What states tax social security?

Social Security is one of the primary sources of retirement income for most retirees. Though retirees expect a tax-free retirement, Social Security benefits are subject to income taxes from the federal government up to a specific limit. Some state governments also impose income taxes on Social Security benefits.

Twelve states tax some or all of Social Security benefits. These states are Colorado, Nebraska, Connecticut, Utah, Kansas, Minnesota, Vermont, Missouri, Montana, New Mexico, Rhode Island, and West Virginia. Each of these states has different income thresholds where benefits are subject to state-level income taxes, while a few of these states are gradually phasing out income taxes on Social Security benefits.

How are Social Security Benefits taxed?

Social Security benefits have been subject to income taxes since 1983. However, the amount of benefits taxed varies depending on the combined income and filing status.

Typically, the amount of benefits subject to federal income taxes should not exceed 85% of the total benefits. For single filers, Social Security taxes up to 50% for income thresholds of $25,000 to $34,000, and up to 85% if the income exceeds $34,000 annually. For married filing jointly, Social security taxes up to 50% for income thresholds of $32,000 to $44,000, or up to 85% if the income exceeds $44,000 annually.

While states like Texas and Florida do not charge state income taxes on Social Security benefits, there are states that levy state-level Social Security income taxes. However, states that impose Social Security income taxes have higher income thresholds than the income thresholds at the federal level. For example, Kansas residents earning below $75,000 do not pay state-level Social Security taxes.

States that tax Social Security

Colorado

Coloradans pay a flat state income tax rate of 4.55% on Social Security payments earned in Colorado. However, residents between ages 55 and 64 qualify for a deduction of up to $20,000 in income, including Social Security payments. Residents who are 65 and older qualify for a deduction of up $24,000, and these deductions can be claimed by both spouses in a marriage. Starting in 2022, the state allows residents to deduct all benefits from their state income, which is part of the tax-code overhaul enacted by Colorado lawmakers.

Connecticut

The state income tax rate in Connecticut ranges from 3% to 6.99%. Typically, retired workers can deduct some or all of their benefits, depending on their adjusted gross income (AGI) and filing status. Single filers with declared earnings below $75,000 and couples filing jointly with declared earnings below $100,000 are not subject to state income taxes on their benefits. However, if the income exceeds these thresholds, 75% of the Social Security benefits will be tax-exempt.

Kansas

Kansas has a state income tax rate starting from 3.1% to 5.7%, and Social Security benefits are taxed at the same rate as other incomes. Social Security beneficiaries do not pay Social Security taxes if their annual adjusted income is below $75,000, for both single filers and married filing jointly.

Minnesota

Minnesota uses a similar formula as the federal government to determine how much benefits should be taxed. Residents who owe taxes on their benefits can benefit from the Social Security Benefit Subtraction to get a partial deduction. For 2022, the maximum subtraction is $4,260 for single filers and heads of household, $2,725 for married filing separately, and $5,450 for married couples. There is a partial exemption for single filers with AGIs of at least $64,670 or $82,770 for married filing jointly.

Missouri

State income taxes in Missouri range from 0% to as high as 5.4%. The state exempts single filers and married couples filing jointly who are 62 years older with incomes below $85,000 and $100,000 respectively from state income taxes on Social Security benefits. If your income is above these income thresholds, you will get a partial deduction on state income taxes, but the deductions are gradually phased out beyond certain limits.

Montana

The state-level income taxes on Social Security range from 1% to 6.75%. The state does not tax Social Security benefits for people with overall incomes of less than $25,000 for single filers and $32,000 for couples filing jointly. However, the state imposes income taxes for residents whose earnings exceed these thresholds. The state provides a worksheet that residents can use to determine the taxes they owe on their Social Security benefits. 

Nebraska

Nebraska’s state-level income taxes on Social Security range from 2.46% to 6.84%. The state exempts Social Security benefits from state income taxes for single filers and married couples filing jointly if their AGI is below $44,460 and $55,960 respectively. If your income is above these thresholds, you will pay state income taxes on your monthly benefits.

Starting in 2021, Nebraska introduced a new law that phases out the taxation of benefits in annual increments through 2025. The new law reduces the taxable share of Social Security in steps to 50% by 2025 when lawmakers will be expected to vote on whether to eliminate the income taxes on Social Security benefits.

New Mexico

New Mexico’s state-level income taxes on Social Security benefits range from 1.7% to 5.9%. Residents who are age 65 or older with incomes above $25,000 for single filers and $32,000 for married filing jointly will have their Social Security benefits taxed as other incomes. However, residents can deduct up to $8,000 if the declared income is below $28,500 and $51,000 for single filers and married couples filing jointly respectively.

Rhode Island

The state-level income taxes in Rhode Island range from 3.75% to 5.99%. The state exempts retirees who have reached their full retirement age from state income taxes if their AGI is below $86,350 and $107,950 for single filers and married filing jointly respectively.

Utah

Utah imposes a tax rate of 4.95% on Social Security benefits, and it uses a similar formula as the federal government to determine the amount of taxable benefits. As of 2021, the state offers partial or full credit on Social Security benefits depending on the income thresholds. 

For example, residents with AGIs of less than $30,000 for single filers and heads of households and $50,000 for married couples filing jointly are eligible for a full tax credit on their Social Security benefits. If your income is above these thresholds, you will get a partial credit, which is gradually phased out by 2.5% for each dollar above these thresholds.

Vermont

Vermont has a state tax rate that ranges from 3.35% to 8.75%. The state offers a full exemption from state income taxes for single filers with an AGI below $45,000 and married couples filing jointly with an AGI below $60,000. 

For incomes above these thresholds, there is a partial exemption that is gradually phased out beyond certain thresholds. Single filers are eligible for a partial exemption at $50,000 to $60,000, while married couples filing jointly are eligible for partial exemption at income thresholds of $65,000 and $75,000.

However, for single filers and married couples filing jointly with incomes above $60,000 and $75,000 respectively, Social Security is taxed fully at the state income tax rate.  

West Virginia

West Virginia imposes income taxes ranging from 3% to 6.5%. However, the state is gradually phasing out income taxes on Social Security benefits for low and middle-income residents.

For the 2021 tax year, single filers and married filing jointly earning up to $50,000 and $100,000 respectively were allowed to deduct 65% of their benefits from state income taxes. This deduction increased to 100% in 2022 for those income thresholds. However, earnings above these thresholds are still subject to the corresponding state income tax rate on up to 85% of their benefits.