Nine US States Tax Social Security Benefits, Reducing Retirement Income
Nine US States Tax Social Security Benefits, Reducing Retirement Income

Nine US States Tax Social Security Benefits, Reducing Retirement Income

News summary

Retirees in the United States face varying tax treatments on their Social Security benefits, as nine states impose state income taxes on these payments despite federal taxation rules. Legislation like the One Big Beautiful Bill Act aims to provide temporary federal tax relief by increasing the standard deduction for seniors, but state levies persist, with only West Virginia planning to phase out its tax by 2026. The nine taxing states—Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia—offer different exemptions and tax rates, often based on income levels, which can significantly reduce retirees' monthly benefits. Most other states, including Missouri which recently eliminated Social Security taxes, do not tax these benefits, offering retirees more disposable income amid rising living costs. This patchwork of state policies creates financial uncertainty and complicates retirement planning for millions who rely heavily on Social Security as their primary income source. Experts advise retirees to carefully assess their total retirement income and consider strategies to minimize tax burdens in light of these complex federal and state tax landscapes.

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Left 67%
Right 33%
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1
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Last Updated
3 days ago
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