13 US States that May Tax Your Social Security Income Benefits

by | Published on Jan 25, 2017 | Social Security Disability

Social security disability claims are determined on the basis of a detailed medical chart review that helps evaluate the nature of the impairment and how it affects a person’s ability to work and engage in substantial gainful activity.Whether retirement benefits or disability benefits,social security benefits are a lifeline for most recipients and imagine their situation if these benefits offered by the SSA are taxed! That is what a survey conducted by the advocacy group The Senior Citizens League found. While beneficiaries may have to pay federal tax on their retirement income, 13 U.S. states levy their own taxes inflicting double burden on SS recipients. Six of these states impose tax in the same way the federal government does, whereas the other seven determine benefit exemptions on the basis of other factors such as income or age or as a certain percentage of social security income. Here are the details as sourced from The Tax Foundation; Wolters Kluwer Tax & Accounting US.

  1. In Colorado, the SS benefits are exempt up to a certain level. If the Colorado household meets certain age requirements, the retirement income may be excluded from income if it is taxable under federal income tax. Called the pension/annuity subtraction, it is subject to a maximum amount.
  2. Connecticut: This state allows residents to fully exempt their SS benefits from state income tax if the earnings total less than $60,000 for joint filers.
  3. Kansas: If your federal annual gross income is less than or equal to $75,000, Kansas exempts your SS benefits from state income tax.
  4. Minnesota: This state taxes Social Security benefits.
  5. Missouri: In this state, exemption is based on adjusted gross income. Residents with annual gross income of under $100,000 (for joint filers) are permitted to deduct all of their taxable social security benefits from income.
  6. Montana: Here also the state tax exemption on SS benefits is based on adjusted gross income. Some SS benefits may be taxable in Montana. In general, if a person earns less than $32,000 a year (for joint filers), the SS benefits are not taxed.
  7. Nebraska: Here SS is taxable to the extent of federal taxation.
  8. New Mexico: Here too, social security benefits are taxable. You can qualify for an exemption from New Mexico state tax if you are 65 years of age or older.
  9. North Dakota: This state taxes SS benefits to the extent of federal taxation.
  10. Rhode Island: Here also your SS benefits are taxed to the extent of federal taxation.
  11. Utah: Utah’s approach to taxation is similar to Colorado’s, except that the deduction is administered as a credit, not as an exclusion or subtraction. It is phased out by income level.
  12. Vermont: This state taxes SS benefits to the extent of federal taxation.
  13. West Virginia: SS benefits are taxable in this mountain state. However, it is only to the extent that it is included in your federal adjusted gross income.

The social security attorneys for whom we provide medical chart review and other medical review solutions advise their clients on the best course to take when applying for SS benefits. While the government has provided all details on the SSA website to assist claimants, the services of an attorney are invaluable because it helps applicants avoid many legal and administrative hassles and obtain the benefits due to them.

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