Broke was never part of their budget

Depending on which state you retire in, your Social Security benefits might be tax-free or partially taxed. Here's a rundown on the tax treatment of benefits across the country:

While Uncle Sam taxes up to 85% of Social Security benefits, most states don’t tax Social Security benefits at all. Seven states — Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming — don’t tax Social Security benefits because they don’t have an income tax. New Hampshire and Tennessee only tax interest and dividends.


Social Security benefits are exempt from tax in the District of Columbia and 28 states: Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin.

That leaves 13 states where a portion of Social Security benefits may be taxable. New Mexico, Utah and West Virginia currently tax Social Security benefits to the same extent they are taxed on the federal return. However, West Virginia will start phasing out its tax on Social Security benefits in 2020.

Taxation of Social Security benefits in the remaining states —Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Rhode Island and Vermont — depends on your income and, in many cases, on your filing status.

Some of these states fully exempt Social Security for taxpayers under certain income thresholds. In Kansas, for example, Social Security benefits are completely exempt from state tax if your federal adjusted gross income (AGI) is $75,000 or less, regardless of your filing status. Starting in 2019, single North Dakota residents can fully exclude Social Security benefits from state taxable income if their federal AGI is $50,000 or less, while married residents filing a joint return can claim the exclusion with a federal AGI of $100,000 or less. Missouri offers partial exemptions for joint filers with federal AGI above $100,000 and all other filers with AGI over $85,000, while Missouri taxpayers with income below these thresholds can get a full state tax exemption.

The remainder of the states have their own formulas for determining whose Social Security benefits are taxed and to what degree.


Rocky Mengle is tax editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more information on this topic, visit Kiplinger.com.

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