12 states that tax Social Security benefits

You may have dreamed of a tax-free retirement, but if you live in one of the states that tax Social Security, your benefits could take a hit.

  • By ROCKY MENGLE, SANDRA BLOCK,
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Are Social Security benefits taxable? You can bet your bottom dollar they are — at least by the federal government, which taxes up to 85% of your benefits, depending on your income. But do states tax Social Security? Unfortunately, a dozen states can tack on additional taxes of their own.

States have different ways of taxing Social Security, too. It can be age-based, such as in Colorado where people under 65 may owe taxes on Social Security benefits but older people generally don't. But other states tax Social Security benefits only if income exceeds a specified threshold amount. For example, Missouri taxes Social Security benefits only if your income tops $85,000, or $100,000 for married couples. Then there's Utah, which includes Social Security benefits in taxable income, but allows a tax credit for a portion of the benefits subject to tax. Other states have different methods of taxing your Social Security check.

Also remember that a tax on Social Security doesn't necessarily mean a state is unsuitable for retirement. Colorado, one of the states that taxes at least some Social Security benefits, actually ranks as one of the 10 most tax-friendly state for retirees. That's why it's best to weigh all state taxes when researching the best places to retire. And our list of the 12 states that tax Social Security benefits will help you do just that. For each state, we provide information on the state's sales tax, property tax, and any death taxes.

Income tax rates and related thresholds are for the 2022 tax year unless otherwise noted.

Colorado

State taxes on Social Security: For beneficiaries younger than 65, up to $20,000 of Social Security benefits can be excluded, along with other retirement income. Anything over that amount is subject to Colorado tax if it's also taxed by the federal government.

Beginning in 2022, all federally taxed Social Security income is deductible for taxpayers 65 and over (amounts exceeding $24,000 were previously taxable).

Sales tax: 2.9% state levy. Localities can add as much as 8.3%, and the average combined rate is 7.77%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor vehicles: Taxable
  • Prescription drugs: Exempt

Income tax range: Colorado has a flat income tax rate of 4.4%. (It was lowered from 4.55% to 4.4% by Proposition 121, which was approved by voters on November 8, 2022.) Denver and a few other cities in Colorado also impose a monthly payroll tax.

Property taxes: In Colorado, the median property tax rate is $505 per $100,000 of assessed home value.

Inheritance and estate taxes: There is no inheritance tax or estate tax.

Connecticut

State taxes on Social Security: Social Security income is fully exempt for single taxpayers with federal adjusted gross income of less than $75,000 and for married taxpayers filing jointly with federal AGI of less than $100,000. Taxpayers who exceed these thresholds can still deduct 75% of their federally taxable Social Security benefits on their Connecticut tax return.

Sales tax: The state taxes most items at 6.35%, and localities are not allowed to add to that.

  • Groceries: Exempt
  • Clothing: Taxable (6.35% for items under $1,000; 7.75% for items over $1,000; items costing less then $50 are fully exempt)
  • Motor vehicles: Taxable (6.35% for vehicles under $50,000; 7.75% for vehicles over $50,000; 4.5% for non-resident military personnel on full-time active duty in the state)
  • Prescription drugs: Exempt

Income tax range: Low: 3% (on up to $20,000 of taxable income for married joint filers and up to $10,000 for those filing individually). High: 6.99% (on the amount over $1 million for married joint filers and over $500,000 for those filing individually).

Property taxes: In Connecticut, the median property tax rate is $2,133 per $100,000 of assessed home value.

Inheritance and estate taxes: Connecticut has an estate tax with a $9.1 million exclusion for 2022. The tax due is limited to $15 million. Connecticut is the only state with a gift tax on assets you give away while you're alive. If you made taxable gifts during the year, state law requires that you file a Connecticut estate and gift tax return to identify such gifts. However, taxes are due in 2022 only when the aggregate value of gifts made since 2005 exceeds $9.1 million. Estate and gift tax rates for 2022 are either 11.6% or 12% (a flat 12% rate takes effect in 2023).

Kansas

State taxes on Social Security: Social Security benefits are exempt from Kansas income tax for residents with a federal adjusted gross income of $75,000 or less. For taxpayers with a federal AGI above $75,000, Social Security benefits are taxed by Kansas to the same extent they are taxed at the federal level.

