For many retirees, Social Security benefits are a critical part of their financial security. While the federal government may tax a portion of these benefits, individual states have the power to impose or waive additional taxes. Fortunately, the majority of U.S. states do not levy state taxes on Social Security income.
However, residents in nine states still face taxation on their benefits, depending on specific income thresholds and state regulations. Understanding these tax implications is essential for retirees when planning their finances or considering relocation.
Which States Do Not Tax Social Security Benefits?
According to The Moley Fool, 41 U.S. states and Washington, D.C., do not tax Social Security benefits. This includes states with no income tax, such as Florida, Texas, and Nevada, as well as those that specifically exempt Social Security from taxation, like California, Illinois, and Pennsylvania.
Missouri, Nebraska, and Kansas are the latest states to remove their Social Security tax, with changes taking effect in 2024. These adjustments mean that more retirees can now keep their full benefits without additional deductions at the state level.
Here is the full list of states where Social Security benefits are not taxed:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Mississippi
- Missouri
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- South Dakota
- Tennessee
- Texas
- Virginia
- Washington
- Wisconsin
- Wyoming
While these states do not impose taxes on Social Security, retirees should still consider other state tax policies, including income tax rates on pensions, property taxes, and sales tax, when evaluating their overall tax burden.
States That Still Impose Social Security Taxes
Nine states continue to tax Social Security benefits to varying degrees: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
However, some of these states offer partial exemptions or deductions based on income levels or age.
- Connecticut allows a full deduction for recipients earning less than $75,000 (single filers) or $100,000 (married filers).
- Colorado exempts all federally taxable Social Security income for residents 65 and older, but only up to $20,000 for those under 65.
- Utah taxes Social Security at its flat 4.55% income tax rate but offers credits for lower-income retirees.
According to the IRS, federal Social Security tax applies regardless of state residency, depending on a recipient’s combined income. Individuals earning above $25,000 (or $32,000 for joint filers) may have up to 85% of their Social Security benefits subject to federal taxation.
For retirees, understanding these tax rules is vital for effective financial planning. While most states provide relief by not taxing Social Security, those living in taxing states should review state-specific policies to determine their exact obligations.
