Does your state tax social security benefits?


We give the government a large part of our income during our working life, part of which comes back to us later in the form of social security benefits. But even that might not be entirely ours. The governments of 13 states impose certain social security benefits on the elderly, forcing them to rely more on their personal savings to cover their expenses.

Knowing which states they are and how they calculate Social Security benefit taxes can help you make informed decisions about where you want to live in retirement and how much you need to save on your own.

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The 13 states that tax social security benefits

The following states have taxes for Social Security benefits:

  1. Colorado
  2. Connecticut
  3. Kansas
  4. Minnesota
  5. Missouri
  6. Montana
  7. Nebraska
  8. New Mexico
  9. North Dakota
  10. Rhode Island
  11. Utah
  12. Vermont
  13. West Virginia

But just because you live in one of these states doesn’t mean you will have to pay taxes on your benefits. Each state has its own formula that determines what percentage of beneficiaries’ benefits are taxable.

For example, Kansas residents only pay Social Security income taxes if their Federal Adjusted Gross Income (AGI) is greater than $ 75,000, regardless of their tax filing status. Other states have different limits for different filing statuses. The only way to know for sure if you will have to pay state taxes on your Social Security benefits is to check with your state’s Department of Revenue.

It might be possible to avoid state taxes by limiting your spending in retirement. Or if you’re not attached to where you live, you might consider moving to a state that doesn’t impose tax benefits. But even then, you may not be able to completely avoid taxes on Social Security benefits.

The federal government also taxes benefits

The federal government also taxes social security benefits for some seniors based on their interim income. This is your AGI, plus tax-free interest and half of your annual Social Security benefits.

If the interim income exceeds $ 25,000 for an individual or $ 32,000 for a married couple, the government can tax up to 50% of Social Security benefits. If the provisional income exceeds $ 34,000 for an individual or $ 44,000 for a married couple, the government can tax up to 85% of the benefits.

But just because you might owe tax on that amount doesn’t mean you actually will. The formula that determines how much of your Social Security benefits are actually taxable is beyond the scope of this article, but here’s a guide to federal taxes on Social Security benefits if you want to learn more.

How to keep more of your benefits

Keeping track of your spending in retirement is essential to maintaining as much of your Social Security benefits as possible. The money you withdraw from Roth accounts will not count against you, as these withdrawals are generally tax free. But the money taken from tax-deferred retirement accounts will increase your AGI.

It may be possible to keep your interim income low enough to avoid benefit taxes, but it is not possible in all situations. If that doesn’t work for you, the best thing to do is estimate how much you might owe and make sure you’re saving enough money on your own to cover those taxes.

The rules regarding the taxation of Social Security benefits could change by the time you register, so it is important to stay abreast of any new laws at the state or federal level that could affect the amount you owe. . Readjust your retirement plan whenever something changes so you don’t have any surprises when you start claiming benefits.

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