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Non-Married Opposite-Sex and Same Sex-Couples are Eligible for Spousal and Survivor Benefits

The Social Security Administration (SSA) in 2014 updated its rules about eligibility for both opposite-sex and same-sex spousal and survivor benefits for non-married couples. The SSA looks at each state to see if inheritance rights exist for the relationship, such as a domestic partnership or civil union. If the state recognizes the individual in the relationship and treats that person as a spouse when the other partner dies with no will in place, then the SSA will recognize that person as a spouse. This means that individuals in a domestic partnership or civil union may not have to get married to be entitled to Social Security spousal and survivor benefits. At the end of this post is an image of the SSA’s listing of states that recognize spousal inheritance rights. Click on this image for an enlarged view. For details see https://secure.ssa.gov/poms.nsf/lnx/0200210004.

The SSA provides the following two examples of how non-married same-sex applications for spousal benefits can be granted or denied.

Example for determining that the non-marital legal relationship is recognized for benefit purposes
Nicole, the “number holder” or worker and Penny (claimant) established a civil union in Colorado. Colorado appears in the chart below. In this section, which shows “Civil Unions” as a “Relationship Type.” Penny indicates that the relationship establishment date was after the “Effective Date” shown in the chart. Colorado’s civil union law would allow Nicole and Penny to inherit as each other’s spouse, according to the information under “Inheritance Rights” in the chart. When Penny applied for aged spouse benefits, Nicole was still domiciled in Colorado. The SSA will treat Penny and Nicole as spouses for purposes of determining entitlement.

Example for determining that the non-marital legal relationship is not recognized for benefit purposes
Tony, the “number holder” or worker and Tim (claimant) entered a domestic partnership in Rhode Island. Rhode Island appears on the chart below. In this section; however, the only type of relationship listed on the chart for Rhode Island is a “Civil Union.” Therefore the SSA will treat the claimant as unmarried for benefit purposes. Tony and Tim’s application will be denied.

Note: The Supreme Court’s June 2015 ruling states that married same-sex couples are eligible for Social Security benefits regardless of which state they reside. To be eligible for spousal benefits, the claimant must be continuously married for a least one year and currently married to the wage earner when the spousal benefit application is filed.

Click on this image to enlarge

Some Retirees pay both Federal and State Taxes on Social Security Benefits

According to the Social Security Administration (www.ssa.gov) some claimants have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits.

Federal Income Taxes on Social Security Benefits
If your Social Security retirement benefits are your only source of income. You will likely not have to pay Federal or State income taxes. Additionally, no one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. If you:

• file a federal tax return as an “individual” and your combined income* is between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. If your income is more than $34,000, up to 85 percent of your benefits may be taxable.

• file a joint return, and you and your spouse have a combined income* that is between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits. If your income is more than $44,000, up to 85 percent of your benefits may be taxable. If you are married and file a separate tax return, you probably will pay taxes on your benefits.

*Note:
Your adjusted gross income + Nontaxable interest + ½ of your Social Security benefits
= Your “combined income”

Each January you will receive a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits you received in the previous year. You can use this Benefit Statement when you complete your federal income tax return to find out if your benefits are subject to tax. If you do not receive From SSA-1099, you can order a replacement form online at SSA Form 1099 Replacement

State Taxes on your Social Security Benefits
There are three primary categories of state Social Security taxation:

1. SOCIAL SECURITY BENEFTS ARE STATE TAX EXEMPT: According to the Kiplinger Personal Finance Magazine (www.kiplinger.com) there are 36 states exclude benefits from state taxes (or have no income tax). Seven states that do not tax individual income are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two other states (New Hampshire and Tennessee)only tax dividends and interest (5 percent for New Hampshire and 6 percent for Tennessee for 2014 and remain the same in 2015)

2. STATES THAT TAX SOCIAL SECURITY BENEFITS: According to Kiplinger Personal Finance (www.Kiplinger.com) there are five states that tax Social Security benefits in the same way the Federal government taxes benefits. These states are Minnesota, North Dakota, Rhode Island, Vermont and West Virginia. Like the federal government, up to 85% of Social Security benefits can be taxed. (See above for details.)

3. STATE TAXATION OF SOCIAL SECURITY BENEFTIS USING AN ASSORTMENT OF ELEMENTS: According to The Tax Foundation (www.taxfoundation.org) some states determine Social Security benefit exemptions based on a variety of factors, such as income, age, or as a certain percentage of Social Security income. States that use categories of exemptions include Connecticut, Kansas, Missouri, Colorado, Utah, Montana, New Mexico, and Nebraska. The following are a few of the details:
• Connecticut allows taxpayers to fully exempt Social Security income from state income tax if income is less than $60,000 (for joint filers).
• Kansas exempts Social Security benefits from state income tax if federal adjusted gross income is if $75,000 or under.
• Missouri allows taxpayers with adjusted gross income of less than $100,000 (for joint filers) to deduct all of taxable Social Security benefits from income.
• If a Colorado household meets certain age requirements, qualifying retirement income can be excluded from income if it is taxable under the federal income tax (it’s called the “pension exclusion” and is subject to a maximum amount).
• A similar program exists in Utah, but it is administered as a credit and is phased-out once income exceeds a certain level.
• In Montana, some Social Security benefits may be taxable, and the state advises taxpayers to fill out a worksheet to determine how the state taxable amount differs from the federally taxable amount. In general, if total income is below $32,000 for joint-filers, benefits will not be subject to tax.
• In New Mexico, benefits are taxable but a person can qualify for an exemption if he or she is 65 years or older, which is based on income level.
• Nebraska taxes Social Security benefits for taxpayers with an adjusted gross income of $58,000 or less for married persons filing jointly, and $43,000 or less for all others are exempt from Nebraska’s personal income tax beginning in 2015.