Once you reach retirement age your life will change. Youll no longer have to get up every morning
to go to work. Youll be on a limited
income and a tighter budget. Youll also
probably have to spend more money for medicine and health care.
to all of this, your tax situation will change.
If youve just retired then youll have a lot of interesting things to
will still have to report your regular income for the part of the year you
werent retired. This means your W2
income and consequently withholdings will be less for the year that you retire
in. This means that you should not count
on your withholdings to pay your complete tax liability for that year.
will also have to figure out whether you will have to pay income taxes on the
distributions from your IRA now that youve reached the qualified distribution
age. If you paid taxes on your IRA when
you deposited the money into the account, you will not be assessed taxes on the
distribution, something to think about if youre planning for retirement.
have to take a look at where your income after retirement is coming from. If you get another job after you retire from
your regular one, youll have to report that income as well. Deciding to get a new job after retirement
can be a tricky proposition, because it might affect your social security or
government pension. However, even if
your new job pays you as an independent contractor, you will have to pay taxes
on the income unless you make less than the reporting standard.
reporting standard is how much income the IRS has determined an individual
needs to earn before they must file their income taxes. The IRS changes its standards each year for
inflation, so you should always check every year to make sure whether you are
required to file.
all of your benefits are from social security, a government pension (like
Teachers Retirement), or Railroad Retirement benefits your benefits are
generally not taxable. If they are
taxable, no more than 50% of your benefits will be taxable unless the total
amount of your benefits and any additional income is more than $34,000 (in
2009) or $40,000 (MFJ), you lived apart from your spouse during the tax year,
or you are a nonresident alien. In those
cases 85% of your total benefits may be taxable.
addition, the IRS allows the elderly or disabled to take a special credit if
they are over 65, your income is within the prescribed limits (as determined by
the IRS), or have proof that you are completely and permanently disabled. If you qualify for this credit, your federal
income tax will be lowered by the amount you qualify for.