HomeMarket News40 States That Don't Tax Social Security Benefits

40 States That Don't Tax Social Security Benefits

Actionable Trade Ideas

always free

As you approach and enter retirement, you might reasonably wonder whether your Social Security benefits will be taxed by your state. It’s smart to consider taxes whenever you’re thinking about or planning your financial future.

There’s good news, too, on that front: Only 10 states currently tax your benefits, and even there, the news isn’t all bad. So read on.

A couple is outside walking for exercise and smiling.

Image source: Getty Images.

The 40 states that don’t tax your Social Security benefits

Here are the 40 states (plus the District of Columbia) that won’t touch your Social Security benefits:

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • 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
  • Washington, D.C.
  • Wyoming

The 10 states that do tax Social Security benefits

And here are the 10 states that do tax benefits:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Montana
  • New Mexico
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

It’s not necessarily bad news if you live in one of the states above β€” because each state has its own rules and tax rates, and many states partially or fully exempt older citizens and/or those with relatively low incomes. For example:

  • In Colorado, your benefits are free from taxation once you turn 65.
  • In Vermont, those with incomes below a certain level will have some or all of their Social Security income exempted from taxation.
  • New Mexico has also exempted Social Security income from taxation for all citizens except those with fairly high incomes (six figures or more in most cases).

Don’t forget the federal government

As nice as it may be to live in one of the 40 states that don’t tax Social Security benefits, you may still face federal taxation of your benefits. Specifically, up to 85% of your benefits may be taxed federally. The table below offers details:

Filing As

Combined Income*

Percentage of Benefits Taxable

Single individual

Between $25,000 and $34,000

Up to 50%

Married, Filing Jointly

Between $32,000 and $44,000

Up to 50%

Single individual

More than $34,000

Up to 85%

Married, Filing Jointly

More than $44,000

Up to 85%

Source: Social Security Administration.
*Your β€œcombined income” is your adjusted gross income (AGI) plus non-taxable interest plus half of your Social Security benefits

This status quo may change over time, too. Some in Washington have suggested ceasing federal taxation of Social Security.

Consider the big picture

Finally, while it’s worth exploring whether your state does or doesn’t tax Social Security β€” or all your retirement income β€” remember to consider the big tax picture. For example, your state might not tax retirement income, but it might have a heavy tax on real estate properties. If your home is a costly one, then you might face hefty taxes. Every state needs income, and they will tax in different ways in order to get it. A heavy income tax might be balanced by no sales tax and no property taxes, and vice versa.

Know, too, that there are ways to increase your Social Security benefits. β€” such as by timing when you start collecting Social Security strategically. If you can beef up your benefits, you may end up with more money in your pocket even after paying taxes.

What stocks should you add to your retirement portfolio?

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now. The 10 stocks that made the cut could produce monster returns in the coming years, potentially setting you up for a more prosperous retirement.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $566,624!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks Β»

The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.