There are several factors to consider when planning for your golden years. Does the state you’re hoping to retire in have quality assisted living communities? What kind of taxes will you have to pay as a retired senior? If you’re looking to retire in Arizona, you’re in luck. Not only does Arizona have cozy, home-like assisted living communities such as Bethesda Gardens Phoenix, but it’s also a moderately tax-friendly state for retirees.
Now, what does moderately tax-friendly mean? Do retired seniors still need to pay federal income taxes? The short answer is yes. But let’s break down the details.
Yes. In the U.S., retired seniors receiving Social Security retirement benefits will pay taxes on 50%-85% of those benefits if their individual income exceeds $25,000 or their joint income exceeds $32,000.
Social Security is a crucial part of retirement planning for most Americans. These benefits serve as your replacement income when you stop working. You can claim your Social Security benefits between the ages of 62 and 70. And in most cases, you can still work while you claim the benefits, but this may lower your benefit amount. The good news is that Social Security retirement benefits aren't taxed in Arizona at the state level. According to the Arizona Department of Revenue, additional income streams Arizona doesn't tax include:
Not all retirement income is treated the same. Certain income streams you receive when you’re retired are taxable. If you have any of the following, be prepared to pay taxes on:
Sunny Arizona is a beautiful place to retire, filled with great places to eat and fun things to do. And when it comes to being tax-friendly, it falls somewhere in the middle. Income tax rates in Arizona start at around 2.59%. The state has a local sales tax rate of 5.6% and a combined state/local sales tax rate of 8.4%. While property taxes are relatively low, sales taxes in Arizona are quite high. According to GoBankingRates’ list of top tax-friendly states for retirees, Arizona ranks 13th out of 25.
Preparing for tax season isn’t thrilling for anyone, but it can be especially difficult when navigating new retirement income streams and taxes. Luckily, you can use several tips and resources to make preparing for tax season as smooth as possible.
Forgetting to file your taxes is easier than you might think. To avoid any potential penalties, mark the dates in your calendar. For 2023, the income tax deadline is Tuesday, April 18. Extensions are available for those who qualify. To request an extension, you’ll need to fill out Form 204.
When you e-file your taxes, you’ll have the option to select direct deposit. This method means your tax refund (if you’re receiving one) will be sent straight to your account. It’s much faster than traditional methods.
When filing your taxes online, there are a few things you need to be aware of to protect yourself and your information.
If filing your taxes electronically sounds too intimidating, don’t worry. There are a handful of volunteer organizations in Arizona that can help you.
Whether you’re looking to retire in Arizona in the future or are already living out your golden years in the Grand Canyon State, now you have all you need to know about paying federal and state income taxes.
