With tax season quickly approaching, Social Security recipients will be prepared to be taxed by the federal government if their total income exceeds a certain level.
But some retirees may not be aware that some states will also impose a Social Security tax.
About a dozen states will tax the benefit for the 2023 tax year, and each has different rules. Most will determine whether or not you have to pay based on your age and income.
In 2023, Social Security beneficiaries received the largest increase in their payments in four decades. With inflation hitting a 40-year high in 2022, millions of Americans received an 8.7 percent increase in their benefits — an average of $140 extra per month.
This jump in income means some recipients could take a hit this tax season. Here’s an overview of the rules for each state.
A dozen states will tax the benefit for the 2023 tax year, and each state has different rules
Methods for how states tax Social Security vary, but are usually based on age and income — but experts recommend checking the guidelines where you live if you’re unsure.
In ColoradoIf you are 65 or older and your Social Security benefits included in your federal taxable income are more than $24,000, you can deduct the full amount of those benefits on your state tax return.
But if you’re under 65, only up to the first $20,000 isn’t taxed.
In Connecticut25 percent of your benefits may be taxed if your income exceeds a certain level.
For single filers, the adjusted gross income (AGI) threshold is $75,000, and for married joint filers it is $100,000.
In KansasIf your AGI is over $75,000, you will be taxed on Social Security.
Minnesota has its own state rules for social security taxes. The benefits are exempt from income tax but are phased out for individuals earning more than $82,190 and for married couples earning more than $105,380.
In MissouriIf your income (excluding Social Security benefits) is more than $85,000 for a single person or $100,000 for a married couple, you must pay state income tax.
But you may be exempt if the amount your income exceeds the income threshold is less than the amount you receive from Social Security.
People who live in it Montana are taxed on their benefits, depending on their income.
For the 2023 tax year Nebraska Residents’ Social Security checks are taxed at 60 percent. But starting with the 2024 tax season, this levy will be abolished.
In New MexicoOnly high earners are taxed on social security.
Single taxpayers with an AGI of less than $100,000, married couples filing jointly with income less than $150,000, and married couples filing separately and earning less than $75,000 are exempt.
Single Rhode Island residents earning more than $101,000, married couples filing joint incomes of more than $126,250 and anyone under retirement age will be taxed on the benefit.
People below these thresholds in the state can get a tax break on up to $20,000 in Social Security income.
In 2023, Social Security beneficiaries received the biggest increase in their payments in four decades, meaning some recipients could take a hit this tax season
In Utah, Social Security is taxed depending on how much you earn. If you are single, the threshold is $45,000, $75,000 if you are head of household or married and filing jointly, and $37,500 if you are married, filing separately.
Residents earning below these thresholds may be able to claim a non-refundable tax credit.
Single Vermont taxpayers earning less than $50,000 and joint filers with an AGI of less than $65,000 pay no Social Security tax.
For all other filers, the income threshold for the full exemption is $50,000. Beyond these levels, the exemption begins to phase out.
West Virginia State law allows residents’ benefits to be taxed if they earn more than $50,000 as a single filer, or $100,000 if a married couple files jointly.
For the 2024 tax year, some states will stop taxing residents on Social Security, including Missouri and Nebraska.
The best way to reduce taxes on Social Security benefits is to limit your income by investing in a Roth IRA USA today.
A Roth IRA is a retirement account where you pay taxes on the money that comes into your account, meaning all future withdrawals are tax-free.