37 States not taxing social security benefits Smart Change: Personal Finance
37 States not taxing social security benefits  Smart Change: Personal Finance

37 States not taxing social security benefits Smart Change: Personal Finance

(Selena Maranjian)

Social security is unlikely to provide you with the kind of income you might have hoped for. Recently, the average monthly retirement benefit was actually $ 1,665 – equivalent to about $ 20,000 a year.

This news is bad enough, but here’s some worse news: a bunch of states are taxing some or all of the citizens’ social security income. Fortunately, most states do not. Here’s a look at which states tax and do not tax social security – plus some insurance, even if your state do tax it.

Image Source: Getty Images.

Where social security is taxed

Let’s start with the bad news first. Here are the 13 states that tax social benefits:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New mexico
  • North Dakota
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

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The 37 states that do not tax your social benefits

You can now use the elimination process to see which states do not tax social security, but here is a handy list to save you the hassle:

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Mississippi
  • Nevada
  • New Hampshire
  • New Jersey
  • New York
  • North Carolina
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Virginia
  • Washington
  • Wisconsin
  • Wyoming

You can also add Washington, DC to this list.

Go ahead and breathe a sigh of relief if you live in one of the states above (or Washington, DC) – but remember to keep the big picture in mind. Many states may not tax your retirement benefits or any earned income – but they still need income to keep the lights on. So in general, while a state may not tax income, it is likely to compensate for it through other taxes, such as on property and / or sales. If you are ever going to compare or make decisions based on a region’s tax rate, be sure to take all taxes into account.

Good news – even if you live in one of the 13 states

In the meantime, if you do living in one of the 13 states that tax social security, you may still be in the clear, or may face a rather small tax bite. Most of the 13 states do not tax particular benefits, and they are all different in how they approach social security taxation. To find out what the tax information is, where you live, look up the information for your state.

As an example, here’s what the state of Kansas says about the case: “If your federally adjusted gross income is $ 75,000 or less, regardless of your application status, your social security benefits are exempt from Kansas income tax. in your federally adjusted gross income. “

If you are hit by a tax, it will most likely be a single-digit tax rate and most likely a low single-digit tax rate.

Federal taxation

While you may be exempt from state taxation of your social benefits, you may not escape federal taxation. Uncle Sam does tax some pension incomeincluding social security.

Up to 85% of your benefits can actually be taxed. The table below shows the tax limits. Note that your “total income” is your adjusted gross income (AGI) plus non-taxable interest plus half of your social security benefits:

Filing as Total income Percentage of taxable benefits

Simple individual

Between $ 25,000 and $ 34,000

Up to 50%

Married, files together

Between $ 32,000 and $ 44,000

Up to 50%

Simple individual

More than $ 34,000

Up to 85%

Married, files together

More than $ 44,000

Up to 85%

Data source: Social Security Administration.

If you find yourself hyperventilating and think you’ll have to give over 50% or 85% of your benefits, take it easy. It is up to 50% or 85% of your benefits that may be affected by tax, which means that between 15% and 50% will not be affected. And on the part that is taxable, your rate can be 12% or 22%, for example.

So do not worry too much about getting your social benefits taxed. But spend some time learn more about social security. The more you know, the more you may be able to wriggle out of the program, and it may make your retirement more secure.

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