Planning for retirement involves more than just saving money—it also requires understanding how taxes will affect your income. One of the most important factors retirees consider is whether their Social Security benefits will be taxed. While the federal government may tax up to 85% of your benefits depending on your income level, some states also impose their own taxes. However, as of 2025, 41 states and Washington, D.C., do not tax Social Security benefits, allowing retirees to keep more of their hard-earned money.
States That Do Not Tax Social Security Benefits
If you are considering relocating for retirement or simply want to understand your current tax situation, here is a list of states that do not impose state income tax on 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
- Washington, D.C.
If you live in one of these states, your Social Security benefits will not be subject to state income taxes. This can significantly increase your retirement income and financial security.
States That Tax Social Security Benefits
While most states have eliminated or never imposed taxes on Social Security benefits, the following nine states continue to tax them:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
However, the tax laws in these states vary. Some offer exemptions or deductions based on income level, age, or other factors. For instance, Colorado allows residents aged 65 and older to fully deduct their federally taxed Social Security benefits from state income taxes. Starting in 2025, this exemption will also apply to those aged 55 to 64 if their adjusted gross income (AGI) is $75,000 or less for individuals or $95,000 or less for couples filing jointly.
Recent Changes in State Tax Policies
Several states have recently updated their tax policies regarding Social Security benefits:
- Missouri and Nebraska: Both states stopped taxing Social Security benefits in 2024.
- Kansas: A bill signed in mid-2024 ensures that Social Security benefits will not be taxed going forward.
- West Virginia: The state is gradually phasing out its tax on Social Security benefits, with a full exemption starting in 2026.
These changes reflect a growing trend among states to eliminate taxes on Social Security income, making them more attractive destinations for retirees.
How State Taxes Impact Retirement Planning
Choosing a retirement location involves more than just looking at whether Social Security benefits are taxed. Here are additional factors to consider:
Cost of Living
- Some states may not tax Social Security benefits but have a higher cost of living, which can offset potential tax savings.
Healthcare Access
- Quality healthcare is essential for retirees. Consider whether the state has good medical facilities and affordable healthcare options.
Climate and Lifestyle
- Your ideal retirement destination should align with your lifestyle preferences, including climate, recreational activities, and community engagement.
Other Taxes
- States without Social Security taxes may have higher property, sales, or other income taxes. It’s crucial to review the overall tax burden before making a decision.
Estimating Your Tax Savings
If you live in a state that taxes Social Security benefits, you can estimate potential savings by calculating your state’s tax rate and applying it to your expected benefits. For example, if your state’s tax rate is 5% and you receive $30,000 in Social Security benefits annually, moving to a tax-free state could save you $1,500 per year.
Understanding how state taxes impact your Social Security benefits is an essential part of retirement planning. With 41 states and Washington, D.C., exempting Social Security income from state taxation in 2025, many retirees have the opportunity to maximize their retirement income by choosing the right place to live.
While tax benefits are important, be sure to consider other factors like cost of living, healthcare access, and overall quality of life before making a decision. By weighing all these elements, you can find the best place to enjoy a financially secure and fulfilling retirement.
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