HomeSocial SecurityAnalyze the Data on Social Security Taxation.

Analyze the Data on Social Security Taxation.

New Mexico’s income tax on Social Security benefits has been the subject of much debate recently.

It is my opinion that as a CPA who receives Social Security benefits, I can provide valuable information and perspective that has been lacking in the commentary I have read thus far.

Federal and New Mexico tax laws are convoluted, to say the least. However, it is important to keep in mind that New Mexico’s tax calculation is based on the federal tax return, but with possible deductions for seniors and lower-income individuals beyond federal deductions.

Knowing that there is a formula in place on the federal tax return to determine how much Social Security is deducted from income up to an upper limit of 85 percent is also helpful.

Analyze the Data on Social Security Taxation.

Some examples were run through my software to see what effect the New Mexico tax system has on Social Security benefit recipients.

There are a few things to keep in mind when looking at the Social Security benefits of a married couple: It is currently $50,328 for someone who waits until they are 70 to claim their benefit. This hypothetical couple doesn’t have any other sources of taxable income to consider.

Also Read: How to Obtain a Letter of Award from Social Security?

They make a total of $100,656 in their combined income. Most people, I believe, would agree that this is a sufficient retirement fund. Is New Mexico taxed on any of this? Zero.

A more realistic case is one in which the person receiving the maximum Social Security benefit does not have any other means of supplemental income.

Analyze the Data on Social Security Taxation.

Think about a scenario where each spouse receives $25,000 from Social Security while having a pension or an Individual Retirement Account (IRA) distribution totaling $16,000. $82,000 is the total amount of money they make.

It’s still a decent retirement income for most people. The federal formula includes $17,050 of Social Security in gross income in this case. New Mexico’s taxable income after deductions is $18,060, and the tax rate is $488 in the state.

The point I’m making is that middle-class retirees in New Mexico who receive Social Security benefits pay very little state income tax on that income.

Also Read: Social Security: Is it possible to get a new credit card?

As a result, New Mexico pays no state income tax on Social Security benefits received by low- and moderate-income elderly residents.

Analyze the Data on Social Security Taxation.

Prior to jumping to conclusions about New Mexico’s taxation of Social Security benefits, let’s take a step back and examine the facts first.”

James Carter
Coffee is my favourite thing to drink. I also love meeting new people and discussing the world. I'm your go-to guy if you want to learn more about anything, especially if you're wanting to get the latest info about your favourite celebs.
RELATED ARTICLES

Leave a reply

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments