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Is Social Security taxable?
Yes, the federal government will reduce your Social Security portion if your gross income exceeds a certain amount. This may include monthly retirement benefits, survivor benefits, and disability benefits. However, recipients should also pay attention to state-level rules and procedures.
Nine states will impose Social Security taxes this year. Rules vary by state, but your age and income usually determine whether you have to pay.
It’s best to check your state’s rules, but here are some general guidelines for what to expect:
Which states tax Social Security benefits?
Colorado: In Colorado, taxpayers age 65 and older can deduct the full amount of their Social Security benefits. People between the ages of 55 and 64 can deduct all their Social Security benefits if their adjusted gross income is $75,000 or less for individuals or $95,000 for married couples filing jointly. If you earn more than these amounts, you can deduct up to $20,000 of your Social Security income.
Connecticut: Connecticut taxpayers can deduct all Social Security benefits if their adjusted gross income is $75,000 or less for individuals or $100,000 for married couples filing jointly. If you earn more than these amounts, you will not be taxed at more than 25% of your benefits.
Minnesota: In Minnesota, Social Security benefits are completely waived for married taxpayers filing jointly with incomes of $108,320 or less. Single or head-of-household taxpayers with incomes of $84,490 or less. and married taxpayers with incomes of $54,160 or less file separately. Married taxpayers who earn between $108,321 and $144,320 will owe some taxes on their benefits. Singles or heads of households earning between $84,491 and $120,490. And married taxpayers with incomes between $54,161 and $72,160 file separately. Above these thresholds, all benefits that are subject to federal taxation are also subject to state tax.
Montana: For single taxpayers with an adjusted gross income of less than $25,000 and joint filers with an AGI of less than $32,000, all Social Security retirement income is deductible in Montana. For taxpayers who exceed these limits, a portion of their Social Security income is subject to a deduction.
New Mexico: Single taxpayers with incomes below $100,000, married couples filing jointly with incomes below $150,000, and married couples filing separately with incomes below $75,000 are exempt from paying Social Security taxes.
Rhode Island: Rhode Island exempts all Social Security benefits for married taxpayers who file jointly and have incomes of $130,250 or less. Single or head-of-household taxpayers with incomes of $104,200 or less. Taxpayers who file separately as a married couple and have incomes of $104,225 or less
Vermont: Vermont exempts all Social Security benefits for married taxpayers who file jointly and have incomes of $65,000 or less. For all other filers, the maximum amount is $50,000. Married taxpayers filing jointly will owe some tax if their income is more than $65,000 but less than $75,000, but beyond that, there is no exemption. All other filers with incomes of $50,000 or more but less than $60,000 have some exemptions. There is no exemption for filers with income of $60,000 or more.
West Virginia: If your income reaches more than $100,000 if you’re a married couple filing jointly or $50,000 if you file alone, at least a portion of your benefits may be taxed. By next year, West Virginia will not tax Social Security benefits at all. For tax year 2025, taxpayers with adjusted gross income over $50,000 (over $100,000 if filing jointly) can deduct 65% of their benefits from their income.
How do states tax Social Security?
Generally, there are several ways states can tax Social Security.
Depending on age: For example, Coloradans under age 65 may be liable to pay taxes on their Social Security benefits, but older taxpayers generally do not have to pay taxes.
Depending on income: New Mexico is an example of a state that taxes Social Security only on income above a certain threshold.
Taxable income includes Social Security benefits. Beneficiaries in some states are eligible for the Social Security income deduction when filing their state tax returns.
How much money can I make from Social Security before I pay taxes?
The best way to avoid taxes on your Social Security benefits is to limit your income by investing in a Roth IRA while you save. Roth IRA withdrawals do not count as taxable income. They are tax exempt. The same goes for withdrawals from your Health Savings Account (HSA) to pay for qualified expenses.
If you enroll in a high-deductible health insurance plan, invest your money by contributing to an HSA, and keep your qualified medical receipts, you can use those receipts for tax-free withdrawals.
Another option is to lobby state legislatures to eliminate the Social Security tax, which has been a national trend for several years.
