13 states that tax Social Security benefits

You may have dreamed of a tax-free retirement, but if you live in these 13 states, your Social Security benefits are subject to a state tax. That's on top of a federal tax on as much as 85% of your Social Security benefits.

  • By Sandra Block, Rocky Mengle,
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If you're wondering if Social Security benefits taxable, here's your answer: Absolutely. Uncle Sam taxes up to 85% of your benefits, depending on your income, and more than a dozens states tack on additional taxes of their own. Utah, for one, treats Social Security benefits the same way as the feds. But other states tax Social Security benefits only if income exceeds a specified threshold amount. For example, Nebraska taxes Social Security benefits only if your income tops $43,000, or $58,000 if you're married and file taxes jointly.

Also remember that a tax on Social Security doesn't necessarily mean a state is unsuitable for retirement. North Dakota, one of the 13 states that taxes Social Security benefits, actually ranks as a tax-friendly state for retirees. That's why it's best to weigh all state taxes when researching the best places to retire. For each state, we've included a link to our full guide to state taxes on retirees. Take a look at the 13 states that tax Social Security benefits.

The state-by-state guide to taxes on retirees is updated annually based on information from state tax departments, the Tax Foundation, and the U.S. Census Bureau. Income tax rates and thresholds are for the 2020 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. Those 65 and older can exclude benefits and other retirement income up to $24,000. Also, Social Security income not taxed by the federal government is not added back to adjusted gross income for state income tax purposes.

Sales Tax: 2.9% state levy. Localities can add as much as 8.3%, and the average combined rate is 7.65%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Income Tax Range: By law, Colorado residents who have federal taxable income pay a flat rate of 4.55% (the approval of Proposition 116 on the November 3, 2020, ballot reduced the standard tax rate from 4.63% to 4.55%). The state also limits the how much its revenue can grow from year-to-year by lowering the tax rate if revenue growth is too high. For example, in 2019, this resulted in a rate reduction to 4.5%. Denver and a few other cities in Colorado also impose a monthly payroll tax.

Property Taxes: In Colorado, the median property tax rate is $494 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 $2,139 per $100,000 of assessed home value.

Inheritance and Estate Taxes: Connecticut has an estate tax with a $5.1 million exclusion, which will rise to $7.1 million on January 1, 2021. 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 2020 only when the aggregate value of gifts made since 2005 exceeds $5.1 million ($7.1 million in 2021). Estate and gift tax rates for 2020 range from 10% to 12% (10.8% to 12% in 2021).

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 8.68%, according to the Tax Foundation.

  • Groceries: Taxable
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Taxable

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 $1,369 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 2020 a married couple filing a joint return can deduct up to $5,240 of their federally taxable Social Security benefits from their state income. The 2020 tax break can be as much as $4,090 for single and head of household filers, and up to $2,620 for married taxpayers filing separate returns. The deduction is phased out for married couples with more than $79,480 of provisional income (it's reduced to zero for couples with more than $105,680 of provisional income). The phase-out range for single and head of household filers is $62,090 to $82,540. For married taxpayers filing separate returns, the phase-out range is $39,740 to $52,840.

Sales Tax: 6.875% state levy. Localities can add as much as 2%, with an average combined rate of 7.46%, 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 $26,960 of taxable income for single filers and on less than $39,410 for joint filers). High: 9.85% (on more than $164,400 of taxable income for single filers and on more than $273,470 for joint filers).

For 2021, the 5.35% rate applies to taxable income less than $27,230 for single filers and less than $39,810 for joint filers. The 9.85% rate applies to taxable income over $166,040 for single filers and over $276,200 for joint filers.

Property Taxes: In Minnesota, the median property tax rate is $1,082 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 5.625%, and the average combined rate is 8.20%, 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 of $107 or more). High: 5.9% (on more than $8,584 of taxable income). Kansas City and St. Louis have an earnings tax of 1 percent.

Property Taxes: In Missouri, the median property tax rate is $930 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.

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 $3,100 of taxable income). High: 6.9% (on taxable income over $18,700).

