Is Your Retirement Income Taxable?


Quick Answer

Whether or not retirement income is eligible for taxation depends on how the income is apportioned and on how much income is earned, with both income and benefits entered into a single equation. Larger sums and sums that exceed previous yearly income are typically taxed by the federal government.

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Full Answer

If benefits and income total less than $25,000, retirement funds generally avoid taxation. This is a low bracket for those operating in many careers, and in most cases retirement funds are taxed for exceeding it, meaning that only relatively low-yield payments provide any security from taxation rates.

Married filing allows couples more latitude in how much they can earn from retirement benefits. The ceilings for plain income and for jointly acquired benefit revenue are raised substantially, sometimes by as much as a full third, meaning that married couples can draw larger benefits packages while still staying under the taxable minimum.

When married benefits and income total less than $40,000, taxation is avoided. When those combined totals, often counting only half of benefits toward the total, are above that number taxation slips into bracketed steps. This means that the more money a couple makes, the higher rates of taxation climb.

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