Sales tax: 6.5% state levy. Localities can add as much as 4%, and the average combined rate is 8.7%, according to the Tax Foundation.

  • Groceries: Taxable
  • Clothing: Taxable
  • Motor vehicles: Taxable
  • Prescription drugs: Exempt

(Note: The state sales tax on groceries is reduced to 4% in 2023, 2% in 2024, and 0% in 2025 and thereafter. Local taxes on groceries will still apply.)

Income tax range: Low: 3.1% (on $2,501 to $15,000 of taxable income for single filers and $5,001 to $30,000 for joint filers). High: 5.7% (on more than $30,000 of taxable income for single filers and more than $60,000 for joint filers). Kansas also has an "intangibles tax" levied on unearned income by some localities.

Property taxes: In Kansas, the median property tax rate is $1,411 per $100,000 of assessed home value.

Inheritance and estate taxes: There is no estate tax or inheritance tax.

Minnesota

State taxes on Social Security: Social Security benefits are taxable in Minnesota, but for 2022 a married couple filing a joint return can deduct up to $5,450 of their federally taxable Social Security benefits from their state income ($5,840 for 2023). The 2022 tax break can be as much as $4,260 for single and head-of-household filers ($4,560 for 2023), and up to $2,725 for married taxpayers filing separate returns ($2,920 for 2023). The deduction is gradually phased out for married couples with provisional income from $82,770 to $110,020 ($88,630 to $117,830 for 2023). The phase-out range for single and head of household filers is $64,670 to $85,970 ($69,250 to $92,050 for 2023). For married taxpayers filing separate returns, the phase-out range is $41,385 to $55,010 ($44,315 to $58,915 for 2023).

Sales tax: 6.875% state levy. Localities can add as much as 2%, with an average combined rate of 7.49%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Exempt
  • Motor vehicles: Exempt from ordinary sales tax, but taxable under special 6.5% excise tax ($10 for certain older vehicles; $150 for certain collector vehicles)
  • Prescription drugs: Exempt

Income tax range: Low: 5.35% (on less than $28,080 of taxable income for single filers and on less than $41,050 for joint filers). High: 9.85% (on more than $171,220 of taxable income for single filers and on more than $284,810 for joint filers).

For 2023, the lowest rate applies to the first $30,070 of taxable income for single filers and the first $43,950 of taxable income for joint filers. The highest rate applies to taxable income over $183,340 for single filers and over $304,970 for joint filers.

Property taxes: In Minnesota, the median property tax rate is $1,106 per $100,000 of assessed home value.

Inheritance and estate taxes: Minnesota’s estate tax exemption is $3 million, but the state looks back to include any taxable gifts made within three years prior to death as part of your estate. Tax rates range from 13% to 16%.

Missouri

State taxes on Social Security: Social Security benefits are not taxed for married couples with a federal adjusted gross income less than $100,000 and single taxpayers with an AGI of less than $85,000. Taxpayers who exceed those income limits may qualify for a partial exemption on their benefits.

Sales tax: 4.225% state levy. Localities can add as much as 5.763%, and the average combined rate is 8.29%, according to the Tax Foundation.

  • Groceries: Taxable (1.225% state rate; additional local taxes may apply)
  • Clothing: Taxable
  • Motor vehicles: Taxable
  • Prescription drugs: Exempt

Income tax range: Low: 1.5% (on taxable of income from $112 to $1,121). High: 5.3% (on more than $8,968 of taxable income). Kansas City and St. Louis have an earnings tax of 1 percent.

Beginning in 2023, the top rate is reduced to 4.95% and the first $1,000 of income is exempt (adjusted for inflation after 2023). Starting in 2024, additional top rate reductions of 0.15% are possible if the net general revenue collected by the state exceeds a certain threshold. In addition, up to three more top rate reductions of 0.1% are possible if net general revenue exceeds a different threshold.

Property taxes: In Missouri, the median property tax rate is $959 per $100,000 of assessed home value.

Inheritance and estate taxes: There is no inheritance tax or estate tax.

