While states in the country are becoming less likely to tax Social Security income, some still do it. However, Social Security retirement income varies considerably by state. This discrepancy is mostly due to different income requirements determining whether your Social Security benefits are taxable.
Moreover, some governments have more permissive guidelines than others. Here’s a look at how these states tax Social Security retirement income
West Virginia
In 2020, West Virginia began phasing out Social Security taxes for residents. It includes married couples earning $100,000 or less and single filers making $50,000 or less. As of 2022, eligible retirees will no longer pay state taxes on their Social Security benefits.
However, those residents with annual gross incomes above thresholds are subject to income tax. These taxes range from 3% to 6.5%.
Colorado
Colorado taxes Social Security benefits. However, people 65 years or older can deduct social security benefits taxable at the federal level from their taxable state income. People aged 55 to 64 can only deduct up to $20,000 in retirement income. Any amount over that is taxed at 4.4%.
Kansas
Retirees in Kansas with an adjusted gross income of $75,000 or less are free from paying state taxes on social security benefits. People with an adjusted gross income higher than this amount are subject to the same tax rate as others. So, if your AGI exceeds the $75,000 threshold for a tax exemption on Social Security benefits, you should expect to pay the 5.7% tax rate.
Nebraska
In the Cornhusker State, Social Security benefits are taxed based on income. If a married couple earns below $59,100 or an individual earns below $44,460, they won’t pay state tax on their benefits. The state plans to eliminate the income tax on benefits by 2025.
Connecticut
Connecticut still taxes Social Security payments but people with adjusted gross income (AGI) below $75,000 for single taxpayers and $100,000 for married filing jointly do not have to pay any taxes on social security benefits.
Anyone beyond these limits need to pay tax on 25% of their benefits.
Vermont
In 2022, lawmakers in Vermont expanded tax exemptions for Social Security benefits. Single filers with an annual gross income of $50,000 or less are fully exempt from taxes on their benefits.
Partial exemptions are granted for incomes between $50,000 and $60,000. Married couples filing jointly with an annual gross income of up to $65,000 receive a total exemption. Meanwhile, a partial exemption applies to incomes between $65,000 and $75,000. Residents earning above these thresholds face state tax rates. These rates range from 3.35% to 8.75% on Social Security benefits.
Utah
Utah assesses state taxation on Social Security income following federal guidelines. The state applies a 4.65% tax rate. The state provides a credit on taxable Social Security benefits, expanded in 2023.
Single filers earning $45,000 or less and married couples with $75,000 or less qualify for a full tax credit. However, the credit is reduced by 25 cents for each dollar earned above these limits.
Minnesota
Minnesota considered eliminating state taxes on Social Security income in 2023. Instead, the state expanded exemptions. Social Security benefits are fully deductible for single retirees earning up to $78,000. Married couples earning up to $100,000 are also eligible.
The state’s Social Security Subtraction Rule doesn’t apply to higher-income retirees. In 2024, the maximum subtraction for married joint filers is $5,840. For married separate filers, it is $2,725; for single filers, it is $4,560. Minnesota imposes income tax rates ranging from 5.35% to 9.85%.
The tax rate ranges from 1% to 6% for retirees earning above these thresholds. Next year, the maximum rate will drop to 5.9%. Up to $50,000 of income may not be taxed if it is only from Social Security payments.
New Mexico
At the start of 2022, New Mexico passed laws allowing the deduction of Social Security income. Single citizens earning less than $100,000 were exempt from taxes on their benefits. Married couples earning less than $150,000 were also eligible.
Individuals who have reached these levels and are retired are subject to income tax rates ranging from 1.7% to 5.9%. It applies to social security benefits.
Rhode Island
Residents must be the FRA’s full retirement age of 67 to be exempt from taxes on Social Security income. Individuals with annual gross incomes under $95,800 and couples under $119,750 qualify. Otherwise, residents face income tax rates of 3.75% to 5.9%, covering Social Security benefits.
Montana
In Montana, single retirees earning less than $25,000 don’t pay taxes on their Social Security benefits. This is the same for married couples earning less than $32,000, aligning with federal rules. There’s a bill being considered to remove the state’s tax on Social Security income completely. However, the future is uncertain.
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