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Navigating Social Security Taxes in Retirement-Friendly States

Are you a retiree wondering about the impact of Social Security taxes on your income? Dallo Law Group is here to provide peace of mind for retirees facing potential tax challenges. In 2023, Social Security recipients experienced the largest cost-of-living adjustment in four decades. However, this increase in payments may lead to financial considerations during tax season.

It’s essential for retirees to be aware that not only does the federal government tax Social Security, but some states also impose taxes on these benefits. Currently, only around a dozen states tax Social Security benefits, and this number is expected to decrease further next year. Understanding your state’s rules is crucial, as age and income often determine whether you’ll be subject to these state taxes.

Colorado: Taxation applies if you’re under 65 and your federal taxable income from Social Security exceeds $20,000.

Connecticut: Taxation occurs for single recipients with adjusted gross income (AGI) over $75,000 ($100,000 for married joint filers).

Kansas: Benefits are taxed if AGI surpasses $75,000.

Minnesota: Exemptions phase out at $105,380 for married joint filers or $82,190 for singles.

Missouri: Taxation for AGI exceeding $100,000 (married joint filers) or $85,000 (single filers) until 2024.

Montana: Taxation depends on AGI.

Nebraska: For 2023, 60% of benefits are exempt; starting 2024, no tax on Social Security checks.

New Mexico: Top earners pay tax; exemptions for incomes below $100,000 (single), $150,000 (married joint), $75,000 (married separate).

Rhode Island: No tax break if income exceeds $101,000 (single) or $126,250 (married joint) or if below full retirement age.

Utah: Taxation kicks in at $45,000 (individual), $75,000 (head of household or married joint), or $37,500 (married separate).

Vermont: Exemptions for AGI below $50,000 (single) or $65,000 (joint filers).

West Virginia: Benefits may be taxed for incomes over $100,000 (married joint) or $50,000 (single).

States employ various methods for taxing Social Security, including age-based, income-based, and considering taxable income.

To ensure financial security during retirement, consider strategies such as investing with a Roth IRA, where withdrawals are tax-free. Additionally, be aware of the trend towards states eliminating taxes on Social Security benefits, providing relief for retirees.

Dallo Law Group is ready to assist retirees in navigating the complexities of Social Security taxes, offering the peace of mind they deserve. For personalized advice, reach out to us today.