Social Security payments, whether from Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), may be taxable in your state. The majority of states, however, exempt disability benefits from taxation. (Also, read about when you have to pay federal taxes on your disability benefits.)
Following are the various categories states fall into regarding the taxation of Social Security disability and SSI disability benefits: states that fully tax benefits, states that have no income tax including tax on disability benefits, states that exempt disability benefits from income tax, states that tax disability benefits only when the recipient's AGI is under a certain amount, and states that tax disability benefits in the same way that the IRS does. Read on to determine into which category your state falls.
States That Exempt Social Security From Taxes
The following states do impose income taxes; however, all of these states exempt 100% of Social Security benefits from a resident’s tax liability. You can click on the state to be directed to its tax authority.
Income Tax-Free States
The following states do not impose state income taxes; accordingly, SSDI and SSI are not taxed. You can click on the state to be directed to its tax authority.
States that Tax Based on AGI
In the following states, SSDI and SSI income are taxed according to the taxpayer’s federally adjusted gross income (AGI). However, some states exempt recipients whose income falls under certain thresholds. For more information, you can click on the state to be directed to its tax authority.
- Connecticut. Individual taxpayers are exempt from paying state taxes on their Social Security benefits if their federal AGI is less than $50,000. Married taxpayers who file jointly are exempt from paying state taxes on their Social Security benefits if their federal AGI is below $60,000.
- Colorado. People under 65 who receive Social Security benefits can exclude up to $20,000 of benefits from their state taxable income. Recipients 65 and older can exclude up to $24,000 of benefits from their state taxable income (this figure includes other retirement income as well, however.) Also, in Colorado, whatever amount of Social Security income that is not taxed by the federal government does not get added back into the recipients adjusted gross income when determining tax liability.
- Iowa. Currently, Iowa does not tax Social Security income for single taxpayers who earn less than $25,000, or for joint taxpayers who earn less than $32,000. For the 2012 tax year, 23% of Social Security benefits for higher-income recipients are taxable. In 2013, the amount of benefits that is taxable for higher income recipients will be 11%. Beginning in 2014, all Social Security benefits will be tax-free (for Iowa state tax purposes).
- Kansas. Social Security benefits are not taxed for recipients who have a federal AGI of less than $75,000.
In all the instances above, any taxable Social Security benefits are taxed at that state’s income tax rate. You may be eligible for other income deductions or credits in your state. For more information, contact your tax professional.
States That Fully Tax Social Security Benefits
The following states fully tax Social Security benefits at their individual state income tax rate. You can click on the state to be directed to its tax authority.
- Utah. Although Utah imposes taxes, there are some tax credits available to residents depending on their age, filing status, and household income.
- Montana. Montana imposes full income taxes on Social Security benefits.
You may be eligible for other disability-related income deductions or credits in these state. For more information, contact your tax professional.
States That Tax Benefits at the Federal Rate
The following states tax Social Security benefits at the same tax rate as the federal government. For more information, you can click on the state to be directed to its tax agency.
You may be eligible for disability-related income deductions or credits in your state. For more information, contact your tax professional.
United States Territories
If you live in a U.S. territory or possession and receive Social Security benefits, your benefits may be taxable by your government (in addition to any U.S. federal income tax liability.) You can click on the links below to be directed to your government’s taxing authority.
Learn more about federal taxation of disability benefits.