Even those who are lucky enough to avoid state taxes need to remember that federal tax rules still apply.
Editor’s note: This story has been corrected: On June 21, the Kansas governor signed a law eliminating state taxes on Social Security income.
Social Security provides a safety net for millions of people, making it one of the most important social security programs in the U.S. While you may not like having Social Security taxes deducted from your paycheck, it can be comforting to know you’ll get some of those benefits when you retire.
Unfortunately, like any other form of income, Social Security benefits can be subject to taxation. While most people don’t have to worry about losing part of their check, some retirees do.
Image source: Getty Images.
States that don’t tax Social Security benefits
Let’s start with the good news: Most states don’t tax Social Security benefits. Here are the 41 states, along with Washington DC, that don’t tax Social Security benefits:
- 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
States with Social Security Taxation
Nine more states have Social Security tax systems.
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Each state has its own rules about whether and how Social Security is taxed, so it’s important to know the specific laws in your state.
For example, in Colorado, retirees over age 65 can deduct their entire Social Security benefits from their state income tax, and those between the ages of 55 and 64 can deduct up to $20,000 of their retirement income. Minnesota taxes them at the same rate as the federal tax rate, and in Utah, everyone pays a flat 4.55% tax.
If you live in one of these nine states, you won’t necessarily be taxed — states are constantly changing their rules, often to make them more recipient-friendly.
Colorado, for example, will extend the exemption to people ages 55 to 64 in 2025 if their adjusted gross income (AGI) is $75,000 or less for single filers and $95,000 or less for married couples filing jointly. States such as Missouri and Nebraska taxed Social Security benefits until this year, and West Virginia wants to eliminate the tax by 2026.
Avoiding state taxes does not mean avoiding federal taxes
If you know Uncle Sam, you know he’s always after his share. Regardless of your state’s specific Social Security rules, the federal rules apply to everyone.
To calculate your taxes, the IRS uses your “total income,” which includes your AGI, tax-exempt interest, and half of your annual Social Security benefits. For example, if your AGI is $50,000, your annual Social Security benefits are $20,000, and your tax-exempt interest is $500, your total income is $65,500.
Here’s how the IRS taxes benefits based on your total income and filing status.
| Percentage of taxable benefits added to income | Single declaration | If you’re married and filing jointly |
|---|---|---|
| 0% | Under $25,000 | Under $32,000 |
| Up to 50% | $25,000 to $34,000 | $32,000 to $44,000 |
| Up to 85% | Over $34,000 | Over $44,000 |
Data source: Social Security Administration.
Please note that the percentages above indicate only the taxable amount, not the amount of the benefit that is taxable. The taxable amount is added to your other income and taxed at your ordinary income tax rate.
As an example, imagine a married couple with a combined income over $44,000 who receive $40,000 per year in Social Security benefits and are taxed at 22% – instead of being taxed on $34,000 ($40,000 * 85%), the $34,000 would be added to their taxable income and taxed at the 22% rate, resulting in a tax of $7,480.
To properly plan for your retirement, it’s important to know exactly what to expect from your Social Security benefits so you can avoid a situation where you plan for one amount but end up receiving a different amount.
