace.
And, yes, if you’re one of them, you’re Social Security benefits can be tax-free if the combined income is below a certain threshold. The taxman calculates your combined income as your AGI plus half the amount of your annual Social Security benefits.
You might find useful: Gather These 7 Documents Before You Apply for Social Security! & Social Security-Related Problems You Can Actually Solve Online
The methods regarding how Social Security benefits get taxed are quite complicated, but you will find a clear explanation of how it works if you check the IRS website. And even if you fall below the threshold, some U.S. states tax your Social Security benefits, so you might want to relocate as you approach retirement.
On a brighter note, Here Are 12 States That Won’t Tax Your Retirement Income!
