In 2023, eleven states taxed Social Security benefits, but this number will decrease to nine by 2024. Your residency could significantly affect your financial planning for retirement, making it essential to understand if your state taxes these benefits.
The tax you owe on your Social Security will vary based on your adjusted gross income (AGI), your tax filing status, and sometimes your age. Remember, tax regulations can change; always consult your state tax authority for the most current information.
Colorado’s
In Colorado, Social Security benefits are taxed, but many retirees are exempt. Specifically, residents 65 and older can deduct all federally taxed Social Security income, while those under 65 receive a smaller deduction. For those aged 55 to 64, up to $20,000 of Social Security benefits can be deducted from their taxable income. Colorado applies a flat tax rate of 4.4% to all taxable income.
Connecticut
Connecticut taxes Social Security benefits for individuals with an Adjusted Gross Income or AGI exceeding $75,000, or $100,000 for joint filers, with potential exemptions up to 25% of the benefits.
For single and separate filers, benefits are not taxed if the AGI is under $75,000. Joint and head-of-household filers enjoy no taxation on benefits with an AGI below $100,000.
However, those exceeding these thresholds may be taxed on up to 25% of their benefits.
Minnesota
In Minnesota, Social Security income is taxable if it is taxable federally. Yet, eligible retirees can subtract a portion of their income when filing state taxes, with maximum subtraction amounts based on filing status and income requirements. For instance, married filing jointly can subtract up to $5,840.
Kansas
In Kansas, the taxation of Social Security benefits is similar to Connecticut’s approach, depending on an individual’s Adjusted Gross Income (AGI).
Specifically, residents with an AGI over $75,000 will have their Social Security benefits taxed, similar to the threshold in Connecticut. This means that Kansas residents need to keep a close eye on their AGI to understand if their benefits will be taxed.
Montana
In Montana, single retirees earning under $25,000 and married couples under $32,000 are exempt from Social Security taxes. For higher earners, the tax rate varies from 1% to 6%, with a potential decrease to 5.9% in the next tax year. The state’s tax calculations allow for a possible exemption of up to $50,000 if the total income is from Social Security.
Missouri plans to eliminate the taxation of Social Security benefits in 2024. Currently, residents aged 62 and above with incomes below $85,000 (or $100,000 for joint filers) can qualify for an exemption, a move that reflects the state’s support for financially vulnerable seniors.
New Mexico
In New Mexico, despite technically taxing Social Security benefits, many retirees will not pay state taxes thanks to recent legislation that raises income thresholds for exemptions. Single filers earning up to $100,000 and joint filers up to $150,000 are exempt from state taxes on Social Security income.
Rhode Island
Rhode Island taxes Social Security benefits for those who start receiving them before reaching the full retirement age of 67, or if their AGI exceeds $101,000 for singles, $126,250 for joint filers, or $101,025 for separate filers. However, eligible residents can exempt up to $20,000 of their retirement income.
Utah
Utah aligns its tax calculations with federal guidelines, applying a 4.65% rate on taxable Social Security income. The state also offers a credit system, fully or partially offsetting the tax for those within certain income thresholds, enhanced in 2023 due to a tax-cut package.
Vermont
In Vermont, Social Security benefits are taxed for taxpayers whose Adjusted Gross Income (AGI) exceeds $60,000, or $75,000 for those married and filing jointly. Individuals with AGIs ranging between $50,000 and $59,999, or between $65,001 and $74,999 for joint filers, are eligible for a partial exemption. This structured approach aims to alleviate the tax burden on retirees with moderate incomes, ensuring a fairer taxation process.
Nebraska
Nebraska is set to eliminate the taxation of Social Security benefits starting in 2024. However, for the year 2023, Social Security benefits remain taxable if a resident’s AGI surpasses $45,790, or $61,760 for married couples filing jointly. This tiered threshold approach is part of Nebraska’s temporary taxation measures, reflecting the state’s movement towards more favorable tax policies for retirees. Residents are advised to review their AGI and filing status carefully to manage potential tax liabilities effectively during this transition period.
