Social Security benefits play a crucial role in many Americans’ retirement plans. As retirees carefully manage their income, understanding how different states tax these benefits can significantly impact their financial well-being.
In recent years, there’s been a growing trend among states to reduce or eliminate taxes on Social Security income.
States That Don’t Tax Social Security
As of 2024, 41 states plus Washington D.C. do not tax Social Security benefits. These states include:
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, and Wyoming.
Recent Changes
Several states have recently made changes to their Social Security taxation policies:
- Missouri and Nebraska: Both states stopped taxing Social Security benefits in 2024.
- Kansas: Legislation was passed midway through 2024 to stop taxing Social Security going forward.
- West Virginia: The state is phasing out Social Security taxes, with complete elimination scheduled for 2026.
States That Still Tax Social Security
As of 2024, only nine states continue to tax Social Security benefits:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia (until 2026) (ref)
However, it’s important to note that even in these states, not all Social Security recipients will necessarily owe taxes. Many have exemptions based on age or income.
State-Specific Exemptions & Thresholds
Even in states that do tax Social Security, there are often exemptions or thresholds in place:
Colorado
Residents 65 and older can fully deduct federally taxed Social Security benefits. (ref) Starting in 2025, this exemption will expand to those 55-64 with specific income limits.
Connecticut
Social Security benefits are not taxed for single filers with AGI under $75,000 and joint filers with AGI under $100,000. (ref)
Rhode Island
Only retirees with a federal AGI of $95,800 or more (single filers) or $119,750 or more (joint filers) are subject to state tax on Social Security benefits. (ref)
Vermont
Offers a full exemption for single filers with AGI of $50,000 or less and joint filers with AGI of $65,000 or less. (ref)
Factors Beyond Taxation
While state-level taxation is an important consideration for retirees, it shouldn’t be the only factor when choosing where to live.
Other important aspects include:
- Overall cost of living
- Healthcare access and quality
- Proximity to family and friends
- Climate and lifestyle preferences
- Other state and local taxes (property, sales, etc.)
Planning for Retirement
Given the complex nature of retirement income taxation, it’s crucial for retirees to plan ahead:
Diversify retirement income sources
This can help manage your tax liability across different types of accounts and income streams.
Consider Roth conversions
Converting traditional IRA funds to Roth IRAs can provide tax-free income in retirement, potentially reducing your overall taxable income.
Manage required minimum distributions (RMDs)
Proper planning around RMDs can help minimize their impact on your Social Security taxation.
Consult with professionals
Tax laws are complex and constantly changing. Working with a financial advisor or tax professional can help you navigate these issues and optimize your retirement strategy.
The trend of states moving away from taxing Social Security benefits is good news for many retirees. However, the tax landscape remains complex, with each state having its own rules and exemptions.
As you plan for retirement or consider relocating, it’s essential to look at the full picture of state taxation, including but not limited to Social Security benefits.
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Nancy Maffia
Nancy received a bachelor’s in biology from Elmira College and a master’s degree in horticulture and communications from the University of Kentucky. Worked in plant taxonomy at the University of Florida and the L. H. Bailey Hortorium at Cornell University, and wrote and edited gardening books at Rodale Press in Emmaus, PA. Her interests are plant identification, gardening, hiking, and reading.
