When planning for retirement, an important aspect to consider is the taxation of Social Security benefits. The federal government taxes these benefits under certain conditions but the rules can vary significantly at the state level. Some states follow federal guidelines, while others choose to tax Social Security income to varying degrees.
Social Security benefits
Social Security benefits are financial payments provided by the United States government to eligible persons and their dependents. Social Security benefits are administered by the Social Security Administration (SSA), a federal agency. The purpose of these benefits is to provide income support to retired and disabled persons, as well as to provide survivor benefits to the families of deceased workers.
12 States that levy a tax on Social Security benefits
|State||Social Security Income Tax|
|Colorado||4.4% (only on recipients under age 65)|
State policy on Social Security Benefits: Tax rate, beneficiaries
Of all 50 U.S. states, 38 states and the District of Columbia do not tax Social Security benefits. Among them, the states of Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not collect state income taxes at all. However, there are 12 states that tax Social Security benefits. More information about the tax policy and beneficiaries of these states is given below.
Colorado: Colorado Social Security income tax rate is 4.4% and it benefits only on recipients under age 65.
Connecticut: Connecticut’s Social Security income tax rate ranges from 3% to 6.99%. If beneficiaries’ AGI is less than $75,000 (for single filers) or $100,000 (for married couples filing jointly), beneficiaries pay no state taxes on their benefits. Above these limits, 75% of Social Security income is still tax-free.
Kansas: Social Security benefits are taxed at the same rate as all other types of income, with tax rates ranging from 3.1% to 5.7%. Retirees with AGI up to $75,000 are exempt from paying state taxes on their Social Security income.
Minnesota: Minnesota’s Social Security income tax ranges from 5.35% to 9.85%. In 2022, single filers and couples filing jointly can exclude federal taxable benefits from their Minnesota income up to $4,260 and $5,450, respectively.
Missouri: Missouri’s Social Security income tax rate can be as high as 5.3% and as low as 0%. Single filers and couples filing jointly who are age 62 and older and whose AGI is less than $85,000 and $100,000, respectively, will be able to have their Social Security benefits cut entirely.
Montana: In Montana, Social Security income tax rates for the 2022 tax year range from 1% to 6.75%. Retirees with an AGI of $25,000 (single filers) or $32,000 (married filing jointly) are not subject to taxes on their Social Security benefits.
Nebraska: Nebraska’s Social Security tax is being gradually reduced. For the 2023 tax year, rates range from 2.46% to 6.84%. Single filers and couples filing jointly are exempt from taxes on Social Security benefits if their AGI is less than $45,790 and $61,760, respectively.
New Mexico: New Mexico taxes Social Security income at rates ranging from 1.7% to 5.9%. Single filers age 65 and older with an AGI between $28,500 and $51,000 and couples filing jointly can deduct up to $8,000 of income, including Social Security payments.
Rhode Island: Rhode Island taxes Social Security income at a rate of 3.75% to 5.99%. The state does not tax benefits for retirees who are at full retirement age (ages 66-67) and earn an AGI of less than $95,800 (single filers) or $119,750 (married filing jointly).
Utah: With a tax rate of 4.65%, Utah offers a partial or full credit on taxable gains. Single filers and couples filing jointly with AGI of less than $45,500 and $75,000, respectively, are eligible for the full tax credit on their benefit income in 2023. Higher income groups still get partial tax exemption.
Vermont: Social Security income in Vermont is taxed at a state rate of 3.35% to 8.75%. Single filers with AGI up to $50,000 are eligible for a full exemption from state taxation of their Social Security benefits. People who earn $50,001 to $59,999 are eligible for a partial exemption.
West Virginia: West Virginia’s tax rate ranges from 3% to 6.5%. Starting in the 2022 tax year, single filers making up to $50,000 and couples making up to $100,000 can deduct 100% of their Social Security benefits from their state income.