Key Points
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Among the states that do tax Social Security, most do so with a light touch.
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The federal government excludes some benefits from taxation.
Are you in or approaching retirement? Starting to collect Social Security benefits, or thinking about doing so soon? You may be wondering whether those benefits, which are a critical support for most retirees, will be taxed.
To answer that question, here is some good news and some possibly bad news.
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The good news
First, the good. Most states — fully 42 of them, plus the District of Columbia — don’t tax Social Security benefits. Here are the eight that do:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
Even among the states taxing Social Security benefits, though, most do so with a light touch, or exclude those of a certain age or those with relatively low incomes.
The bad news
While most states leave your Social Security alone, the federal government does tax (some) Social Security benefits. It all depends on your “combined income,” which is your adjusted gross income (AGI) plus non-taxable interest, plus half of your Social Security benefits. The table below spells out the details:
|
Filing As |
Combined Income |
Percentage of Benefits Taxable |
|---|---|---|
|
Single/Head of household |
Less than $25,000 |
0% |
|
Married, filing jointly |
Less than $32,000 |
0% |
|
Single/Head of household |
Between $25,000 and $34,000 |
Up to 50% |
|
Married, filing jointly |
Between $32,000 and $44,000 |
Up to 50% |
|
Single/Head of household |
More than $34,000 |
Up to 85% |
|
Married, filing jointly |
More than $44,000 |
Up to 85% |
Data source: Social Security Administration.
While many benefits will go untaxed, at a certain income level, up to 85% of your benefits might be taxed (and 15% would not be taxed at all).
If you’re concerned about your taxes in retirement, be sure to think through all the taxes you’ll likely face, because Social Security is just a part of the picture. Remember, too, that while one state might look great because it has, say, no income tax, it might make up for that lost revenue via a heavy sales tax or property tax. Every state does need to generate income one way or another.
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