AARP Urging Lawmakers to Reduce Taxes on Social Security

Minnesota is only 1 of 7 States that tax Social Security Benefits. Minnesota should follow the lead of most states and Stop Taxing these Benefits.

Background:

Today with more and more Minnesotans finding it difficult to save for a secure retirement Minnesota

Boffeli, Seth

should adopt tax policies that reduce or eliminate taxes on Social Security benefits. According to the MN House research department our state is only 1 of 7 states that taxes Social Security Benefits to the extent that they are taxable at the federal level. Most states exclude Social Security retirement benefits from state income taxes including the District of Columbia and 27 states with income taxes provide a full exclusion for Social Security benefits.

How Does Minnesota Tax Social Security Benefits

Under federal law, up to 85 percent of Social Security benefits are subject to federal and state income tax, depending on the taxpayer's income.

• For taxpayers with incomes less than $25,000 ($32,000 for married joint taxpayers), all Social Security benefits are excluded from taxable income.
• For incomes between $25,000 and $34,000 ($32,000 and $44,000 for married joint taxpayers), up to 50 percent of Social Security benefits may be subject to tax.
• For those with incomes over $34,000 ($44,000 for married joint taxpayers) up to 85 percent of Social Security benefits may be included in taxable income.

 

The initial Federal levels were established in 1984 with a second tier added in 1994 to tax up to 85% of your Social Security benefits. However, with no indexing for inflation, more and more low and middle income Minnesotans are paying taxes on their Social Security benefits.

Solution:

AARP is urging policy makers to consider, at a minimum, adding inflationary protection to these income thresholds or do as other states have and exclude Social Security Benefits from taxation altogether .State Senator Dave Senjem has introduced Senate File 124 which would exempt Social Security from Minnesota taxation. AARP is urging lawmakers to support this legislation.