( Spanish) — More than 10 states tax Social Security benefits, though rates and deductible amounts vary widely and depend on your income and, in some cases, your age as well. Here is a guide to understand how much you should pay where.
Both the federal government and some state governments collect taxes on Social Security benefits. Below we explain how each payment is.
Federal taxes on Social Security benefits
If you have substantial income beyond Social Security benefits, such as from wages, interest, or dividends, among other categories, you may have to pay federal taxes on those benefits.
According to him regulations of the Internal Revenue Service IRS, you may have to pay taxes on up to 50% of benefits if you file a tax return as an individual and your combined income (a term for adjusted gross income plus interest and half of Social Security benefits) is between $25,000 and $34,000. If your combined income exceeds that figure, up to 85% of benefits may be taxable.
If you file a joint return with your spouse and their combined income is $32,000 to $44,000, you may have to pay taxes on up to 50% of your Social Service benefits. The figure increases to 85% if the combined income is more than $44,000.
If you’re married and file a separate tax return, according to the government you’ll likely pay taxes on the benefits.
What happens at the state level?
According to the non-profit organization AARP, there are 12 states where Social Service benefits are taxed. However, there are multiple full or partial exemptions that generally depend on one or two factors: income and age. Here, a review of the situation state by state.
Colorado
At the state-set rate, benefits pay 4.55% tax, but residents can deduct up to $20,000 in retirement income if they’re 55 to 64 and up to $24,000 if they’re 65 and older. In addition, beginning in tax year 2022, benefits that are taxed at the federal level can be deducted.
Connecticut
You pay state tax on the benefits if your individual adjusted gross income is more than $75,000 (and more than $100,000 for couples filing jointly). In these cases, you may have to pay up to 25% of the benefits.
Kansas
You pay state taxes on the benefits if your individual adjusted gross income is greater than $75,000. The rate ranges between 3.1% and 5.7%.
Minnesota
This state follows the federal rules explained initially to define who should pay taxes on their benefits. However, it also has a rule called “Social Security subtraction” that allows a partial deduction excluding up to approximately $4,000 of taxable benefits. This possible reduction is eliminated for those who have income of more than US$62,710 ($80,270 in the case of couples filing jointly).
Missouri
You pay state tax on the benefits if your individual adjusted gross income is more than $85,000 (and more than $100,000 for couples filing jointly) and you’re under age 62, though partial deductions may apply. The rate ranges between 0 and 5.4%.
Mountain
You pay taxes on the benefits if your overall income is more than $25,000 ($32,000 for couples filing jointly), the same thresholds as the federal government. The rate ranges between 1 and 6.9%.
Nebraska
You pay taxes on the benefits if your individual adjusted gross income is more than $44,460 (and more than $59,960 for couples filing jointly). The rates are between 2.46% and 6.84%, although according to the AARP as of 2021 Nebraska “is phasing out taxes on benefits.” The reduction in taxes on benefits will reach 60% by 2025 and there will have to be a vote on whether to maintain those taxes for 2030 or remove them.
New Mexico
Starting in 2022, under a law approved by state legislators and signed by the governor, everyone with an individual adjusted gross income of less than $100,000 ($32,000 for couples filing jointly) can deduct benefit income. ). Rates range from 1.7% to 5.9%.
Rhode Island
In Rhode Island, rates between 3.75% and 5.99% are charged, but there are big exceptions. Those who have reached full retirement age (which, depending on the year of birth, can range between 66 and 67 years) and have an individual adjusted gross income of less than US$86,350 ($107,950 in the case of couples filing jointly).
Utah
Utah charges a 4.9% rate, but you can get deductions — a full or partial credit on those taxable benefits — if you have less than $30,000 in individual income ($50,000 for couples filing jointly).
Vermont
You pay taxes on the benefits if your individual adjusted gross income is more than $45,000 (and more than $60,000 for couples filing jointly). If your income is between US$45,001 and US$54,999, you get a partial exemption.
If you earn at least $55,000 ($70,000 for couples filing jointly) you must pay all income tax, which ranges from 3.35% to 8.75%.
W.V.
You pay taxes on the benefits if your individual adjusted gross income is more than $50,000 (and more than $100,000 for couples filing jointly). The rate is between 3% and 6.5%.
