Social Security Benefits Are Taxed in 10 States in the United States

Social Security Benefits Are Taxed in 10 States in the United States.Many Americans are under the impression that once they start receiving Social Security retirement benefits, they are exempt from taxes. However, this is a misconception. In several states, these benefits are taxable, and the rules can vary significantly from one state to another.

Social Security Benefits Are Taxed in 10 States in the United States

1. Colorado: Social Security benefits may be taxed for individuals younger than 65.
2. Kansas: Taxes are levied on Social Security retirement benefits, but only for retirees with an income exceeding $75,000 annually.
3. Missouri: This state also imposes taxes on retirement benefits, but there are exceptions.

   Exceptions in Missouri:

   • Single filers, qualifying widows or widowers, heads of household, or those married filing separately can avoid this tax if their gross income is $85,000 or below.
   • Married couples filing jointly are exempt if they earn $100,000 or less. However, this rule is set to change in 2024, eliminating taxes on SSA benefits.
4. Montana: The state’s taxation on retirement benefits mirrors the Federal government’s approach.
5. Nebraska: While Nebraska currently taxes retirement benefits, this will change in 2024 when the tax will be abolished.
6. New Mexico: The state taxes SSA retirement benefits based on annual gross income. Singles earning $100,000 or less can avoid this tax. For married couples filing jointly, qualifying widows/ers, or heads of households, the threshold is $150,000 or less.
7. Other States: Rhode Island, Utah, Vermont, and West Virginia also tax Social Security retirement benefits.

Conclusion: While the number of states taxing SSA retirement benefits is decreasing, it’s crucial for retirees to be informed. Before relocating in retirement, it’s advisable to research the tax implications in the desired state, especially since over ten states still impose this tax.