Social Security is an important source of retirement income for millions of American workers, so the good news is that benefits are not taxed by a majority of states, which allows retirees to keep a little more of their cash.
However, there are about a dozen that tx the benefits, although their methods differ.
It is important to note that benefits may still be subject to taxes at the federal level. People with incomes of more than $25,000 ($32,000 for married couples filing jointly) are subject to taxes, though the portion of their benefits that are exposed varies.
For example, individuals with incomes between $25,000 and $34,000 will have 50 percent of their benefits subject to federal taxes ($32,000 and $44,000 for joint filers).
That amount increases to 85 percent for people with incomes of more than $34,000 ($44,000 for joint filers).
On top of the potential of having to pay those federal taxes, here’s a look at states that levy taxes on Social Security benefits:
Nebraska, Utah
Taxed the same way as the federal government.
Colorado
People under the age of 65 can exclude $20,000 worth of benefits from their taxes, and that threshold increases to $24,000 for individuals above age 65.
Connecticut
Only wealthier residents in Connecticut are subject to Social Security taxes, those with incomes above $75,000 and married couples filing jointly with more than $100,000.
Kansas
Social Security benefits are only treated as income for individuals or joint filers with income of $75,000 or more.
Minnesota
Social Security income is taxable at the same rate as other kinds of income with rates that range from 5.35 percent to 9.85 percent. However, the state does allow different subtractions, which are not subject to tax, based on provisional income thresholds.
Missouri
Benefits are completely exempt if an individual is 62 or over and has income less than $85,000, or $100,000 for joint filers.
The exemption is reduced by one dollar for every dollar that the taxpayer’s income exceeds the limitation.
Montana
Montana does not tax Social Security benefits the same way as the IRS. Residents are required to fill out documents in order to calculate the portion of their benefits that are taxable.
New Mexico
In New Mexico, Social Security income is partially taxed, although there has been a push this year to either reduce or repeal those taxes.
North Dakota
Beginning this tax year, North Dakota offered a new exemption for individuals with less than $50,000 in adjusted gross income ($100,000 for joint filers), equal to the taxable portion of the benefits reported on the Form 1040.
Rhode Island
Once an individual has reached his or her full retirement age, it’s mostly only high-earners who pay taxes on their Social Security benefits in Rhode Island. The exemption thresholds for full retirement age individuals is pretty high on both the individual filer ($81,900) and joint filer ($102,400) sides.
Vermont
In Vermont, Social Security benefits are taxed on a graduated scale. Individuals with incomes below certain thresholds are fully exempt, while other individuals are partially exempt. But once your income reaches a certain level, you do not get an exemption.
West Virginia
Last year, West Virginia lawmakers signed a bill into law that exempts Social Security benefits from personal income taxes. The phase-out period for residents to see the tax fully eliminated is three years, and the first phase began in tax year 2020.
A number of other states exempt the portion that is taxed at the federal level.
