A Quick Reference Guide to Taxes in Retirement

As you enter retirement, your tax burden won’t disappear, but it is likely to change. Here are six areas that may impact your taxes in retirement.

• Part-time work: Working during retirement could raise your income into a higher tax bracket, which could result in having to pay federal income tax on your Social Security benefits. For this reason, you might consider delaying Social Security benefits.
• IRA distributions: Keep in mind that there are different tax advantages and disadvantages to Roth IRAs versus traditional IRAs.
• Distributions from employer-sponsored retirement plans: If you wait to take a distribution after you reach age 59 1/2, you will avoid paying the 10 percent early withdrawal penalty and generally will pay income taxes on the distribution based on your ordinary income tax rate.
• State tax laws: Where you live determines how much state tax you’ll pay. If you’re planning to move to a new state, learn how tax laws may affect your income.
• The Tax Credit for the Elderly or the Disabled: Depending on your age, filing status, and income, you may be eligible for the credit.
• Reverse mortgages: Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable, but make sure you understand the fees and costs associated with them.

For more help with filing your taxes, visit the Regions Tax Center and watch the video on income rates in retirement.