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Social Security is a massive government program with hundreds of billions of dollars running through it. In fact, $863 billion was paid out just in 2014. Whether you’re already receiving Social Security payments, or it’s decades away for you (and contrary to rumors, your Social Security payments will probably still be there for you then), let’s walk through the tax aspects of Social Security under current rules that everyone should know.

Whenever you elect to begin receiving Social Security payments, one of the forms you will fill out is called a W-4V, which directs the federal government to withhold zero or some taxes out of each payment as they are considered income to you. That’s right, even though the fact that you are getting a check at all is the result of decades of taxes on your income, when it comes back to you it’s taxed as income.

With a 401(k), IRA, Roth IRA, personal residence in most cases, and just about any other type of tax structure, you at least get a deduction or freedom from the tax in one direction or the other — when it comes to you or when you deposit the funds. Not so with Social Security, thanks to laws passed initially in 1984, and again in 1993 to increase the taxable amount of the benefits — both specifying that only households of the “higher income” category would have to deal with this tax. However that threshold might be a gray area, as the official Social Security website says “Beneficiaries of modest incomes might still be subject to the 50% rate, or to no taxation at all, depending on their overall taxable income.”

Under current rules, if you file a joint return and your household income is more than $44,000, then up to 85% of your Social Security payments may be considered taxable. It can actually be noticeably more complicated to calculate this, so it’s important to check with your financial planner or tax adviser for general planning purposes. He or she may advise you that if your income will be above this figure, you may want to consider withholding some of the payments. If you are a single filer and receive more than $34,000, up to 85% of your payments may be considered taxable. The formula here would be to take your adjusted gross income, your normally non-taxable interest like municipal bond interest payments, and half of your Social Security income. So that means that households that are living mostly or entirely off of their Social Security checks may not have any tax due.

There’s a little bit of good news: Although you might be paying some tax to the federal government, there are 37 states that do not tax Social Security payments. That leaves only 13 that do in some form — Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia. If you live in one of these states though, don’t start packing your bags just yet. There may be some exemption from other forms of income, like pensions or IRA withdrawals that affects you in a positive way — so again, consider working with a tax adviser. After deductions and exemptions, Colorado rarely taxes a significant portion of payments. Connecticut doesn’t tax it if you file jointly and your income is under $60,000, or under $50,000 for single filers. There are similar exemptions in the other states.

If you have not yet retired, try this exercise. Take the net paycheck you have coming in right now — after all the taxes and retirement contributions and health insurance and so forth are removed — and write it down. Then either calculate, or have your financial or tax adviser calculate, what your household’s net check or checks from Social Security would be combined after these tax scenarios. Unless your budget is taking you backwards each month, that gap you’re looking to cover might be smaller than you think.

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