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, 50 percent to 85 percent at higher income levels.
Other states offer their own deductions or exemptions based on age or income, and a few are reducing or eliminating taxation of benefits. (North Dakota did so in 2021, amending its tax code to strike Social Security payments from its definition of taxable income.) Here’s what to expect if you live in a state that taxes Social Security.
Benefit income is taxable at the state’s flat rate of 4.55 percent. Coloradans, however, can deduct up to $20,000 in retirement income, including Social Security payments, if they are between the ages of 55 and 64 and up to $24,000 if they are 65 or older. Both spouses in a married couple can take the deduction.
Starting with the 2022 tax year, residents will be able to deduct all federally taxable Social Security benefits from their state income, part of a tax-code overhaul that Colorado lawmakers enacted in June 2021. For more information, contact the Colorado Department of Revenue.
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.
Minnesota follows the federal rules for determining the amount of Social Security benefits that are subject to income tax.
For those who owe taxes on their benefits, a state policy called the Social Security Subtraction offers a partial deduction. In 2021 single filers can exclude up to $4,130 of their federally taxable benefits from their Minnesota income. The maximum subtraction for married couples is $5,290. The subtraction is phased out for those with higher incomes, starting at $80,270 for married joint filers and $62,710 for singles.
For more information, contact the Minnesota Department of Revenue.
Social Security benefits are fully deductible for Missouri residents ages 62 and older with an AGI of less than $85,000 (single) or $100,000 (married, filing jointly). If you earn more, you may still be eligible for a partial deduction.
Missouri’s income-tax rates range from 0 percent to 5.4 percent. For more information, contact the Missouri Department of Revenue.
Like the federal government, Montana does not tax Social Security for people with overall incomes of less than $25,000 for a single filer and $32,000 for a couple filing jointly. Residents who make more are liable for tax on their benefits, but the state uses a different method than the feds to determine the taxable amount. The state tax form includes a worksheet for calculating the difference.
Montana’s income-tax rates range from 1 percent to 6.9 percent. For more information, contact the Montana Department of Revenue.
Nebraska does not tax Social Security benefits for couples filing jointly with an AGI below $59,960 and for singles with an AGI below $44,460. Above those levels, a portion of Social Security income is taxable, but the share is set to decline annually as the state phases out taxation of benefits.
A state law enacted last year set a timetable to reduce the taxable portion of a beneficiary's Social Security in annual increments through 2030. A bill passed by the legislature April 7 and awaiting Gov. Pete Ricketts' signature would shorten the timetable by five years. Under the new measure, the taxable share of Nebraskans' Social Security income would drop in steps from 60 percent in 2022 to zero in 2025.
Nebraska taxes income at rates of 2.46 percent to 6.84 percent. The top rate is set to decline over the next several years as part of the new tax law. For more information, contact the Nebraska Department of Revenue.
For the 2021 tax year, Social Security benefits are taxable for residents with incomes of more than $25,000 for individuals and $32,000 for couples filing jointly. The state does have an age-specific tax break that allows people 65 and older with AGIs under $28,500 for singles and $51,000 for married couples to deduct up to $8,000 in income, which can be applied to benefits.
Legislation passed by state lawmakers in February and signed by Gov. Michelle Lujan Grisham the following month eliminates future taxation of benefits for most New Mexicans. Starting with the 2022 tax year, Social Security income is fully deductible for residents with AGIs below $100,000 for an individual and $150,000 for a couple filing jointly.
New Mexico taxes income at rates from 1.7 percent to 5.9 percent. For more information contact the New Mexico Taxation & Revenue Department.
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The state does not tax benefits for people who have reached full retirement age as defined by the Social Security Administration (66 and 2 months for people born in 1955, 66 and 4 months for those born in 1956 and gradually rising to 67 for people born in 1960 or later) and have an AGI below $86,350 if their filing status is single or head of household or $107,950 for a couple filing jointly.
Rhode Island taxes income at rates ranging from 3.75 percent to 5.99 percent. For more information, contact the Rhode Island Department of Revenue’s Division of Taxation.
Utah uses the federal formula to calculate how much Social Security income is taxable at the state tax rate, which is 4.95 percent, but as of 2021, the state offers a full or partial credit on those taxable benefits.
Couples reporting income of $50,000 or less and singles making $30,000 or less qualify for a full tax credit on their benefit income. Those earning more can still get a partial break on their benefits, with the tax credit reduced by 25 cents for each dollar above the income thresholds above.
For more information, contact the Utah State Tax Commission.
In Vermont single filers with an AGI of $45,000 or less qualify for a full exemption from paying state taxes on Social Security. Those who make between $45,001 and $54,999 are eligible for a partial exemption.
For married couples filing jointly, the full exemption applies at incomes of $60,000 or less. The exemption is phased out at incomes between $60,001 and $69,999.
For single filers earning at least $55,000 and couples making at least $70,000, benefits are fully taxed at the state rate, which ranges from 3.35 percent to 8.75 percent. For more information, contact the Vermont Agency of Administration’s Department of Taxes.
West Virginia is gradually phasing out state income taxes on Social Security for low- and middle-income residents.
For the 2021 tax year, West Virginians making $50,000 or less ($100,000 for couples filing jointly) are allowed to exclude 65 percent of their Social Security benefits from their taxable state income. The exclusion rises to 100 percent in 2022. For people with incomes above those levels, benefits are taxed according to the federal model.
West Virginia’s income-tax rates range from 3 percent to 6.5 percent. For more information, contact the West Virginia State Tax Department.
Updated April 8, 2022
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