How is My Retirement Income Taxed? – Annapolis and Towson Estate Planning

Based on the state in which you retire, state income taxes could vary by thousands of dollars. However, as a recent Kiplinger article, “State Taxes on Retirees Differ by Types of Retirement Income,” tells us, it’s not just a state’s tax rate that matters. The type of income you get in retirement frequently has a bigger impact on your state taxes than your tax rate, because each state has its own method of taxing specific types of retirement income.

Let’s look at the taxes on Social Security benefits. The federal government can tax up to 85% of Social Security benefits, but most states don’t tax Social Security benefits. There are seven states—Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming—that don’t tax Social Security benefits because they don’t have any income tax. New Hampshire and Tennessee only tax interest and dividends. Social Security benefits are exempt from tax in DC and 28 states: Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia, and Wisconsin.

That leaves 13 states where part of Social Security benefits may be taxable. New Mexico, Utah, and West Virginia currently tax Social Security benefits to the same extent they are taxed on federal returns, but West Virginia plans to phase out its tax on Social Security benefits in 2020. Taxation of Social Security benefits in the rest of the states—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Rhode Island, and Vermont—is based on your income and, in many instances, on your filing status. Some of these states may also exempt Social Security for taxpayers under certain income thresholds.

As far as retirement plan payouts, state taxation of payouts from retirement plans, such as pensions, IRAs, and 401(k)s, can be more complicated. States without an income tax or that just tax interest and dividends don’t tax retirement plan payouts. However, with the other states, it’s all over the board. Mississippi and Pennsylvania are the most generous—they typically don’t tax any retirement income. However, California, D.C., Nebraska, and Vermont offer few or no tax breaks for retirement plan payouts. In some cases, the type of retirement plan involved makes a difference.

Reference: Kiplinger (October 28, 2019) “State Taxes on Retirees Differ by Types of Retirement Income”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

For Immediate Release

Contact: Jane Frankel Sims

410-828-7775

Contact: Frank Campbell

410-263-1667

Sims & Campbell Estates and Trusts

Frankel Sims Law and Holden & Campbell
Merge to Form Sims & Campbell

Firm will offer comprehensive Trusts & Estates services through offices in Towson and Annapolis

TOWSON, Md. (April 26,2019)  Frankel Sims Law and Holden & Campbell have jointly announced the merger of their firms to create a boutique Trusts & Estates law firm providing comprehensive services in the fields of Estate Planning, Estate Administration, Trust Administration and Charitable Giving. The combined firm will be named Sims & Campbell and have offices in Towson, Md. and Annapolis, Md.  Jane Frankel Sims and Frank Campbell will lead and hold equal ownership stakes in the firm.

Sims & Campbell will have 9 attorneys and 15 legal professionals that handle every facet of estate and wealth transfer planning, including wills, revocable living trusts, irrevocable trusts, estate and gift tax advice, and charitable giving strategies.  The firm will focus solely on Trusts & Estates but will serve a wide range of clients, from young families with modest resources to ultra-high net worth individuals.  This allows clients to remain with the firm as their level of wealth and the complexity of related estate and tax implications change over time. 

“By joining forces, we have expanded our footprint to conveniently serve clients in Maryland, D.C. and Virginia” said Jane Frankel Sims.  We are seeing some of the greatest wealth transfer in our country’s history, and we want to continue to be on the leading edge of helping our clients maintain and enhance their family’s wealth.  In addition, we aim to serve our clients for years to come, and the new firm structure will allow Sims & Campbell to thrive even after Frank and I have retired.”    

“Jane and I have always admired each other’s firms and recognized the need to provide even greater depth and breadth of focused expertise to help families amass and protect their wealth from generation to generation,” said Frank Campbell.  “Now we have even greater capabilities to make a real difference for our clients.” 

The Sims & Campbell Towson office is located at 500 York Road, on the corner of York Road and Pennsylvania Avenue in the heart of Towson.  The Annapolis office is currently located at 716 Melvin Avenue, and is moving to 181 Truman Parkway in August, 2019.  For more information, visit www.simscampbell.law.