You pay taxes all your working years to fund Social Security, and you will be surprised to know that taxes don’t leave you when you retire. Depending on your income, some retirees pay federal taxes on their Social Security benefits. In some states, retirees may have to pay taxes to their state as well.
Fortunately, not many states fall into this category, and even those that do tax social security, offer exemptions or ways to reduce or eliminate the tax. Thus, taxpayers need to know if the state they are living in levies taxes on Social Security or not. In this article, we will list the states that tax social security benefits, as well as each state’s general guidelines on Social Security taxes.
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Before we list the states that tax social security benefits, it is important for taxpayers to know that each state has different rules on how they tax social security money. In general, the amount of tax depends on the taxpayers age, income and filing status.
Following are the states that tax Social Security benefits, as well as their tax guidelines:
Colorado
For the 2022 tax returns, residents aged 65 and older are allowed to fully deduct Social Security benefits from their state income. Previously, the state only allowed this age group to deduct up to $24,000 in retirement income. Those ages 55 to 64 (receiving Social Security) are allowed to deduct up to $20,000 in retirement income, while income above the threshold is taxable at a flat rate of 4.4%.
You can visit the Colorado Department of Revenue website for more information on Social Security taxes.
Connecticut
Connecticut’s income-tax rate ranges from 3% to 6.99%, but single beneficiaries with an adjusted gross income (AGI) of less than $75,000 (and married couples with an AGI below $100,000) pay no taxes on their benefits. For those with AGI above the threshold income, 75% of their Social Security benefits are tax-exempt.
Visit the Connecticut Department of Revenue Services website for more information on the state’s Social Security taxes.
Kansas
Residents with AGI of $75,000 or less don’t pay any taxes on Social Security benefits, regardless of their filing status. Those with an AGI above the threshold pay taxes at the same rate as other income, i.e., from 3.1% to 5.7%.
Visit the Kansas Department of Revenue website for more information on Social Security taxes.
Minnesota
Single filers with an AGI below $64,670 are allowed to deduct up to $4,260 of their social security benefits from their state tax returns for 2022. Similarly, married couples with AGI below $82,770 are allowed a deduction of $5,540. Those with AGI above the threshold get a phased-out deduction, while individuals with AGI above $85,970 (and married couples with AGI above $110,020) don’t qualify for a deduction.
Contact the Minnesota Department of Revenue for more information on Social Security taxes.
Missouri
Single filers ages 62 and older and with an AGI below $85,000 (married couples filing jointly with incomes below $100,000) don’t need to pay any taxes on the Social Security benefits. Those with AGI above the threshold may qualify for a partial deduction. The state income tax rates range from 5.35% to 9.85%.
You can visit the Missouri Department of Revenue website for more information on Social Security taxes.
Montana
Half of the benefits are taxable for single filers (between $32,000 and $44,000 for married couples) with AGI between $25,000 and $32,000. Up to 85% of the benefits are taxable for those with AGI above the threshold income. The state income tax rate ranges from 1.0% to 6.75%.
For more information, visit the Montana Department of Revenue.
Nebraska
Nebraska has approved phasing out the Social Security taxes by 2025. Up to 40% of the benefits are exempted in 2022. The exemption percentage increases to 60% in 2023, 80% in 2024 and 100% in 2025. Presently, single filers with an AGI below $45,790 and couples with an AGI below $61,760 don’t pay taxes on Social Security benefits.
Visit the Nebraska Department of Revenue website for more information on Social Security taxes.
New Mexico
Social Security benefits for residents with an AGI below $100,000 ($150,000 for a couple filing jointly) are fully deductible. For those with an AGI above the threshold, the income tax rate ranges from 1.7% to 5.9%.
Visit the New Mexico Taxation & Revenue Department website for more information on Social Security taxes.
Rhode Island
Those who have reached full retirement age and have an AGI of less than 95,800 (below $119,750 for a couple filing jointly) don’t need to pay taxes on Social Security benefits. Those with income above the threshold could be subject to income tax rates ranging from 3.75% to 5.99%.
Visit the Rhode Island Department of Revenue’s Division of Taxation website for more information.
Utah
Utah taxes Social Security benefits, but offers a tax credit as well. Singles with income less than $37,000 and married couples with income less than $62,000 qualify for the full tax credit on the Social Security benefits. The credit amount is reduced by 25 cents for each dollar income above the threshold.
You can visit the Utah State Tax Commission website for more information.
Vermont
Singles with an AGI below $50,000 (below $65,000 for married couples) are exempt from paying taxes on benefits. Singles with an AGI between $50,000 and $59,999 (between $65,000 and $74,999 for married couples) qualify for a partial deduction. Those with an AGI above the threshold don’t qualify for a deduction.
Visit the Vermont Agency of Administration’s Department of Taxes website for more information.
West Virginia
Singles with an AGI below $50,000 (below $100,000 for couples filing jointly) are allowed to fully deduct their benefits. Those with AGIs above the threshold face income tax rates ranging from 3% to 6.5%
You can visit the West Virginia State Tax Department’s website for more information on Social Security taxes.
