U.S. States Taxing Social Security Benefits in 2023 and 2024: Navigate Your Retirement Finances

As you approach retirement, the tax treatment of Social Security benefits varies across U.S. states, impacting your retirement income. While 37 states and the District of Columbia exempt or do not include Social Security benefits in taxable income calculations, 13 states do impose taxes on these payments. Let’s explore the states where you may incur taxes on your Social Security benefits.

States Taxing Social Security Benefits

1. New Mexico

All Social Security benefits in New Mexico are taxable, but the state provides a deduction to ease the taxation burden on all retirement income. Analyzing not only tax rates but also compensatory measures becomes crucial for retirees.

2. Utah

Utah taxes Social Security benefits but offers tax credits to eliminate liability for beneficiaries with incomes below $30,000 (single filers) or $50,000 (joint filers). Credits gradually reduce for incomes exceeding these thresholds, providing substantial tax relief for lower-income retirees.

Additional Adjustments

Several states make adjustments based on factors like age or income level:

  • Colorado: Allows subtraction of part of Social Security and pension income for those 55 or older.
  • Connecticut: Excludes Social Security benefits from income calculations for taxpayers with less than $75,000 (single filers) or $100,000 (joint filers) in adjusted gross income (AGI).
  • Kansas: Exempts benefits for taxpayers with AGI at $75,000, irrespective of filing status.
  • Minnesota: Graduated Social Security subtractions based on provisional income.
  • Missouri: 100% exemption for those 62 or older with annual income less than $85,000 (single filer) or $100,000 (joint filer).
  • Nebraska: Allows subtraction for single filers with $43,000 AGI or less ($58,000 for joint filers).
  • North Dakota: Allows subtraction if AGI is less than $50,000 (single filer) or $100,000 (joint filer).
  • Rhode Island: Modification for full retirement age taxpayers with federal AGI less than $81,900 (single filer) or $102,400 (joint filer).
  • Vermont: Graduated Social Security exemptions for income less than $34,000 (single filer) or $44,000 (joint filer).

Special Cases

  • Montana: No age or income stipulations, but Social Security benefits may be taxable.
  • West Virginia: Phasing out Social Security taxes for incomes not exceeding $50,000 (single filers) or $100,000 (joint filers) with increasing exemptions, becoming completely exempt in 2022.

Understanding your state’s approach to Social Security taxation aids in planning for a financially secure retirement.

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