Race Day Live – Retirees whose income reaches a specific threshold must pay federal income taxes on their Social Security benefits. However, tax obligations do not end there for everyone.
In rare cases, you may owe state income taxes on your Social Security benefits. Knowing which states have these taxes can help you plan for retirement.
Here are the states where residents may incur additional income taxes on Social Security earnings.
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Utah
Utah Governor Spencer Cox has advocated removing state Social Security taxes. For the time being, some residents must continue to pay this tax.
Some individuals, however, can claim a tax credit for Social Security taxes. The Utah state government has a worksheet available on their website that can assist you in determining whether you are eligible for the break.
Utah has a flat state income tax of 4.55%.
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Colorado
Colorado taxes some Social Security income. Taxpayers between the ages of 55 and 64 can deduct up to $20,000 in Social Security payments from their state-taxable income.
After the age of 65, Colorado taxpayers can deduct up to $24,000 of their Social Security benefits from their state taxable income.
Colorado’s individual income tax rate is steady at 4.4%.
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Connecticut
Individual Connecticut taxpayers with an adjusted gross income of $75,000 or less can deduct all of their Social Security income from their state taxable income. The adjusted gross income level for married couples filing jointly is $100,000.
Such with incomes over such criteria continue to receive a partial exemption from state taxes. State taxes on Social Security benefits do not exceed 50% of the benefits received.
Connecticut income taxes range between 2% and 6.99%.
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Minnesota
Minnesota residents can deduct at least a portion of their Social Security benefits from their state taxable income.
Single taxpayers who earn $82,190 or less are completely exempt from state Social Security taxes.
If your combined income is $105,380 or less, your Social Security benefits are completely exempt from state taxes. Those who earn more than these amounts will have to pay some state taxes on their Social Security income.
Minnesota income taxes range between 5.35% and 9.85%.
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Montana
In Montana, single filers with an income of less than $25,000 and joint filers with an income of less than $32,000 do not pay state taxes on Social Security benefits. Others may owe such taxes, however.
Montana’s income taxes range between 4.7% and 5.9%.
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New Mexico
In New Mexico, most seniors are free from paying Social Security taxes. Since 2022, single seniors with less than $100,000 in income and married couples filing jointly with less than $150,000 in income have not had to pay state income taxes on their Social Security benefits.
Those who earn more than these limits must pay state taxes on their Social Security benefits.
New Mexico’s income tax rates range from 1.7% to 5.9%.
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Rhode Island
Rhode Island pensioners who have achieved full retirement age will not be taxed on their Social Security payments if their income is $101,000 or less for singles or $126,250 for married couples filing jointly.
If your income exceeds this limit, you must pay taxes on your Social Security benefits.
Rhode Island’s income tax rates range from 3.75% to 5.99%.
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Vermont
Vermont provides Social Security income exemptions to people with specified income levels.
For married couples and civil unions filing jointly, Social Security benefits are exempt from state taxes if their adjusted gross income is $65,000 or less. Single filers are excluded if their income is $50,000 or less.
Others will have their Social Security income subject to state levies.
Vermont’s income tax rates range from 3.35% to 8.75%.
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West Virginia
West Virginia is currently phasing away the taxes on Social Security benefits, which is good news for residents hoping to improve their finances.
Residents earning less than $50,000 — or less than $100,000 for joint filers — do not now pay these taxes. Social Security taxes are being reduced for anyone earning more than these amounts. By 2026, the tax will be eliminated entirely.
West Virginia’s income tax rates range from 2.36% to 5.12%.
Conclusion
Social Security benefits are subject to federal and state taxes, which can significantly effect your retirement budget. For those wanting a more comfortable financial condition, consider strategies to augment your Social Security income, such as working part-time or starting a side venture.
No matter what your bank account balance is, there is always room to optimize and improve your money. Here’s a quick selection of things to look at today.
Debt can prevent you from making progress toward your overall financial well-being. Aside from decreasing spending, there are methods available to help you pay off debt faster, such as balance transfer credit cards and debt counseling.
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