Personal Finance
11 states want a cut of your Social Security check. Do you live in one of them?
Just because you paid a payroll tax during your working years to fund Social Security doesn’t mean you’re done once you retire.
Retirees may know that they will pay federal taxes on their social security benefits if their total income exceeds certain amounts. But few of them may realize that some states also will try to take a cut. Social Security benefits include monthly retirement, survivor and disability benefits.
The good news is fewer than a dozen states tax social security benefits, so chances are good you won’t get hit. While each state has different rules on what or how they will tax your social security money, age and income usually determine if you pay. It’s best to check with your state’s rules, but here are general guidelines on what you can expect.
Important information: Are you ready to file your taxes? Here’s everything you need to know to file taxes in 2023.
Which states tax social security benefits?
States that tax benefits include:
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Colorado
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Connecticut
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Kansas
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Minnesota
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Missouri
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Montana
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Nebraska
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New Mexico
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Rhode Island
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Utah
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Vermont
More state taxes to watch: State taxes can be complex if you choose to work in a different state. Here’s what to know.
State inheritance taxes: Is there a federal inheritance tax? Here’s how much inherited money is taxed state-by-state.
How are states taxing social security?
Methods vary widely so check your state’s laws, but these are generally the ways states will tax Social Security:
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Age based. For example, Coloradans under 65 may owe taxes on Social Security benefits but older people generally don’t.
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Income based. For example, Missouri taxes Social Security benefits only if your income tops $85,000, or $100,000 for married couples.
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Taxable income includes Social Security benefits. Minnesota and Utah follow federal rules to determine how much Social Security income is taxable: none for people with incomes below $25,000 for a single filer and $32,000 for a couple filing jointly, and up to 85% at higher income levels. Each though, offers either a deduction or credit to help offset the blow.
Future plans: Sen. Joe Manchin floats ‘better program’ for future Social Security, Medicare beneficiaries
Delaying Social Security: Earning a paycheck could stop your Social Security benefits. But that could be a good thing.
Can I avoid taxes on Social Security?
The best way to avoid taxes on Social Security benefits is to limit your income by investing with a Roth IRA while saving. Roth IRA withdrawals aren’t counted as taxable income. They are tax-free.
You can also hope your state eliminates its tax on Social Security benefits, as has been the trend. West Virginia phased out its tax, with last year being the first year without it. Missouri has introduced a bill to eliminate the tax there that could go into effect next year if it passes.
Retirement tips: Your ultimate guide to retirement: Savings, investments and tax tips to help you thrive
Early Social Security: Retirement considerations: 3 benefits to claiming Social Security early
More of your 2022 tax season questions answered
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Tax season 2023 officially started: Here are key deadlines to keep in mind
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1099, W-4, W-2, W-9, 1040: What are these forms used for when filing your taxes?
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What are the 2022 US federal tax brackets? What are the new 2023 tax brackets? Answers here
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2023 tax season guide for new parents: What to know about the Child Tax Credit, EITC and more
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IRS may owe you from 2020 taxes. Here’s why and what you need to do to find out if you’re owed
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What is OASDI tax on my paycheck? Here’s why you and your employer pay this federal tax
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Do you have to report crypto on taxes? Yes. Here’s what you should know about form 8949
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Tax season 2023: What exactly is the mileage rate? There’s more than one.
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Is it better to pay someone to do your taxes or do them yourself? We’ll help you decide.
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What is income tax? What to know about how it works, different types and more
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Is Social Security income taxable by the IRS? Here’s what you might owe on your benefits
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Companies can deduct full cost of business meals on 2022 tax returns
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Who has to file a tax return: It’s not necessary for everyone. Here are the rules.
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What is capital gains tax in simple terms? A guide to 2023 rates, long-term vs. short-term
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Best way to receive your 2023 tax refund? IRS says direct deposit. Here’s how to do it.
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What is FICA? How much you contribute to federal payroll taxes.
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How much is the Child Tax Credit for 2023? Here’s what you need to know about qualifying.
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A 30% national sales tax? Abolishing the IRS? What the FairTax Act of 2023 would do.
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The Inflation Reduction Act carves out an EV tax credit for 2023. Does Tesla qualify?
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: 11 states tax Social Security benefits. Do you live in one?
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