If you’re planning for retirement, one thing you’ve got to keep an eye on is how your state handles Social Security taxes. Every state has its rules, which can affect your budget. While the number of states that tax Social Security benefits has gone down, nine still do, and you’ll need to know about them. Let’s take a look.
Colorado
Colorado has a pretty good deal for seniors. Anyone between 55 and 64 must not pay taxes on the first $20,000 of their Social Security benefits. And if you’re 65 or older, you won’t have to pay a dime on those benefits, so it’s like a retirement bonus from the state. If you plan where to hang your hat in retirement, Colorado might just be calling your name.
Connecticut
In Connecticut, if you make more than $75,000 or $100,000 with your spouse, you might have to start paying taxes on your Social Security. Plus, you can save up to 25% of it from taxes, which isn’t too bad. Just keep an eye on your earnings, and you should be alright.
Kansas
In Kansas, things are pretty straightforward. You’ll only pay taxes on Social Security if your income is over $75,000. There are no sliding scales or complicated rules, and that’s kind of refreshing. As long as you know your income, you’ll know exactly where you stand with your benefits.
Minnesota
Minnesota likes to mix it up a bit with different income levels for different people. Single people have different numbers from married people, and even then, couples have to think about whether they’re filing together or separately. For example, anyone single who makes over $82,190 can expect to pay taxes on their Social Security.
Montana
Montana’s approach depends on your marital status and where you’re at with your spouse. The state has a different tax threshold for whether you’re living together or apart. You must pay taxes on your benefits if you’re married and living together but decide to file separately. Since it’s so complicated, you should make sure you know your situation.
New Mexico
The bar is a little higher in New Mexico, meaning you’ll need to earn quite a bit before your Social Security benefits face any taxes. Anyone who makes more than $100,000, or half that if you file separately from your spouse, will likely have to pay taxes. Thankfully, that’s not the case for most people, so you’ll have a bit more room to breathe and enjoy those benefits.
Rhode Island
Rhode Island bases its approach to Social Security taxes on the full retirement age (FRA). If you start going into your fund before this and you make over $101,000, you’ll have to pay some taxes. But if you make less, you could protect up to $20,000 of it from taxes. It’s a bit of give-and-take.
Utah
In Utah, anyone under $45,000 may qualify for a tax credit to help offset any taxes on their benefits. For married couples filing together, it’s under $75,000; for those filing separately, it’s $37,500. Either way, this credit can significantly affect how much cash stays in your pocket.
Vermont
Currently, Vermont is the last state that’ll tax you on your Social Security, and here, it also depends on your earnings. People over $60,000, or $75,000 if they’re married, will have to give it to the tax man, although it’s not all bad news. Anyone earning between $50,000 and $59,999 can get a slight tax exemption, which could be pretty useful.
Missouri and Nebraska
Missouri and Nebraska have recently made life a bit easier for retirees by eliminating state taxes on Social Security benefits. This will likely save residents quite a bit each year, giving them some financial relief during the rising cost of living. Previously, both states had tax structures that applied different rates based on income levels.
A Little More in Your Pocket
Social Security checks grew slightly in 2024, thanks to a 3.2% cost-of-living adjustment (COLA). This means everyone’s monthly payment grew, which could mean around 50 extra monthly bucks. Although it might seem small, it’s not too shabby when you’re trying to keep up with prices that just won’t quit climbing.
Paying a Bit More, Too
If you’re earning a lot, there’s a new cap on what gets taxed for Social Security, and in 2024, any cash you make over $168,600 won’t be subject to Social Security taxes. But up to that point, you’ll likely be taxed. Of course, this depends on your financial situation and other factors, and so does your research.
Birthday Determines Payday
Interestingly, when you get your Social Security check depends on when you were born. Anyone born early in the month can expect to receive their money by the second Wednesday. But for those born a bit later, you’ll probably wait until the fourth Wednesday of the month to see that deposit.
Working While Retired
For those taking Social Security early and still earning a paycheck, there’s a limit to how much you can make before it starts eating into your benefits. In 2024, that limit was $22,320, meaning if you go over that, they’ll start docking your checks. You’ll need to stay under that cap if you’re trying to balance a part-time job with retirement.
Earning Social Security Credits
To qualify for benefits, you’ve got to earn “credits,” and in 2024, you need to make at least $1,730 to get one. You can earn up to four credits per year. This system is meant to ensure that the benefits are reserved for people who contributed enough during their careers, so try to get as many credits as you can for your later years.
Closing the Gender Gap
The gap between men and women fully insured for Social Security has tightened. More women are catching up, and such a change is a big win for equality because it shows that women have greater access to stable careers. Clearly, efforts to balance the scales in the workforce are paying off in real ways.
Relying on Social Security
For many people over 65, Social Security is what keeps the lights on, as it accounts for about 30% of their total income. Millions of people rely on these checks, and if that’s you, you must stay aware of these changes. Knowing what’s going on can make all the difference in maintaining a comfortable lifestyle as you age.
Adjustments to Medicare Premiums
You should also know how Medicare and Social Security can affect each other. For example, if your modified adjusted gross income (MAGI) is more than $103,000 for individuals or $206,000 for couples filing jointly, your Medicare Part B and Part D premiums will increase. It’s meant to help balance the higher costs of healthcare against higher income levels.
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