Finance

Here Are the States That Collect Taxes on Social Security Benefits

November 4th, 2020

As a wise man once said, “’Tis impossible to be sure of any thing but Death and Taxes,” meaning, in no uncertain terms, that taxes are inevitable. This is still true, even in retirement. You’ll have to pay taxes on most of your income, which includes Social Security income. In fact, the government taxes up to 85% of those benefits. And depending on where you live, you can expect to pay a state tax on top of the federal taxes. 

However, each state calculates its tax differently. You may not end up paying much extra when you account for these different factors, so don’t call the moving company just yet. Here are the states where you can expect to pay taxes on Social Security income. 

Colorado

If you’re retired but under age 65, you’ll be able to deduct $20,000 of your retirement income from state taxes. Once you turn 65, you can deduct up to $24,000 of your retirement income from state taxes. Plus, any Social Security income the federal government doesn’t tax isn’t counted for state income tax purposes.

Connecticut 

If you have a federal adjusted gross income under $75,000, your Social Security income is exempt from state taxes. It’s also exempt from state taxes for married couples filing jointly if their income totals less than $100,000. Even if you make more than these amounts, you can still deduct 75% of federally taxable Social Security benefits when calculating your state taxes.

Kansas

Similar to Connecticut, if you receive a federal adjusted gross income under $75,000, your Social Security benefits aren’t subject to Kansas’s income tax. Over that amount, the state of Kansas will tax your benefits the same amount as the federal government does.

Minnesota

Minnesota’s benefits are a little more complicated than the above states. Depending on your income, you may be able to deduct anywhere from $2,620 to $5,240. However, the amount you can deduct falls off the more you make.

Missouri

Single taxpayers with an AGI under $85,000 and married couples with an AGI under $100,000 are exempt from state Social Security taxes. If your income is over this threshold, you may still be able to receive a partial exemption.

Montana

Montana taxes Social Security benefits, but it varies from person to person.

Nebraska

For joint filers making $58,000 or less, Social Security benefits were not subject to tax. Single filers making $43,000 or less were also not subject to extra Social Security taxes. Over these amounts, Nebraska taxed Social Security benefits at the same rate as the federal government.

New Mexico

Social Security benefits are subject to the same tax at the federal and state level if you live in New Mexico.

North Dakota

Joint filers with an AGI of $100,000 will not have to pay extra taxes on Social Security benefits. Nor will single filers with an AGI of $50,000 or under. Over these amounts, you’ll pay the same tax rate at the state and federal level.

Rhode Island

Rhode Island’s rates are almost the same as North Dakota’s. If your joint income is $106,400 or less, you won’t pay extra taxes. For other taxpayers, if your AGI is under $85,150, you also won’t pay taxes on your benefits. Over these thresholds, you’ll pay the same taxes at the state and federal levels.

Utah

You’ll pay the same taxes at the state and federal levels on Social Security benefits.

Vermont

If your AGI is $60,000 (joint filers) or $45,000 (other taxpayers) you aren’t subject to Social Security benefit taxes. If you make over these amounts, though, you may still be eligible for a partial exemption.

West Virginia

If you make $50,000 or less (or $100,000 or less for joint filers), you’ll only pay taxes on 65% of the Social Security benefits taxed by the federal government for 2020. For 2021, qualifying taxpayers will only pay taxes on 35% of Social Security benefits taxed by the federal government. After that, West Virginia is phasing out state Social Security taxes.

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