It shouldn’t catch you off-guard that you have to pay taxes even after retirement. It functions in the same way it did in your pre-retirement days; you will have to pay the income tax on the income you receive each year. To calculate the retirement income tax, you can even use the retirement tax calculator that helps you estimate the amount of tax you need to pay, so you can prepare for the same. You must not overlook the estimation of your retirement tax; you need to determine the amount of money that you will be paying as retirement income tax since it allows you to prepare a budget and set up tax withholdings in advance.

The retirement income tax depends on the type of income you receive in your retirement; whether it is the Social Security income or the pension you receive, the retirement income will be calculated according to this. If you still need help calculating your retirement income tax according to the type of income, here’s how retirement income is calculated keeping in mind the type of income you receive.

• Social Security income – If Social Security is the only source of income for you, then you wouldn’t have to pay any retirement income tax. However, if the Social Security income isn’t the only source of income for you, a portion of the Social Security becomes taxable. There’s a formula that determines how much of your social security is taxable. It is asserted that depending on your other income source, 0 to 80 percent of your Social Security income can be taxable. According to the IRS, this other source of income and your Social Security income fall under the category of “combined income”, and in your tax worksheet, you will have to enter your combined income into a formula to calculate how much of your income becomes taxable.
• Pensions – It is common knowledge that pension income is taxable. You can determine whether your pension income is taxable or not by adhering to this easy guideline: If the pension went in before the tax, then it will be taxed on withdrawal. Since most pension accounts are funded with pre-tax income, it results in the entire amount of the annual pension being considered as taxable income every year on your tax return. If this is the case, you can ask for the taxes to be completely withheld from your pension check. In case a portion of the pension account was funded by after-tax dollars, then a certain portion of your pension becomes taxable and the other portion becomes tax-free. Also, there are certain types of military and disability pensions that are partially or entirely tax-free. In such cases, the pension provider sends the individual a 1099 form at the start of each year and informs them whether their pension is taxable or not.
• IRA and 401(k) withdrawals – The withdrawals from retirement accounts are taxable. This implies that the IRA withdrawals and other withdrawals from 401(k) plans, 403(b) plans, 457 plans, and other similar plans are reported on the individual’s tax returns as taxable income. The amount of retirement tax levied on these withdrawals depends on the total amount of income and deductions you have in the said year, and the tax bracket you fall under for that particular year.
  The only type of IRA accounts that are tax-free is Roth IRA withdrawals; if done correctly, the withdrawals from this type of retirement account is tax-free.
• Annuity distributions – In case your annuity is owned by an IRA or some other retirement account, then the tax rules meant for IRA withdrawals shall be applicable to any withdrawals or annuity payments you receive from the annuity. If you have purchased these annuities with after-tax dollars, then the tax rules that are applied in such cases depend on the type of annuity you have purchased.
  If the income you receive is from an immediate annuity and if the portion of the immediate annuity is divided into a return of principal and that of interest, then the interest portion will be considered as your taxable income for the year.
  If you receive your income from fixed or a variable annuity, then the rax rules imply that the earnings from this type of annuity have to be withdrawn first if your account is worth more than what you had contributed. If this is the case, the investment gain will be taxable.
• Investment income – Just like you used to pay taxes on any dividends, interest income, or capital gains before you retired, you will have to continue paying these even after your retirement. Such investment incomes are reported on the 1099 tax form sent to you every year by the financial institution that holds your account.
• Gains received on selling the house – If you have resided in the house for more than two years, then there are less chances of paying taxes on gains from selling your house. This rule won’t be applicable if the gains exceed $250,000 in case you are single or $500,000 if you are married.

You have to estimate your retirement income tax based on the kind of income you receive. Moreover, your task can be made simpler if you use a retirement tax calculator since it gives you an exact number, depending on the accuracy of the data you fill in.