Montana

State taxes on Social Security: Social Security benefits are taxable. The method used to calculate the taxable amount for Montana income tax purposes is similar to the method used for federal returns. However, there are important differences. As a result, the Montana taxable amount may be different than the federal taxable amount. (Beginning in 2024, Social Security benefits will be taxed by Montana to the same extent they are taxed at the federal level.)

Sales tax: No state sales tax. Resort areas such as Big Sky, Red Lodge and West Yellowstone have local sales taxes.

Income tax range: Low: 1% (on up to $3,300 of taxable income). High: 6.75% (on taxable income over $19,800).

Beginning with the 2024 tax year, Montana's income tax rates and brackets will be substantially revised (there will only be two rates — 4.7% and 6.5%).

Property taxes: In Montana, the median property tax rate is $827 per $100,000 of assessed home value.

Inheritance and estate taxes: There is no inheritance tax or estate tax.

Nebraska

State taxes on Social Security: For 2021, Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $59,960 or less and other taxpayers with a federal AGI of $44,460 or less (the 2022 thresholds are not available yet). For taxpayers exceeding these thresholds, Social Security benefits are taxed by Nebraska to the same extent they are taxed at the federal level.

For 2022, taxpayers can chose to deduct 40% of Social Security benefits included in federal AGI instead of following the rules above (it was 5% for 2021). The optional deduction percentage increases to 60% for 2023, 80% for 2024, and 100% for 2025 and thereafter.

Sales tax: 5.5% state levy. Localities can add as much as 2.5%, and the average combined rate is 6.94%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor vehicles: Taxable
  • Prescription drugs: Exempt

Income tax range: Low: 2.46% (on up to $3,340 of taxable income for single filers and $6,660 for married couples filing jointly). High: 6.84% (on taxable income over $32,210 for single filers and $64,430 for married couples filing jointly). (Note: The threshold figures are for the 2021 tax year, since the 2022 thresholds are not available yet.)

Beginning in 2023, the top rate is gradually reduced according to the following schedule: 6.64% in 2023, 6.44% in 2024, 6.24% in 2025, 6% in 2026, and 5.84% in 2027 and thereafter.

Property taxes: In Nebraska, the median property tax rate is $1,684 per $100,000 of assessed home value.

Inheritance and estate taxes: With Nebraska's inheritance tax, the closer the heir's relationship to the decedent, the smaller the tax rate and the greater the exemption (surviving spouses are exempt from the tax). For example, the tax on heirs who are immediate relatives (e.g., parents, grandparents, siblings, children and other lineal descendants) is only 1% and does not apply to property that is worth less than $40,000 ($100,000 beginning in 2023). For remote relatives (e.g., uncles, aunts, nieces, nephews), the tax rate is 13% and the exemption amount is $15,000 (11% and $40,000, respectively, beginning in 2023). For all other heirs, the tax is imposed at an 18% rate on property worth $10,000 or more (15% and $25,000, respectively, beginning in 2023). However, regardless of the heir's relationship to the decedent, the state's inheritance tax does not apply to heirs 21 years of age or younger.

New Mexico

State taxes on Social Security: Social Security benefits are not tax by the state for single filers with an adjusted gross income (AGI) of $100,000 or less, joint filers and head-of-household filers with an AGI of $150,000 or less, and married people filing separate returns with an AGI of $75,000 or less. (Prior to 2022, Social Security benefits were taxed to the same extent they were taxed at the federal level.)

Sales tax: 5.125% state levy (5% effective July 1, 2022; 4.875% effective July 1, 2023, and then subject to reversion to 5.125% if tax revenues drop below a certain level). Localities can add as much as 4.313%, and the average combined rate is 7.84%, according to the Tax Foundation. New Mexico's tax is a gross receipts tax that covers most services.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor vehicles: Exempt from ordinary sales tax, but taxable under special 4% excise tax
  • Prescription drugs: Exempt

Income tax range: Low: 1.7% (on up to $5,500 of taxable income for single filers and $8,000 for joint filers). High: 5.9% (on taxable income over $210,000 for single filers and over $315,000 for married couples filing jointly).

Property taxes: In New Mexico, the median property tax rate is $796 per $100,000 of assessed home value.

Inheritance and estate taxes: There is no inheritance tax or estate tax.

