OMG, Minnesota stopped taxing my social security!!

[dreamshark]

I completed my not terribly complicated taxes using H&R Block Deluxe and found myself staring at a completely ludicrous result. Normally my Minnesota tax bill is nearly as high as my Federal. Because despite what you may have heard, Minnesota does NOT have a wonderfully progressive tax code. They tax all capital gains as ordinary income (the Feds do NOT tax it at all, at least at my income level), which clobbers middle-class retirees living on mutual fund investments. Minnesota also taxes a large portion of my Social Security income. At least they did last year. But this year I ran the taxes and owed the state only $420 instead of the usual $3000 or so. My income had dropped a little from last year, but not THAT much.

I was convinced that I had done something wrong and spent literally hours poring over the forms, trying to figure out where that huge new "Subtraction" had come from. I finally recognized the amount as the sum of our taxable Social Security and that $520 "rebate" that the state sent out last year. 

So I googled around and discovered that Minnesota has stopped taxing Social Security for couples making < $100K!  About time! It makes a surprisingly large difference in the bottom line. So if you are on Social Security and have been putting off doing your taxes, you may have a pleasant surprise in store. 

Comments

[davidwilford]

States ending income taxes on Social Security is a trend, with Iowa dropping theirs last year as well.