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May 28, 2021 at 01:29 PM
Related: How to Minimize Taxes When Social Security, RMDs Kick In
Beyond what the federal government taxes Social Security benefits, U.S. states that have income taxes can also take an additional swipe. Most states don’t tax Social Security, but 13 do, mostly with modifications different from those of federal taxation, according to the Tax Foundation.
The U.S. government taxes a portion of Social Security benefits. It starts with adjusted gross income that includes Social Security plus any other sources of income, such as required monetary distributions or any wages. Added to this is any tax-exempt interest (not taxed but added to the calculation).
If this amount exceeds the minimum amount, Social Security benefits will be taxed. For an individual, if annual gross income exceeds $25,000 ($32,000 for a couple), up to 50% of benefits may be taxed. However, if it exceeds $34,000 ($44,000 for a couple), up to 85% may be taxed.
But states are different. Eight don’t have state income taxes: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.
And 29 other states that have state income taxes do not include Social Security benefits in their tax calculation.
That leaves 13 states that tax Social Security benefits. For the most part, each of those states has different methods of calculating that tax, according to the Tax Foundation. The gallery above looks at those states and how they tax Social Security benefits.
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