Does anyone know if social security retirement benefits and pension benefits from a retirement plan are taxable?

Thanks

It depends on the state you live in. For instance, my husband and I live in Florida, so no state income tax at all. Tennessee taxes only dividends and interest, while Alabama taxes retirement income, but not Social Security income. Each state is different. I recommend checking out the state's DOR where you plan on living (domicile).

Update - sorry, should have made it clear I was talking about state income tax only, not federal. 

You are subject to Federal Income tax on your Social Security benefits when your adjust gross income plus one-half of your Social Security benefits for the year, plus any non-taxable interest income exceeds $25,000 for an indivdual or $32,ooo for a married couple.  More details can be found in IRS publication 915, you can check that out online at www.irs.gov

Thanks Elvis....glad to see your are alive! lol.

Do you also know whether pensions are taxable?

Thanks

Okay, I couldn't stand it in any longer.  I couldn't let a financial post go without putting in my two cents.

The question about whether income is taxable has to be approached from a couple of different angles.  There is federal taxation and state taxation and federal and state threshholds on taxation.

Federal first.  As Elviswi said, social security may be taxed depending upon your other income.  If you have only social security income, you probably won't have tax on your social security and will not have to file a return.  If you have other income, like a pension, your SS benefits may or may not be taxable.

If your other income (pension, wages, interest, etc.) plus 1/2 of your annual social security is less than $32,000 (married filing jointly), your SS benefits are not taxable.  If that figure is between $32,000 and $44,000 (married filing jointly), 1/2 of your SS benefits will be taxable.  If the figure is over $44,000, up to 85% of your SS benefits may be taxable.  It's all much more complicated than it needs to be.

Generally pensions are taxable by the IRS.  The key is whether the amounts coming to you from a retirement account have been previously taxed.  Usually the money coming from pensions has not been taxed previously.

The second aspect of all this whether or not a tax will actually be due.  You can go through all the calculations to determine that you have taxable income, but you still may not have to pay tax after standard or itemized deductions have been applied.  This aspect is often overlooked in state taxation when choosing a domicile for full-timing.

State taxation.  Most states now start with the taxable income you calculated for the feds.  However, what they do from there is so varied that it would take pages and pages to discuss the options.  Some states allow you to deduct a certain amount of pension income from taxable income so that some or none of it is taxed.  Some don't tax it at all.  Some will exempt retirement income earned in the state but tax retirement income earned in other states.

If your primary source of income is from pensions, it is very important to research the states you may consider as your domicile.

However, too often, full-timers automatically choose a "no-income" tax state or a "no-tax-on-retirement-income" state without doing a full analysis.  My point is that some full-timers choose states based on this and may be forfeiting the benefits of a state that is better for them overall.

Each state has taxable income threshholds.  But if your income or retirement income is such that you never meet the threshholds, you may not have to pay income tax in an "income tax state."  If that is the case, what's the difference between being in a state with or without income tax?  If no tax is due in either case, that should not be a reason for choosing a state of domicile.

So, my two cents turned into a buck and a half.  Hope some of it was helpful. 

That brings up a good point. As a workcamper do you recieve W-2s at the end of the season? Also, does it contain the value of the camp site or do they give you a 1099 for that value?

Standard lawyer answer on the W-2/1099 question - it depends.

If you are hired as an "employee" you should receive a W-2 for wages earned.  The value of your "free campsite" is NOT included IF:

1. Your site is on the property of your employer,
2. You are staying on-site for the convenience of your employer, and
3. Staying on-site is a condition of employment

However, many, many "employers" hire workampers as "independent contractors".  Now the IRS distinction between "employee" and "independent contractor" is pretty clear.  So most workamping "independent contractors" are really "employees" because they have little control over how they do their job - the employer gives explicit instructions and have pretty much full control of how the job is to be done.

However, the employers don't want to deal with payroll, payroll taxes, benefits, etc., so they take the chance that they won't get busted for treating workampers as "independent contractors" instead of "employees" as they should.

Therefore, if the employer treats you as an "independent contractor", they should provide you a 1099 for compenstation paid to you (they are not required to provide a 1099 for amounts under $600).  That 1099 SHOULD include the value of your "free" campsite.  The question of whether the value of your campsite should be left out of the 1099 based on the three conditions above (as appled to "employees") is open for debate.

So what is correct and what is supposed to happen can be quite different from actual practice.  A lot of employers will NOT provide a 1099 if you are just providing services in exchange for a campsite.  But, legally, there is no difference between providing services for money or providing services for a campsite.  Either way, you are receiving something of value that technically should be reported as income.  The only clear exception to that is the provided lodging for "employees" as stated at in the enumerated items above.

Now, just because an employer does not provide a 1099 (it was under $600 or they just didn't do it), your income is still reportable, so the burden becomes yours to document it.  Yes, I know - most people don't report anything unless a 1099 or W-2 has been issued to the government.    Pleading ignorance is a highly used strategy and it has been used successfully.  If you adopt that plan, be careful and don't complain if you get caught. 

Bottom line with workamping: 1) Know how the employer will be classifying you and what tax documents they will be providing BEFORE you accept a position, and 2) Keep the contact information of a good tax accountant or attorney handy. 

In the member resort system we belong to, members often did member worker exchange for sites.  Normally it envolved doing limited work (10 to 12 hrs weekly) in this exchange. One normally selects an area they wish to assist in. At that time there was no money changing hand. This allowed full timers to stay in a resort beyond normal limits.  The assistance was invaluable in helping operate/ maintain the resorts.

Of course when this type of program goes on there will be some who believe other workcampers  were getting better considerations than they are getting.  These people were reportred to have contacted the IRS to get even.  Reportedly, these type of arrangements are considered "barter" type of income and are taxable, as described in IRS documents   Needless to say this changed the way the program operated.  So now the Resort pays the workcampers a wage that equales the cost of the camp site. With the escalation in electric rates, the workcampers use sites with separate electric meters and must pay for the electric they use.   This arrangement meant the cost of the site was exspense equale to the income and did not increase the adjusted income of the individuals.

GET OUT THERE AND ENJOY ----