When you start taking Social Security, don't forget about the taxes. Up to 50% of your benefit is taxable at the federal level for individuals with incomes between $25,000 and $34,000, or couples with incomes between $32,000 and $44,000. And 85% of benefits are taxable for individuals and couples whose income exceeds $34,000 or $44,000, respectively.
But these aren't the only taxes Social Security recipients should account for. In 12 states, you could lose part of your benefit to state taxes.
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12 states where Social Security benefits are taxable
If you live in one of the following 12 states, you could owe additional taxes on your Social Security benefits. Here's a state-by-state breakdown.
1. Colorado
Colorado allows residents ages 55 to 64 who receive Social Security to deduct $20,000 of retirement income for state taxes, including Social Security. Those who are 65 and older can deduct their full Social Security amount on their state tax returns.
2. Connecticut
In Connecticut, individuals whose adjusted gross income (AGI) is less than $75,000 and married couples filing jointly with an AGI below $100,000 can deduct 100% of their Social Security benefits. For taxpayers with incomes above these thresholds, only 75% of Social Security benefits are tax-exempt.
3. Kansas
Social Security benefits are taxed as ordinary income in Kansas for anyone whose AGI exceeds $75,000, regardless of filing status. Benefits are exempt from state taxes for anyone whose AGI is less than $75,000.
4. Minnesota
Minnesota allows single Social Security recipients with incomes of less than $64,670 to deduct $4,260 of benefits from their state tax returns for 2022 (which are due in 2023). Married couples filing jointly can exclude $5,540 if their AGI is below $82,770. Taxpayers with incomes above these amounts are allowed a phased-out deduction. Individuals with incomes above $85,970 and married couples with incomes above $110,020 are ineligible for a deduction.
5. Missouri
Missourian single filers with an income of less than $85,000 and married couples filing jointly with incomes below $100,000 can deduct 100% of Social Security benefits. Taxpayers whose income exceeds these amounts may still qualify for a partial deduction.
6. Montana
Montana's taxation of Social Security benefits mirrors that of the federal government. Up to half of benefits are taxable for individuals with AGIs between $25,000 and $32,000 and married couples whose AGI is between $32,000 and $44,000. For taxpayers earning above these amounts, up to 85% of benefits are subject to state taxes.
7. Nebraska
Nebraskan singles with incomes below $44,460 and married couples with incomes below $59,960 are exempt from paying taxes on their Social Security. However, in 2021, the Nebraska Legislature voted to phase out the taxation of Social Security benefits by 2025. In 2022, recipients can exempt 40% of benefits for tax purposes. The exemption increases to 60% in 2023, 80% in 2024, and 100% in 2025.
8. New Mexico
As of 2022, most New Mexico residents won't have to pay taxes on Social Security benefits. Singles with incomes below $100,000 and married couples earning less than $150,000 can deduct their full benefit.
9. Rhode Island
In Rhode Island, people who have reached full retirement age and whose incomes are below $95,800 (singles) and $119,750 (married couples) are exempt from state Social Security benefits. Those claiming benefits early or whose incomes exceed the limit may owe taxes on benefits.
10. Utah
Utah taxes Social Security benefits, however, singles with incomes of less than $37,000 and married couples with less than $62,000 of income qualify for a full tax credit for the amount. The credit is reduced by 25 cents for each dollar of additional income above these limits.
11. Vermont
Vermont exempts Social Security recipients with incomes below $50,000 (singles) and $65,000 (married couples) from paying taxes on benefits. Singles with incomes between $50,001 and $59,999, and married couples with incomes between $65,001 and $74,999 qualify for a phased-out deduction. Taxpayers with incomes above these limits don't qualify for a deduction.
12. West Virginia
As of 2022, West Virginia will only tax Social Security benefits for individuals earning $50,000 or more, and married couples with incomes of $100,000 or higher.
Want to avoid Social Security taxes?
While your Social Security benefits could be subject to state income taxes, remember to look at the overall tax picture. Consider how much you'll pay in capital gains taxes, property taxes, and sales taxes, in addition to taxes on Social Security and other income when planning for retirement.
But if you're worried about taxes, consider saving for retirement in a Roth IRA or Roth 401(k). You'll pay taxes on the money you contribute now, but your withdrawals will be tax-free when you retire -- and won't cause you to pay more of your Social Security benefit in taxes.
