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Retirees in These 13 States Play by Different Social Security Rules

By Christy Bieber – Dec 1, 2021 at 10:03AM

Key Points

  • States set their own rules for when Social Security benefits are subject to tax.
  • Retirees need to understand the local rules.
  • Thirteen states take a different policy approach than the other 37.

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Do you live in one of them?

The rules for Social Security can be complicated, but seniors need to know them, since they determine the amount of income they'll have in their later years.

While Social Security can't be the sole source of support for most seniors, it's still an important one -- and the laws and regulations that affect it matter a great deal to those who rely on benefits to help cover the necessities.

While many of the Social Security rules are federal ones applicable across the United States, since this is a federal benefits program, retirees in 13 states should know about some specific laws in their home areas that could affect the amount of benefits they get to bring home.

In particular, seniors in these 13 locations are playing by different rules than those in the other 37 U.S. states -- and it could cost them. 

Two older adults in field together on a hike.

Image source: Getty Images.

These are the 13 states where Social Security rules for retirees are different

If you live in one of the following 13 states, you need to understand a key rule that other retirees don't need to worry about: how your state taxes Social Security benefits.

See, in 37 states, no taxes are charged on these benefits at all. But in these other 13 locations, state taxes are imposed on at least some retirees that end up reducing the amount of benefits they get to keep. The 13 states that are affected are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.

Note that if you live in one of them, that doesn't mean you'll definitely owe taxes on your Social Security income. But you could, depending upon the specific tax rules applicable in your location. So you need to research exactly when and how taxes are imposed on benefits so you can be prepared for any payments that you may owe. 

How to find out your state's rules on Social Security taxes

The best way to find out the rules that apply to you is to visit your individual state's Department of Revenue or state tax commission, which you can find at the following links:

In many states, you'll find it's possible to avoid tax liability on Social Security benefits if your income isn't very high. Some states, such as Utah, use tax credits to eliminate tax liability on retirement benefits for lower earners (those with under $30,000 in income for single filers or $50,000 for joint filers). Others, such as Colorado, have a "Pension and Annuity Subtraction" that can render some benefits nontaxable. 

But because these rules are a lot more confusing than the blanket rule of no tax on benefits that applies in the other 37 states, seniors who live in one of these locations -- or those who plan to retire in one of them -- should take the time to research how much tax they'll owe, if any.

Understanding your tax liability is an important part of preparing for your later years, as you need to ensure you have plenty of money left over to live on after fulfilling your obligations to the government. 

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