About 97% of Americans 60 or older either receive Social Security or will. And for 40%, that monthly payout represents at least half of their income.
That's from a study by the Center on Budget and Policy Priorities, and it points to why you might make a budget priority of your own out of knowing how the state you live in now, or plan to later on, will or will not tax those benefits.
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There are 40 states -- plus the District of Columbia -- that do not tax Social Security benefits at all. The 10 that currently do are Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
States that tax Social Security income have different rules, but they all provide breaks or exemptions based on age or income. For instance, Kansas taxes Social Security benefits for people with adjusted gross income (AGI) of above $75,000. In Colorado, the first $20,000 in retirement benefits are not taxable through age 64, and none of it is after that.
Keep up with changes, and don't go it alone if you're unsure
These rules can and do change, depending on which way the political and fiscal winds blow in each state, and they can be complicated. Consulting with an experienced tax lawyer or CPA is never a bad idea if you're at all uncertain.
As a reminder, we're talking about retirement benefits here, not Supplemental Security Income, which is paid primarily to low-income disabled adults and children and is not taxed.
And if you're wondering if there's anywhere in the U.S. where Social Security won't be taxed by the feds or the state, no such luck. As much as 85% of your Social Security retiree payout can be federally taxable, depending on your income.
