With tax season quickly approaching, Social Security beneficiaries will be prepared to be taxed by the federal government if their total income exceeds a certain level.
But some retirees may not realize that some states will also tax Social Security.
About a dozen states will tax the benefit for tax year 2023, each with different rules. Most will determine whether or not you need to pay based on your age and income.
In 2023, Social Security beneficiaries received the largest increase in their payments in four decades. As inflation reached a 40-year high in 2022, millions of Americans received an 8.7% increase in their benefits — an additional $140 per month on average.
This jump in income means some beneficiaries may take a hit this tax season. Below is a breakdown of the rules for each state.
Dozens of states will tax the benefit for tax year 2023, each with different rules
How Social Security is taxed varies, but tends to depend on age and income — but experts recommend checking the guidelines for where you live if you’re not sure.
In Colorado, if you’re 65 or older and your Social Security benefits included in your federal taxable income amount to more than $24,000, you can subtract the full amount of those benefits from your state tax return.
But if you’re under 65, you’ll only be taxed on up to the first $20,000.
In Connecticut, 25 percent of your benefits may be taxed if your income exceeds a certain level.
For single filers, the minimum adjusted gross income (AGI) is $75,000, and for married joint filers it is $100,000.
In Kansas, if your average gross income is above $75,000, you will be taxed on Social Security.
Minnesota has its own state rules regarding Social Security fees. The benefits are exempt from income tax, but begin to phase out for individuals earning more than $82,190 and couples earning more than $105,380.
In Missouri, if your income (excluding Social Security benefits) is higher than $85,000 for a single person or $100,000 for a married couple, you will have to pay some state taxes.
But you may be exempt if the amount your income exceeds the earnings limit is less than the amount you receive in Social Security.
People living in Montana are taxed on their benefits depending on their income.
For tax year 2023, Nebraska residents’ Social Security checks will be taxed at 60 percent. But as of the 2024 tax season, this tax is scheduled to be eliminated.
In New Mexico, only high-income earners are taxed on Social Security.
Single taxpayers with an AGI of less than $100,000, married couples filing jointly with income less than $150,000, and married couples filing separately with income less than $75,000 are exempt.
Single Rhode Islanders earning more than $101,000, couples filing jointly with income more than $126,250 and anyone under retirement age will be taxed.
People in the state who fall below these thresholds may receive a tax break for up to $20,000 in Social Security income.
In 2023, Social Security beneficiaries received the largest increase in their payments in four decades, meaning some beneficiaries may take a hit this tax season.
In Utah, Social Security will be taxed depending on how much you earn. If you are single, the minimum is $45,000, $75,000 if you are head of household or married filing jointly and $37,500 if married filing separately.
Residents who earn less than these thresholds may be able to claim a non-refundable tax credit.
Vermont single taxpayers who earn less than $50,000 and joint filers with an AGI of less than $65,000 do not pay tax on Social Security.
For all other applicants, the earnings limit for full exemption is $50,000. After these levels, the exemption begins to gradually disappear.
West Virginia law states that residents’ benefits may be taxable if they earn more than $50,000 as a single filer, or $100,000 as a married couple filing jointly.
For tax year 2024, some states will stop taxing residents on Social Security, including Missouri and Nebraska.
The best way to reduce taxes on Social Security benefits is to limit your income by investing in a Roth IRA, according to USA Today.
A Roth IRA is a retirement account where you pay taxes on the money deposited into your account, meaning all future withdrawals are tax-free.