Once you start receiving Social Security benefits, you’ll owe federal taxes on a portion of the payments if your income exceeds certain thresholds. You might also owe state taxes on the benefits depending on where you live.
For the 2023 tax year, 11 states tax Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah and Vermont. All other states and the District of Columbia do not tax the payments.
West Virginia had previously taxed Social Security payments but started phasing out the tax in 2020. Several other states are either in the process of phasing out the tax or are exploring eliminating the tax entirely.
Here’s what else you should know about states that tax Social Security.
States that tax Social Security payments
Below you’ll find the tax rates for each state that taxes Social Security as well as any exemptions.
Colorado’s state tax rate is 4.40 percent for the 2023 tax year. Taxpayers who are 65 and older as of Dec. 31of the tax year can subtract either $24,000 or their taxable pension/annuity income (including Social Security benefits), whichever is smaller, from their federal taxable income.
Connecticut’s state income tax rate ranges from 2 percent to 6.99 percent. In general, Social Security benefits that are taxable at the federal level are also subject to Connecticut income tax. However, the state tax on benefits is limited to 50 percent of the benefits received, even if a greater percentage of your benefits are subject to federal income tax.
State income tax rates in Kansas range from 3.1 percent to 5.7 percent. Social Security benefits are exempt from Kansas state income tax if your federal adjusted gross income is $75,000 or less, regardless of your filing status.
Minnesota state income tax rates range from 5.35 percent to 9.85 percent. Minnesota allows taxpayers to subtract a portion of their Social Security payments from their adjusted income as long as they meet certain income thresholds. A new law, effective for tax year 2023 and later, allows taxpayers to subtract the greater of a new Simplified Method of calculating the subtraction, The new method allows taxpayers with AGIs below $100,000 for married joint returns — or $78,000 for single or head of household filers — to subtract all taxable Social Security benefits.
Missouri state income tax rates range from 1.50 percent to 4.95 percent. Missouri allows Social Security income to be 100 percent exempt from taxes if the taxpayer is age 62 or older and their adjusted gross income is less than certain thresholds. A bill to completely eliminate taxes on Social Security was signed into law in July 2023.
Montana state income tax rates range from 1.0 percent to 6.75 percent. A portion of Social Security payments may be deductible depending on your income level.
Nebraska state income tax rates range from 2.46 percent to 6.84 percent. Nebraska began phasing out its tax on Social Security payments in 2022. For the 2022 tax year, 40 percent of Social Security payments can be deducted from your adjusted gross income. Certain low-income taxpayers will be able to deduct all Social Security benefits. The tax will be eliminated completely beginning in 2024.
New Mexico state income tax rates range from 1.70 percent to 5.90 percent. For the 2022 tax year, most seniors in New Mexico will be exempt from Social Security taxes thanks to recent changes in the law. Seniors with incomes below the following levels will not have to pay taxes on Social Security:
Single taxpayers: $100,000
Married filing jointly, surviving spouses and heads of household: $150,000
Married filing separately: $75,000
Rhode Island state income tax rates range from 3.75 percent to 5.99 percent. If you’ve reached full retirement age and received Social Security benefits during the year, Rhode Island provides an exemption as long as your income is below the following levels for the 2022 tax year:
Single, married filing separately, head of household: $95,800
Married filing jointly: $119,750
Utah has a flat state income tax of 4.65 percent. Utah allows for a tax credit for Social Security payments based on adjusted gross income thresholds of $37,000 for single filers, $31,000 for married filing separately and $62,000 for married filing jointly.
Vermont state income tax rates range from 3.35 percent to 8.75 percent. Vermont offers an exemption for taxpayers with low to middle income levels. The exemption applies in full for married filing jointly and civil union filing jointly up to $65,000 in adjusted gross income. For all other filers, the income threshold for the full exemption is $50,000. The exemption phases out beyond those levels.
Understanding how your Social Security benefits will be taxed is an important part of preparing for retirement. Most states don’t tax these payments at all, but some still do. While many retirees consider these tax issues when choosing where to spend their golden years, remember that Social Security taxes are just one element of the equation to consider. Sales tax, property taxes and the overall cost of living should also impact your decision on where to retire.