10 States Still Tax Social Security Benefits, Is Your state one of them?

Despite reductions in tax rates, ten U.S. states continue taxing Social Security benefits in 2024, impacting retirees' financial planning.

Written byPraveen Singh

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10 States Still Tax Social Security Benefits: Readers who want to get benefits offered by Social Security should think before deciding the state in which they want to retire. Apart from thinking about the climate and other factors, it is important to know that there are many states in the country which tax the social security benefits. There are 10 States Still Tax Social Security Benefits. So, is your state one of them? Check out the list of 10 States Still Tax Social Security Benefits along with the tax rate and exemption below.

10 States Still Tax Social Security Benefits, Is Your state one of them?

10 States Still Tax Social Security Benefits

Please note that it is not hard to live in a state where the tax is deducted from Social Security. The cost of living is also lower than in other states so people live easily without worrying about basic needs. Below is the list of 10 States Still Tax Social Security Benefits along with some essential information regarding it:

Colorado

The citizens of Colorado will still get the benefits of social security after tax. However, it must be noted that the taxes are charged only to people whose age is less than 65 years old. The rate at which the tax is deducted is flat at 4.4%.

Connecticut

The income tax rate on social security for Connecticut revolves around 3 to 6.99%. The retirees can deduct most and even all of their benefit income depending upon the AGI as well as the filing status. Many beneficiaries do not have to pay any state taxes on their benefit if the AGI of the single person is less than $75,000 and $ 100,000 for couples who are filing jointly. If the income exceeds the mentioned one, 75% of the received Social Security is still tax-exempted.

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Kansas

The tax rate in Kansas revolves around 3.1% to 5.7%. The state taxes the social security benefits as all other forms of income. However, retirees whose AGI is upto $ 75,000) will not have to pay any state tax on their social security income, no matter the filing status.

Minnesota

Minnesota uses the threshold which is used by the federal government of Canada to estimate the amount which must be taxed on the Social Security benefit. Individuals who have to pay taxes on their social security can save some amount i.e., partial deduction by using Minnesota’s Social Security Subtraction. 

In 2022, people who are single or couples can save upto $4,260 and $5,450 of their federally taxable benefits from their income in Minnesota. This offer is not available for people who have higher incomes. People who are filing as single and couple with AGI of $ 64,670 and $ 85,970 are eligible for only partial exemption. People whose income is more than  $85970 and $110,020, cannot be an exemption, the income rate revolves around 5.35 to 9.85%.

Montana

The Social Security Income Tax Rate is between 1 to 6.75% in Montana for the 2022 fiscal year. It must be noted that Montana rarely uses the methods used by the federal government to estimate the amount owned by someone. Retirees whose AGI is less than $25,000 for single filers or $32,000 for married couples filing jointly will not have to pay tax on the Social Security benefits. The tax rate is scheduled to drop to 5.9% for the 2024 fiscal year.

New Mexico

The income tax rate revolves around 1.7% to 5.9% in New Mexico. New Mexico uses the same method used by the federal government to offer exemptions for people with lower incomes. The Social Security benefit is considered as the other form of income for tax for people with high income. However, people who are single or couples filing jointly, ages 65 or older with AGI up to $28,500 and $51,000 may cut up to $ 8,000 in the income which consists of Social Security payments.

Rhode Island

Rhode Island also tax the Social Security Income. The rate at which the income is deducted is 3.75% to 5.99%. It must be noted that the states do not tax the SSI of retirees who are at their full retirement age i.e., 66 to 67 years old and earn less than $ 95,800 for single filers or $119,750 for married couples filing jointly.

Utah

Utah used the same method as the federal government to take out the amount at which the benefits would be taxed at the rate of 4.65%. However, Utah provides partial and full credit on the taxable benefits.

Vermont

The rate at which the Social Security benefits are taxed is 3.35% to 8.75%. However, the state provides an exemption of some amount to the beneficiaries based on the income amount.

West Virginia

The tax rate is 3 to 6.5%. However, the state is slowly reducing the amount of SS benefits for people with low income. 

Frequently Asked Questions

Which State Is the Most Tax-Friendly for Retirees?
There are no official tools to measure which state is the most tax-friendly. However, Delaware is considered one of the best states for retirees in terms of taxes.

Which States Don’t Tax Social Security Benefits?
Out of 50 states, 10 states still levy tax on social security benefits and the remaining states do not put any tax.

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