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13 States That Tax Social Security Benefits

5 1 24
22.10.2020

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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.

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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.

Income Tax Range: By law, Colorado residents who have federal taxable income pay a flat rate of 4.63%. The state has a Taxpayers Bill of Rights provision that limits the how much state revenue can grow from year-to-year. In 2020, it resulted in an actual tax rate of 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.

For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Colorado.

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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.

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).

For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Connecticut.

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