Once you start taking Social Security, don’t forget about taxes. Individuals with incomes between $25,000 and $34,000 or couples with incomes between $32,000 and $44,000 are taxable at the federal level up to 50% of their benefits. In addition, 85% of benefits are taxable for individuals and couples with incomes over $34,000 or $44,000 respectively.
But these aren’t the only taxes Social Security recipients should consider. Twelve states could lose some of their state tax benefits.
12 States That Tax Social Security Benefits
If you live in one of the following 12 states, you may have additional taxes on your Social Security benefits. Here’s a breakdown by state.
In Colorado, residents between the ages of 55 and 64 who receive Social Security can deduct $20,000 from their retirement income for state taxes, including Social Security. People over the age of 65 can deduct the full amount of Social Security from their state tax returns.
Connecticut allows individuals with an adjusted gross income (AGI) of less than $75,000 and couples with an AGI of less than $100,000 to deduct 100% of Social Security benefits if they apply together. For taxpayers with income above these thresholds, only 75% of social security benefits are tax-free.
In Kansas, people with an AGI over $75,000 are taxed on Social Security benefits as ordinary income regardless of their filing status. State tax exempt if AGI is less than her $75,000.
In Minnesota, a single Social Security beneficiary with income less than $64,670 can deduct a $4,260 benefit from their 2022 state tax return (due in 2023). Married couples whose AGI is below her $82,770 can exclude her $5,540 in a joint application. Taxpayers with income exceeding these amounts are eligible for gradual deductions. Individuals earning more than $85,970 and married couples earning more than her $110,020 are not eligible for the deduction.
Missouri singles earning less than $85,000 and jointly applying couples earning less than $100,000 can deduct 100% of their Social Security benefits. Taxpayers whose income exceeds these amounts may qualify for partial deductions.
Montana’s taxation of Social Security benefits mirrors the federal tax system. For individuals with AGI between $25,000 and $32,000 and for couples with AGI between $32,000 and $44,000, up to half of the benefits are taxable. For taxpayers earning more than these amounts, up to 85% of their benefits are subject to state taxes.
Nebraska singles earning less than $44,460 and married couples earning less than $59,960 are exempt from Social Security taxes. However, in 2021, the Nebraska legislature decided to phase out the taxation of her Social Security benefits by 2025. In 2022, the recipient can waive her 40% of benefits for tax purposes. The exemption will increase to 60% in 2023, 80% in 2024 and 100% in 2025.
8. New Mexico
As of 2022, most New Mexico residents will no longer have to pay taxes on their Social Security benefits. Singles earning less than $100,000 and married couples earning less than her $150,000 are fully deductible.
9. Rhode Island
In Rhode Island, people who have reached full retirement age and earn less than $95,800 (singles) and $119,750 (couples) are exempt from state Social Security benefits. If you claim your benefits early or your income exceeds the limit, you will have to pay taxes on your benefits.
Utah does tax Social Security benefits, but singles earning less than $37,000 and married couples earning less than $62,000 are fully tax deductible. Credits are reduced by 25 cents for each additional dollar of income over these limits.
Vermont exempts Social Security recipients earning less than $50,000 (singles) and $65,000 (couples) from paying taxes on their benefits. Singles with incomes between $50,001 and $59,999 and married couples with incomes between $65,001 and $74,999 are eligible for gradual deductions. Taxpayers with income exceeding these limits are not eligible for the deduction.
12. West Virginia
Starting in 2022, West Virginia will only tax Social Security benefits for individuals earning $50,000 or more and for couples earning $100,000 or more.
Want to avoid Social Security tax?
Your Social Security benefits may be subject to state income tax, but don’t forget to check the tax landscape. Consider how much you will pay in capital gains tax, property tax, and sales tax.
But if taxes are a concern, consider saving for retirement with a Roth IRA or Roth 401(k). The money you contribute is taxed, but when you retire, your withdrawals are tax-free and you don’t have to pay your social security benefits with taxes.