are personal retirement accounts subject to income taxes
Up to 50 percent of your Social Security benefits may be subject to income tax if your combined income (MAGI plus one-half your Social Security benefits) exceeds $25,000 for an individual filing single, unmarried head of household, or qualified widow(er) with dependent ($32,000 if married and filing jointly). IRS Tax Tip 2012-34, February 21, 2012. Taxpayers may sometimes find themselves in situations when they need to withdraw money from their retirement plan early. What they may not realize is that that transaction may mean a tax impact when they file their return. Rhode Island Retirement Taxes. Rhode Island is the smallest state in the U.S. with a land area of just 1,045 miles (less than 0.03% of the country’s total land area). Much of that is located on or near the ocean, in close proximity to fantastic sight-seeing, sailing, kayaking and fishing. A portion of your benefits may be subject to income tax if your modified adjusted gross income (MAGI), plus one-half your Social Security benefits, exceeds specific limits. Your MAGI equals: In 2012, a person’s estate would be subject to a federal estate tax if the net estate (all assets owned by the person (including residence, retirement accounts, life insurance, stock, bonds, mutual funds, and other real estate and business interests) minus all debt of the decedent) exceeds $5,120,000. Avoiding income taxes during retirement requires knowledge of the various types of 401(k)s and IRAs. Money in tax-advantaged investment accounts, such as 401(k)s and IRAs, can only be taxed on one of two occasions: when the money goes into the account or when the money comes out. If money is held in a Traditional 401(k) or IRA, the money is taxed as income when it is withdrawn from the account. In contrast, money in a Roth 401(k) or IRA is taxed as income when it is deposited into the account. As a result, the Roth 401(k)s and IRAs allow their owners to avoid paying income taxes unconditionally during retirement. No. Rhode Island taxes all retirement income at rates ranging from 3.75% to 5.99%. It is one of the few states to tax Social Security retirement benefits, though it only taxes Social Security income that is taxed at the federal level. All other retirement income in Rhode Island is subject to the state income tax. This includes income from retirement accounts like an IRA or a 401(k). It also includes income from a government pension ora private pension. Early distributions are usually subject to an additional 10 percent tax. Early distributions must also be reported to the IRS. Distributions you roll over to another IRA or qualified retirement plan are not subject to the additional 10 percent tax. You must complete the rollover within 60 days after the day you received the distribution.
Yes, personal retirement accounts in Rhode Island are subject to income taxes.