Federal Income Tax Treatment of Social Security Benefits
Up to 50 percent of Social Security benefits are subject to the federal income tax if a taxpayer’s combined income, including 50 percent of Social Security benefits, exceeded a statutory threshold. The taxable amount is the lesser of 50 percent of benefits or 50 percent of the amount by which the combined income exceeded the statutory threshold.
A secondary threshold can result in as much as 85 percent of Social Security benefits being taxable. The Social Security Administration reports that approximately 40 percent of people receiving Social Security benefits must pay income tax on their benefits.
Kansas Income Tax Treatment of Social Security Benefits
Kansas uses federal adjusted gross income (AGI) as the starting point for the Kansas income taxation. Accordingly, income subject to federal tax is generally subject to the Kansas income tax. However, the Kansas Legislature created a modification to federal AGI for Kansas income tax purposes to exclude Social Security benefits from Kansas income tax after a certain threshold.
The Kansas exclusion of certain Social Security benefit income from Kansas income tax applies uniformly to taxpayers regardless of the taxpayer’s filing status. The chart on the next page illustrates the current threshold at which Social Security benefits become taxable in Kansas.
Income Tax Treatment in Other StatesCurrently, 37 states have no income tax or do not include Social Security benefits in their calculation for taxable income. The remaining 12 states approach Social Security benefits in various ways.
- Colorado allows taxpayers to subtract a portion of Social Security income if they are 55 or older. Taxpayers aged 65 and older pay no income tax on Social Security benefits.
- Minnesota provides subtraction for taxpayers with income below $81,180 filing single, or $103,930 for those filing jointly.
- Missouri allows full exemption if the taxpayer is 62 years of age or older and has income less than $85,000 filing single, or less than $100,000 for those filing jointly.
- Montana does not have age or income stipulations. The state does encourage taxpayers to complete a worksheet to determine their state taxable amount.
- Nebraska allows taxpayers below an indexed income level to deduct all federally taxable Social Security benefits. Income above that level must follow federal guidelines.
- North Dakota allows taxpayers to deduct benefits if their AGI is less than $50,000 filing single, or less than $100,000 for those filing jointly.
- West Virginia exempts benefits for taxpayers whose income does not exceed $50,000 filing single, or $100,000 for those filing jointly.
Recent Kansas Legislative Considerations
The 2021 and 2022 Kansas Legislatures have considered legislation that would further or entirely exempt Social Security income; however, no such legislation has been enacted into law.
In 2021, the Senate Committee of the Whole twice advanced legislation that would have exempted all Social Security benefits from Kansas income tax.
In 2022, the Conference Committee for the Senate Committee on Assessment and Taxation and House Committee on Taxation advanced legislation that would have increased the threshold up to $85,000 for tax year 2023 and increase the threshold by $5,000 for all tax years thereafter.
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