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A portion of Social Security retirement, disability and other benefits are subject to federal income tax if your overall income exceeds a cap the U.S. government sets. Twelve states also tax some or all of their residents’ Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia.
State policies on taxing benefits vary widely. Some follow the federal rules for determining how much of a beneficiary’s Social Security income is taxable: none for people with incomes below $25,000 for a single filer and $32,000 for a couple filing jointly, up to 85 percent at higher income levels.
Other states offer their own deductions or exemptions based on age or income, and some have reduced or are in the process of eliminating taxation of benefits for most or all older residents. Here’s what to expect if you live in a state that taxes Social Security.
Coloradans ages 65 and older can fully deduct Social Security benefits from their state income. Before the 2022 tax year, people in this age group could deduct up to $24,000 in retirement income, including Social Security payments, but a 2021 state law repealed that cap.
Younger beneficiaries may still owe state taxes on a portion of their benefits. Those ages 55 to 64 and receiving Social Security can deduct up to $20,000 in retirement income, including Social Security payments. For this group, retirement income above that level is taxable at the state’s flat rate of 4.4 percent.
For more information, contact the Colorado Department of Revenue.
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State residents can deduct most or all of their benefit income, depending on their adjusted gross income (AGI), the figure on line 11 of the IRS 1040 form.
Single beneficiaries who report an AGI of less than $75,000 and married couples whose AGI is below $100,000 pay no state taxes on their benefits. If your income exceeds those thresholds, 75 percent of your Social Security benefits are tax-exempt.
Connecticut’s income-tax rate ranges from 3 percent to 6.99 percent. For more information, contact the Connecticut Department of Revenue Services.
Kansans whose AGI is $75,000 or less are fully exempt from paying state taxes on Social Security. The cap applies for all filing statuses. Beyond that threshold, benefits are taxed at the same rate as other income, which in Kansas ranges from 3.1 percent to 5.7 percent.
For more information, contact the Kansas Department of Revenue.
Legislation passed by state lawmakers and signed by Gov. Tim Walz in May makes Social Security benefits fully deductible for residents with incomes up to $78,000 for a single filer and $100,000 for a married couple filing jointly, starting with the 2023 tax year.
For those with higher incomes, a state policy called the Social Security Subtraction offers a partial deduction. Under the new law, people making up to $118,000 for an individual and $140,000 for a couple could exclude a portion of their Social Security benefits from their taxable income. The deduction is phased out as income rises, and at incomes above the top thresholds, benefits are fully taxable.
Minnesota taxes income at rates ranging from 5.35 percent to 9.85 percent. For more information, contact the Minnesota Department of Revenue.