Income Taxation of Social Security Benefits

This article provides information on federal and state income taxation of Social Security benefits.

It provides information concerning the federal income tax rules for Social Security benefits and their inclusion or exclusion from taxable income and the Kansas rules providing for the exclusion from income tax of federally taxable social security benefits under some circumstances.

Finally, this article highlights recent Kansas legislative proposals to expand the exemption of Social Security benefits from state income tax.

Federal Income Tax Treatment of Social Security Benefits

Prior to 1983, Social Security benefits were entirely exempt from federal income taxation. Legislation enacted by Congress in 1983 provided for up to 50 percent of Social Security benefits to be 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 was the lesser of 50 percent of benefits or 50 percent of the amount by which the combined income exceeded the statutory threshold.

In 1993, Congress enacted a secondary threshold that could result in as much as 85 percent of Social Security benefits being taxable. This framework has not changed since that time. Today, the Social Security Administration reports that approximately 40 percent of people receiving Social Security benefits have to pay income tax on their benefits.

Kansas Income Tax Treatment of Social Security Benefits

Kansas uses federal adjusted gross income as the starting point for the Kansas income taxation. Accordingly, income subject to federal tax is generally subject to the Kansas income tax. However, in 2007, the Kansas Legislature created a modification to federal adjusted gross income for Kansas income tax purposes to exclude from Kansas income tax Social Security benefits for taxpayers with federal adjusted gross income of $50,000 or less for tax year 2007 and $75,000 or less for tax year 2008.

The Kansas exclusion of certain Social Security benefit income from Kansas income tax applies uniformly to taxpayers regardless of the taxpayer’s filing status.

Recent Kansas Legislative Considerations

The 2020 and 2021 Kansas Legislatures have considered legislation that would further or entirely exempt Social Security income; however, no such legislation has been enacted into law.

In 2020, the House Committee on Taxation held hearings on legislation that would have increased the income threshold for exemption or reduced the amount of benefits included as income for taxpayers exceeding the threshold. Neither piece of legislation advanced beyond the Committee.

In 2020, the Senate Committee on Assessment and Taxation held hearings on legislation that would have increased the income threshold for married filing jointly taxpayers to $150,000 and legislation that would have exempted all Social Security benefits from Kansas income tax. The Committee recommended legislation that would have increased the income threshold for married filing jointly taxpayers to $100,000. In 2021, the Senate Committee of the Whole twice advanced legislation that would have exempted all Social Security benefits from Kansas income tax.

The chart below illustrates the current threshold at which Social Security benefits become taxable in Kansas.