Hey there, fellow Social Security beneficiaries! Let’s dive into the not-so-mysterious world of state taxes on Social Security benefits. Now, you might be thinking, “Taxes? Yawn!” But stick with me – I promise to make this as painless and even a smidge entertaining. Who knows, you might even crack a smile!
First off, let’s talk about the big picture. The U.S. government might tax a slice of your Social Security retirement, disability, or other benefits if your total income hits a certain level. But wait, there’s more! Twelve states – yes, only twelve – decide they want a piece of the pie too. These states are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Quick note: Missouri and Nebraska are waving goodbye to this taxation starting the 2024 tax year. Party time for residents there!
Now, let’s take a whimsical tour across these states and see what they’re up to:
Colorado: If you’re 65 or older in Colorado, you’re in luck! You get to deduct all your Social Security benefits from state income tax. Younger folks, though, might still owe some taxes. But hey, at least you’re in beautiful Colorado!
Connecticut: Here, it’s all about your adjusted gross income (AGI). Earn below certain thresholds and voilà – no state taxes on those benefits!
Kansas: Kansans with an AGI under $75,000 get a free pass on state taxes for Social Security. Over that, and the regular income tax rates apply.
Minnesota: They follow Uncle Sam’s lead but offer a sweet little deduction called the Social Security Subtraction. Not too shabby, Minnesota.
Missouri: Good news! They’re ditching Social Security taxes starting 2024. For now, there’s a full deduction for certain age and income brackets.
Montana: Big Sky Country says if you earn under a certain amount, no state tax on your Social Security. Over that, and it’s a bit of a different story.
Nebraska: Joining the no-tax party in 2024, Nebraska offers some exemptions for 2023. Early celebration, anyone?
New Mexico: A law in 2022 gave most residents a break from these taxes. Way to go, New Mexico!
Rhode Island: If you’ve hit full retirement age and earn below specific limits, you’re in the clear. Otherwise, the state might want to talk.
Utah: They use the federal formula but offer a tax credit on those benefits. Nice little perk there, Utah.
Vermont: In 2022, they decided to be more generous with exemptions. Vermont, known for its maple syrup and now, tax kindness!
West Virginia: Following the federal model, they give a nod to lower-income folks with full deductions.
Now, before you start planning your next vacation based on these tax rules, remember this doesn’t apply to Supplemental Security Income (SSI). That’s a whole different ball game and tax-free!
In conclusion, while the thought of taxes might make you want to run for the hills, it’s not all doom and gloom. Each state has its unique twist on taxing Social Security benefits. Whether you’re in the mountains of Colorado or the plains of Kansas, it’s all about understanding your local rules. And who knows, maybe your state is on the brink of giving you a pleasant tax surprise. Keep smiling, and here’s to hoping your Social Security benefits stay as tax-friendly as possible!
