Q. I am 84 years old and I collect Social Security $ 18,500 annually. I have the option to freelance for $ 30,000 annually. How much do I have to pay in income tax?
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A. Determining your income tax burden is complex and there are many factors involved.
For starters, New Jersey doesn’t tax Social Security income, but the federal government does.
Before you can get an accurate estimate of your tax debt, there are several aspects of your life to consider, said J. David Principe, Certified Financial Planner at SAGEbroadview Wealth Management in Morristown.
- Are you married or single
- Are you a veteran
- Do capital gains or losses need to be taken into account?
- Are there required minimum payouts from IRAs or other retirement accounts?
- Is the freelance work really self-employed income – which would be subject to self-employment tax – or do you actually get a paycheck with wage tax withheld?
- Will this work be in New Jersey or in another state?
- Could you face an underpayment penalty?
You could try running the numbers with something like Free TurboTax, he said.
“However, our recommendation would be to consult a qualified tax professional to discuss the above and any other considerations that may apply in order to plan appropriately,” said Principe.
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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.