Which States Tax Social Security Benefits?
Only 13 states do, and one is phasing out the tax
Less than half of all states impose income taxes on Social Security benefits. In all, 37 states (plus the District of Columbia) don't. Of the 13 states that do impose a tax, six follow the federal rules for determining the taxable portion of Social Security benefits.
The remaining seven states have their own calculations for how much of a person's Social Security benefits are subject to tax. West Virginia taxes benefits in 2021, but it's phasing out the tax and plans to eliminate it in 2022.
Here's a state-by-state breakdown as of 2020.
|State||Doesn't Tax||Does Tax|
|District of Columbia||X|
|West Virginia||$$ (Phasing Out)|
State-by-State Taxation of Benefits
These 13 states tax Social Security benefits to varying degrees:
Colorado's pension subtraction system exempts up to $24,000 in pension and annuity income, including some Social Security benefits. The exemption is based on the age of taxpayers, starting at age 55.
Connecticut partially or fully exempts Social Security benefits based on a person's filing status and income.
Kansas exempts Social Security benefits from state tax based on the taxpayer's income. Your Social Security benefits are exempt from Kansas income tax if your federal adjusted gross income (AGI) is $75,000 or less, regardless of your filing status.
Minnesota partially taxes Social Security benefits. The state allows a subtraction from benefits ranging from $4,090 to $5,240 depending on filing status, but this rule is subject to phaseouts starting at incomes of $79,480 for joint married filers and $62,090 for head of household and single filers. The subtraction is less at these incomes and eventually phases out entirely as you earn more.
Missouri exempts Social Security benefits from state tax provided that the individual is age 62 or older and has adjusted gross income of less than $100,000 if married filing jointly, or $85,000 for all other filing statuses. Those who earn more than this might qualify for the exemption if they're disabled.
Montana provides a worksheet to determine the portion of your Social Security benefits that's taxable by the state. This might be different from the federal amount.
Nebraska allows a deduction for Social Security income that's included in your federal federal adjusted gross income if your federal AGI is less than or equal to $58,000 for married couples filing jointly, or $43,000 for all other filers. These income thresholds are based on 2019 tax returns, so check the state's website for any 2020 changes.
Don't be surprised if some states re-evaluate their entire taxing structure in the coming year, given the state of fiscal disruption in 2020.
New Mexico follows the federal rules for including a portion of Social Security benefits as part of taxable income, but the state provides an $8,000 tax credit to eligible taxpayers age 65 or older to offset the tax on Social Security benefits.
North Dakota made significant changes to its tax policy for Social Security income in 2019. Federally taxable Social Security benefits are tax-exempt in the state for incomes up to $50,000 for single filers and $100,000 for married filers.
Rhode Island has an exemption on Social Security taxation for those who have reached full retirement age as defined by the IRS. Eligible taxpayers must have federal AGIs of $81,900 if single, or $102,400 if married and filing a joint return, as of the 2020 tax year.
Utah adopted a sweeping tax bill in late 2019 that includes a tax credit for Social Security benefits that are included in a taxpayer's federal adjusted gross income.
Vermont previously followed the federal rules for determining the taxable portion of Social Security benefits, then it adopted exemptions for taxpayers with incomes below $25,000 for single filers and $32,000 for other statuses. Benefits for those with higher incomes are taxed at incremental levels with no exemption available for AGIs of $55,000 or $70,000 or more respectively.
West Virginia follows federal rules for determining the taxable portion of Social Security benefits. Legislation passed in 2019 will eliminate state taxes on these benefits by 2022.
Where to Retire?
You could end up ahead anyway even if you retire in one of the states that imposes a tax on Social Security benefits if all other taxes in the state are favorable, such as sales tax, gasoline tax, or property tax. And you might still be subject to federal taxation on your benefits even if you live in a state with no state-imposed tax.
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