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Retirees in These 12 States Risk Losing Some of Their Social Security Checks

Published

2 weeks ago

November 6, 2023

Retirees in These 12 States Risk Losing Some of Their Social Security Checks.The impact of your retirement location on your retirement costs is widely known. Choosing to retire in Santa Monica, California, will likely require a larger budget compared to retiring in Myrtle Beach, South Carolina. This aspect of retirement expenses is clear-cut, but it’s essential to consider how your retirement income, particularly Social Security, may be influenced.

For a significant number of individuals, Social Security constitutes a substantial portion of their retirement income. Regrettably, retirees residing in these 12 states need to be mindful that they might have to return a portion of that income to the government.

Social Security benefits are taxed in which states?

There is both good news and bad news regarding the taxation of Social Security benefits. The good news is that in 38 states, Social Security benefits are not subject to taxation. However, the bad news is that in certain circumstances, 12 states have the potential to tax at least a portion of your Social Security benefits. These states are:

Colorado
Connecticut
Kansas
Minnesota
Missouri
Montana
Nebraska
New Mexico
Rhode Island
Utah
Vermont
West Virginia

It’s important to note that the taxation of Social Security benefits in these states is not guaranteed. Each state has its own specific rules regarding whom they tax and to what extent.

For instance, in Colorado, individuals aged 65 and older can fully deduct Social Security benefits from their state income. However, those between the ages of 55 and 64 must pay a 4.4% tax on retirement income exceeding $20,000, including Social Security. On the other hand, in Kansas, only retirees with an adjusted gross income (AGI) over $75,000 are required to pay taxes.

To illustrate, a 66-year-old retiree with an AGI of $80,000 would owe taxes on Social Security benefits if they lived in Kansas but not if they resided in Colorado. Conversely, a 63-year-old retiree with an AGI of $60,000 might potentially owe taxes in Colorado but not in Kansas.Therefore, it is crucial to have knowledge of how your state treats Social Security benefits as well as retirement income in general to make informed decisions.