Social Security isn't likely to give you the kind of income that you might have hoped for. The average retirement benefit is about $20,000 a year.
That news is bad, but there is more bad news: a bunch of states tax Social Security income. Most states don't. Here is a look at which states do and do not tax Social Security.
The image is from the same source.
The bad news first. There are 12 states that tax Social Security benefits.
The process of elimination can be used to see which states do not tax Social Security.
Washington, D.C. can also be added to that list.
If you live in one of the states above, you can breathe a sigh of relief, but remember to keep the bigger picture in mind. Many states don't tax your retirement benefits, but they still need revenue to keep the lights on. One state may not tax income, but other taxes, such as on property and/or sales, will make up for it. If you are ever going to compare or make decisions based on tax rates, be sure to take all taxes into account.
If you live in one of the 12 states that tax Social Security, you may be able to avoid a tax bite. Most of the states don't tax Social Security very much, and they all have different approaches to taxing it. You can find the tax details for your state by looking up the information.
If your federal adjusted gross income is less than $75,000, your social security benefits are exempt from Kansas income tax. The exemption for social security benefits only applies if the benefits are included in your federal adjusted gross income.
If you get hit with a tax, it is most likely going to be a single-digit tax rate.
You might be able to escape state taxation of your Social Security benefits. Social Security is taxed by Uncle Sam.
Up to 85% of your benefits can be taxed. The thresholds are shown in the table. The combined income is your adjusted gross income plus non-taxable interest and half of your Social Security benefits.
| Filing As | Combined Income | Percentage of Benefits Taxable |
|---|---|---|
|
Individual. |
Between $25,000 and $34,000. |
Up to 50%. |
|
Married and filing together. |
Between $32,000 and $44,000. |
Up to 50%. |
|
Individual. |
More than $34,000. |
Up to 85%. |
|
Married and filing together. |
More than $44,000. |
Up to 85%. |
The data source is the Social Security Administration.
If you think you will have to fork over 50% or 85% of your benefits, calm down. Between 15% and 50% of your benefits may not be affected by a tax hit. The portion that is subject to taxation might have a rate of 12% or 22%.
Social Security benefits can be taxed. Do you know more about Social Security? You can make your retirement more secure if you know more about the program.
A previous version of the article failed to acknowledge the recent enactment of legislation in North Dakota making Social Security no longer taxable at the state level. The author and the fool made a mistake.
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