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Millions of retirees rely on Social Security as a key source of income, but if you live in Colorado, Connecticut, Vermont, Montana, Minnesota, New Mexico, Rhode Island, West Virginia, or Utah, you might see a portion of your benefits taxed at the state level.
While most states don’t tax Social Security, these nine states impose taxes on beneficiaries above certain income thresholds—potentially reducing your retirement income. Here’s what you can do to minimize the impact.
1️⃣ Know Your State’s Income Thresholds
State taxation of Social Security benefits typically applies only if your income exceeds specific limits:
- Connecticut: Couples filing jointly owe state tax on benefits if their income is above $100,000; for individuals, the threshold is $75,000.
- Rhode Island & New Mexico also tax Social Security benefits based on income brackets.
- Federal Taxes: Social Security benefits become taxable if:
- Your total income exceeds $25,000 (single filers)
- Your combined income exceeds $32,000 (married filers)
Understanding your income level can help you plan ahead and avoid unexpected tax bills.
2️⃣ Look for Tax Credits and Exemptions
Some states offer deductions or exemptions to reduce Social Security taxation:
- Colorado: Retirees over 65 years old can fully deduct Social Security benefits from taxable state income.
- Vermont: Offers partial exemptions based on income level.
Before filing, check your state’s rules to maximize deductions and lower your tax liability.
3️⃣ Consult a Tax Expert
🔹 Only 24% of Americans plan to hire a tax professional in 2025, according to a survey—yet tax planning can save you thousands.
🔹 Whether you file yourself or use software, consider speaking with a Certified Public Accountant (CPA) to:
✅ Ensure you’re claiming all available deductions
✅ Strategize ways to stay below taxable income thresholds
✅ Plan for future Social Security withdrawals to minimize taxes
With the right planning, you can protect your retirement income and keep more of your Social Security benefits.
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