Property Taxes: In Montana, the median property tax rate is $831 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: Social Security benefits were not taxed in 2019 for joint filers with a federal adjusted gross income of $58,000 or less and other taxpayers with a federal AGI of $43,000 or less (AGI threshold amounts for 2020 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.

Sales Tax: 5.5% state levy. Localities can add as much as 2.50%, and the average combined rate is 6.93%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Income Tax Range: Low: 2.46% (on up to $3,290 of taxable income for single filers and $6,570 for married couples filing jointly). High: 6.84% (on taxable income over $31,750 for single filers and $63,500 for married couples filing jointly).

Property Taxes: In Nebraska, the median property tax rate is $1,614 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. For remote relatives (e.g., uncles, aunts, nieces, nephews), the tax rate is 13% and the exemption amount is $15,000. For all other heirs, the tax is imposed at an 18% rate on property worth $10,000 or more.

New Mexico

State Taxes on Social Security: Social Security benefits are taxed to the same extent they are taxed at the federal level.

Sales Tax: 5.125% state levy. Localities can add as much as 4.313%, and the average combined rate is 7.83%, 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: 4.9% (on taxable income over $16,000 for single filers and over $24,000 for married couples filing jointly).

Property Taxes: In New Mexico, the median property tax rate is $776 per $100,000 of assessed home value.

Inheritance and Estate Taxes: There is no inheritance tax or estate tax.

North Dakota

State Taxes on Social Security: Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $100,000 or less and other taxpayers with a federal AGI of $50,000 or less. For taxpayers exceeding these thresholds, Social Security benefits are taxed by North Dakota to the same extent they are taxed at the federal level.

Sales Tax: 5% state levy. Localities can add as much as 3.5%, and the average combined rate is 6.94%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 5% excise tax
  • Prescription Drugs: Exempt

Income Tax Range: Low: 1.10% (on up to $40,125 of taxable income for singles and up to $67,050 for married couples filing jointly. High: 2.90% (on taxable income over $440,600).

Property Taxes: In North Dakota, the median property tax rate is $986 per $100,000 of assessed home value.

Inheritance and Estate Taxes: There is no inheritance tax and no estate tax.

Rhode Island

State Taxes on Social Security: Social Security benefits were not taxed in 2019 for joint filers with a federal adjusted gross income of $106,400 or less and other taxpayers with a federal AGI of $85,150 or less (AGI threshold amounts for 2020 are not available yet). For taxpayers exceeding these thresholds, Social Security benefits are taxed by Rhode Island to the same extent they are taxed at the federal level.

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 $65,250 of taxable income). High: 5.99% (on taxable income over $148,350).

Property Taxes: In Rhode Island, the median property tax rate is $1,533 per $100,000 of assessed home value.

Inheritance and Estate Taxes: Rhode Island has an estate tax with a 2020 exemption amount of $1,579,922 ($1,595,156 for 2021). Rates range from 0.8% to 16%.

Utah

State Taxes on Social Security: Social Security benefits are taxed to the extent they are taxed at the federal level.

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 7.18%, 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 4.95%.

Property Taxes: In Utah, the median property tax rate is $575 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 $60,000 or less and other taxpayers with a federal AGI of $45,000 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 6.22%.

  • 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 $40,350 of taxable income for singles and up to $67,450 for joint filers). High: 8.75% (on taxable income over for $204,000 for singles and up to $248,350 for joint filers).

Property Taxes: In Vermont, the median property tax rate is $1,861 per $100,000 of assessed home value.

Inheritance and Estate Taxes: Vermont has an estate tax with an exemption of $4.25 million for 2020 (the exemption amount will increase to $5 million for 2021). The tax rate is a flat 16%.

West Virginia

State Taxes on Social Security: In 2020, 35% of 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 ($100,000 or less for joint filers). In 2021, 65% will be excluded for qualifying taxpayers. After 2021, qualifying taxpayers can exclude all Social Security benefits.

Sales Tax: 6% state levy. Municipalities can add up to 1% to that, with an average combined rate of 6.50%, 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).

Property Taxes: In West Virginia, the median property tax rate is $571 per $100,000 of assessed home value.

Inheritance and Estate Taxes: There is no inheritance tax or estate tax.

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