Rhode Island

State taxes on Social Security: For 2021, Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $111,200 or less, single and head-of-household filers with federal AGI of $88,950 or less, and married taxpayers filing a separate return with a federal AGI of $88,975 or less. For taxpayers exceeding these thresholds, Social Security benefits are taxed by Rhode Island to the same extent they are taxed at the federal level. (Note: The threshold figures are for the 2021 tax year, since the 2022 thresholds are not available yet.)

Sales tax: 7% state levy. No local taxes.

  • Groceries: Exempt
  • Clothing: Exempt if under $250
  • Motor vehicles: Taxable
  • Prescription drugs: Exempt

Income tax range: Low: 3.75% (on up to $68,200 of taxable income). High: 5.99% (on taxable income over $155,050).

Property taxes: In Rhode Island, the median property tax rate is $1,571 per $100,000 of assessed home value.

Inheritance and estate taxes: Rhode Island has an estate tax with a 2022 exemption amount of $1,648,611. Rates range from 0.8% to 16%.

Utah

State taxes on Social Security: Social Security benefits are included in Utah taxable income to the same extent they're taxed at the federal level. However, a nonrefundable tax credit is available for Social Security benefits. The credit is calculated by multiplying the Utah income tax rate (currently 4.85%) by the amount of Social Security benefits included in federal adjusted gross income (AGI). The total credit amount is reduced by $.025 for each dollar by which the taxpayer's modified AGI exceeds $31,000 for a married person filing a separate tax return, $37,000 for a single filer, and $62,000 for a married couple filing a joint return or a head-of-household filer. Taxpayers can't claim both the Social Security credit and the general $450 credit for retirees.

Sales tax: State levy is 4.85%, but mandatory 1% local sales tax and 0.25% county option sales tax are added to the state tax (for a 6.1% total rate). Plus, localities can add up to an additional 2.95%, making the average combined state and local rate 7.19%, according to the Tax Foundation.

  • Groceries: Taxable (1.75% state tax, plus mandatory 1.25% in local and county taxes)
  • Clothing: Taxable
  • Motor vehicles: Taxable
  • Prescription drugs: Exempt

Income tax range: Utah has a flat tax of 4.85% (reduced from 4.95% starting with the 2022 tax year).

Property taxes: In Utah, the median property tax rate is $602 per $100,000 of assessed home value.

Inheritance and estate taxes: There is no inheritance tax or estate tax.

Vermont

State taxes on Social Security: Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $65,000 or less and other taxpayers with a federal AGI of $50,000 or less. Taxpayers who exceed those income limits may qualify for a partial exemption on their benefits.

Sales tax: 6% state levy. Municipalities can add 1% to that, but the average combined rate is 6.24%.

  • Groceries: Exempt
  • Clothing: Exempt
  • Motor vehicles: Exempt from ordinary sales tax, but taxable under special 6% purchase and use tax
  • Prescription drugs: Exempt

Income tax range: Low: 3.35% (on up to $40,950 of taxable income for singles and up to $68,400 for joint filers). High: 8.75% (on taxable income over for $206,950 for singles and up to $251,950 for joint filers). (Note: The threshold figures are for the 2021 tax year, since the 2022 thresholds are not available yet.)

Property taxes: In Vermont, the median property tax rate is $1,902 per $100,000 of assessed home value.

Inheritance and estate taxes: Vermont has an estate tax with an exemption of $5 million for 2021. The tax rate is a flat 16%.

West Virginia

State taxes on Social Security: Social Security benefits taxed by the federal government are excluded from taxable income for single taxpayers with federal adjusted gross income of $50,000 or less and for joint filers with federal AGI of $100,000 or less. (Before 2022, qualifying taxpayers could only exclude 65% of Social Security benefits.)

Sales tax: 6% state levy. Municipalities can add up to 1% to that, with an average combined rate of 6.52%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor vehicles: Taxable
  • Prescription drugs: Exempt

Income tax range: Low: 3% (on up to $10,000 of taxable income). High: 6.5% (on taxable income of $60,000 or more).

West Virginia municipalities can also impose city service fees on people working in the city.

Property taxes: In West Virginia, the median property tax rate is $584 per $100,000 of assessed home value.

Inheritance and estate taxes: There is no inheritance tax or estate tax.

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