Outside the sun is bright, the skies are blue and it couldn’t be a more beautiful winter day.
It also happens to be -30. Factoring in the wind, it “feels like” -50.
Schools, some government offices and many private businesses are closed. The local power company has just announced an urgent request for homeowners to dial back their thermometers to 60 to reduce demand on the power grid.
To me it sounds like a perfect day to work from home, break out the fingerless gloves, and get a jump on my 2018 tax return.
Of course, life doesn’t have to be this way. Some states never see temps fall below freezing and there’s even a few where state income taxes don’t exist.
However, the move to a more weather and tax friendly state comes at a price.
Before you sell the ice shanty and move to a state where the taxes and temps are more favorable, consider this:
For the past 40 years or more you have paid into the Social Security system with the promise that someday when you retire, you will receive a guaranteed monthly income for the rest of your life. Along the way, your employer has kicked in a matching contribution equal to 100% of your contribution.
At the end of your working life there should be a giant pile of cash with your name on it. And there is (figuratively speaking anyway). But it comes with a giant string attached.
In this case, the catch is that up to 85% of your monthly benefit is considered taxable income once it’s paid out to you. What’s more, depending on the state you live in, you may owe state income tax on those benefits as well. (Bad news fellow Minnesotans. We live in one of those states).
The following post will explain how much of your benefit is taxable and what, if anything, you can do about it.