What states tax social security 2023? This is a question that many retirees and soon-to-be retirees are asking as they navigate the complexities of their financial planning. Social Security is a critical source of income for millions of Americans, and understanding how it is taxed can significantly impact one’s financial well-being in retirement.
Social Security benefits are generally not taxed at the federal level, but the situation can be different at the state level. As of 2023, only a few states tax Social Security income, and the rules for these states can vary widely. This article will explore which states tax Social Security in 2023 and the criteria they use to determine the taxability of these benefits.
States That Tax Social Security in 2023
1. Connecticut: Connecticut is one of the few states that tax Social Security income. Retirees in Connecticut must pay state income tax on all Social Security benefits they receive, regardless of their filing status.
2. Maine: Similar to Connecticut, Maine taxes all Social Security benefits received by its residents. There is no exception for filing status or income level.
3. Mississippi: Mississippi residents who receive Social Security benefits must include them in their state income tax return. However, only a portion of the benefits is taxed, depending on the individual’s total income.
4. Montana: While Montana does not tax Social Security income, it does tax retirement income from other sources, such as pensions and annuities.
5. Nebraska: Nebraska is another state that taxes a portion of Social Security benefits. The amount taxed depends on the individual’s total income, and the tax is calculated based on a sliding scale.
6. New Mexico: New Mexico taxes Social Security income, but only if the individual’s total income exceeds a certain threshold. The tax rate is progressive, meaning the more income an individual has, the higher the tax rate.
7. North Dakota: North Dakota does not tax Social Security income, but it does tax other types of retirement income, such as pensions and annuities.
8. Oklahoma: Oklahoma residents must include Social Security benefits in their state income tax return, but only if their total income exceeds a certain amount.
9. Rhode Island: Rhode Island taxes Social Security income, but only if the individual’s total income is above a specific level. The tax rate is progressive, with higher income levels subject to higher tax rates.
10. Vermont: Vermont residents must include Social Security benefits in their state income tax return, with the tax rate depending on the individual’s filing status and total income.
Understanding the Taxation of Social Security Benefits
It’s important to note that the rules for taxing Social Security benefits can change, and it’s essential for retirees to stay informed about their state’s tax laws. Additionally, some states offer exemptions or deductions for Social Security income, which can reduce the overall tax burden.
Retirees should consult with a tax professional or financial advisor to understand how Social Security benefits are taxed in their specific situation. By doing so, they can make informed decisions about their retirement income and ensure they are maximizing their financial well-being.
