13 states that tax social security benefits
Thirteen states tax social security benefits, an issue of great interest to retirees. Each of these states has its own approach to determining how much of the benefits are subject to tax, although these provisions can be grouped into a few broad categories. Today’s map illustrates these approaches.
Thirty-seven states and DC do not have income tax (AK, FL, NV, SD, TN, TX, WA, WY) or do not include Social Security benefits in their calculation of taxable income ( AL, AZ, AR, CA, DE, DC, GA, HI, ID, IL, IN, IA, KY, LA, ME, MD, MA, MI, MS, NH, NJ, NY, NC, OH, OK, OR, PA, SC, VA, WI).
New Mexico includes all Social Security benefits in the taxable income base, although the state provides a deduction that reduces the taxation of all retirement income.
Utah taxes Social Security benefits, but uses tax credits to eliminate liability for beneficiaries with less than $ 30,000 (single filers) or $ 50,000 (joint filers), with credits gradually fading to 2.5 cents for every dollar above those thresholds. Until this year, Utah’s credits reflected the federal tax code, where the taxable portion of Social Security income depends on two factors: the taxpayer’s declarative status and the size of his “combined income” (adjusted gross income + non-taxable interest + half of Social Security benefits). Under Federal law and Utah law before the promulgation of HB 86… the thresholds were respectively $ 25,000 and $ 32,000.
In addition, several states reduce the level of taxation applied to Social Security benefits based on factors such as age or income level:
Colorado allows taxpayers to subtract part of their social security income (as well as their pension income) as long as they are 55 years of age or over, under the heading “subtraction of pensions and annuities”.
Connecticut Excludes Social Security benefits from income calculations for any taxpayer whose Adjusted Gross Income (AGI) is less than $ 75,000 (single filers) or $ 100,000 (jointly filer).
Kansas provides an exemption for these benefits for any taxpayer with an AGI of $ 75,000, regardless of filing status.
Minnesota provides a graduated system of Social Security subtractions that come into play if a person’s interim income is less than $ 81,180 (single filer) or $ 103,930 (joint filing).
Missouri allows a 100 percent exemption from Social Security as long as the taxpayer is 62 years of age or older and has less than $ 85,000 (single filer) or $ 100,000 (joint filing) of annual income.
Nebraska allows single filers with $ 43,000 in AGI or less ($ 58,000 in joint filing) to subtract their income from Social Security. If their income exceeds this threshold, the state follows federal treatment.
North Dakota Allows taxpayers to deduct taxable Social Security benefits if their AGI is less than $ 50,000 (single filer) or $ 100,000 (joint filing).
Rhode Island allows a modification for taxpayers who have reached full retirement age as defined by the Social Security Administration and who have a federal AGI of less than $ 81,900 (single filer) or $ 102,400 (jointly filer).
Vermont provides a progressive system of Social Security exemptions that come into play if a taxpayer’s income is less than $ 34,000 (single filer) or $ 44,000 (joint filing).
While Montana and West Virginia have no age or income stipulations, their approaches to these taxes still deserve attention.
In Montana, which has no age or income stipulations, some Social Security benefits may be taxable, and the state advises taxpayers to complete a worksheet to determine how the state taxable amount differs from the federal taxable amount.
West Virginia pass a law in 2019 to begin phasing out Social Security taxes for people with incomes no more than $ 50,000 (single filers) or $ 100,000 (jointly married filers). As of tax year 2020, the state has exempted 35% of benefits for eligible taxpayers. From 2021, this amount has increased to 65%, and in 2022 the benefits will be completely exempt for these taxpayers.