Minnesota Republicans are proposing the state eventually eliminate its tax on Social Security benefits. Currently Minnesota taxes Social Security benefits at the same rate as the federal government, meaning that people whose income mostly relies on social security is not taxed, but those who have additional income are taxed.
The legislation titled “The Retire In Minnesota Act” would cut seniors payments to the state by $127 million over the next two years. Republicans say the bill will help keep retirees from leaving the state for warmer climates or states that don’t tax Social Security benefits. Minnesota is one of only seven states that taxes Social Security benefits.
By 2018 the lost tax revenue would cost the state $437 million. Republicans say spending by seniors who stay in Minnesota will offset the cost of the tax break. Sen Mary Kiffmeyer (R-Big Lake) is a co-sponsor of the bill.
Who pays taxes on Social Security income?
The formula is a little complicated. The first step is to add up all your income, including what would ordinarily be tax-exempt income from municipal bond interest, and then add in one-half of your Social Security benefits for the year. If you’re over the $25,000 or $32,000 initial thresholds, then some of your benefits might be taxable.
House Research on taxable Social Security income in Minnesota: http://www.house.leg.state.mn.us/hrd/issinfo/sstaxes.aspx?src=20