Although many seniors live on a budget in their golden years, there are some financial benefits to the retired life, especially when tax time comes around. Social Security and other retirement wages aren’t considered earned income, which means they’re usually taxed differently than money earned through active work. However, in some states, some unearned income is taxed. Fortunately for residents, Ohio is not one of those states.
Tax in Ohio and Social Security
Ohio residents will not pay taxes on Social Security income, even in instances where the IRS requires you to pay taxes. However, other forms of retirement income will face taxes, including any 401(k) or IRAs you have. These funds are taxed as regular income, with brackets affecting the percentage you’ll pay. If your non-Social Security income is between $5,250 and $10,500, for instance, your tax rate will be 0.990 percent. But Ohio has a relatively low cost of living and that, combined with the fact that it doesn’t tax Social Security earnings, makes it possible for some seniors to live solely off their Social Security.
Credits for Retirees
For retirees concerned about taxes on non-Social Security income, there are Ohio retirement credits that can help. In order to qualify for this credit, your adjusted gross income must be less than $100,000. You’ll be able to earn up to $200, depending on your income, along with an additional $50 for those whose income falls under $100,000. In some instances, the Social Security taxes you pay at the federal level may be tax deductible on Schedule A of your Ohio state tax return.
IRS Social Security Income Tax
Whether you pay federal taxes on your Social Security income depends on your earnings for the year. If your sole income comes from that Social Security check, you’ll be fine. However, if you have a part-time job or money from a 401(k) coming in, you may owe taxes on your Social Security earnings. One easy way to tell is to take half of the money you received from Social Security and add that to every other form of income you received during the year. Include any tax-exempt interest, as well. If this amount exceeds the IRS’s limits, you’ll owe taxes on your earnings. For those filing singly, if that amount you calculated is between $25,000 and $34,000, you’ll owe taxes on as much as 50 percent of the Social Security funds you received. If that calculation exceeds $34,000, up to 85 percent of your Social Security benefits will be taxed.
