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38 States That Don’t Tax Social Security Benefits

Stretching a Social Security check far enough to cover basic expenses is a huge challenge for many retirees. According to the Senior Citizens League, Social Security benefits buy approximately 30% less today than they did in 2000. The reason? Senior households spend a disproportionate share of their budgets on things like healthcare and housing, which rise at a much faster pace than the inflation rate that determines cost-of-living adjustments. 

If Social Security will make up a significant part of your retirement income, the last thing you want is to fork over part of your benefit for state taxes. Fortunately, 38 states and the District of Columbia won’t touch your benefits.

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These 38 states won’t touch your Social Security

If you live in one of these 38 states or the District of Columbia, you won’t have to worry about state Social Security taxes. Nine of these states don’t have state income taxes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming (note that New Hampshire does tax interest and dividend income). In the other states, Social Security benefits aren’t considered taxable income.

Alabama
Alaska
Arizona
Arkansas
California
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
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

That doesn’t mean, however, you’ll avoid taxes altogether on your Social Security checks. Benefits are still taxable at the federal level if your income exceeds certain thresholds.

For single filers with incomes between $25,000 and $34,000, up to 50% of benefits are taxable. Up to 85% of your benefit is taxable if you’re a single filer whose income is greater than $34,000.

Up to 50% of benefits are taxable for married couples filing a joint return who have a combined income between $32,000 and $44,000. Up to 85% of benefits are taxable for couples whose combined income exceeds $44,000.

12 states where Social Security is taxable

In the following 12 states, Social Security benefits are taxable in some circumstances. However, many states don’t tax benefits for retirees whose income is below certain limits, or they allow retirees to shield a portion of their benefits from state taxes. 

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

Should you worry about state Social Security taxes?

If you’re worried about taxes in retirement, state Social Security taxes may be a factor in where you spend your golden years. However, it’s important to consider the overall tax picture.

Property taxes can put a serious strain on your retirement budget if you live in an area with high housing costs. You should also consider sales taxes and whether your state taxes capital gains and other investment income. Finally, if you have a high net worth, estate taxes may also be a consideration.

Obviously, you don’t want to give up part of your Social Security benefit to your state government if you don’t have to. But look at your total tax bill when determining which state will become your retirement home.

The Motley Fool has a disclosure policy.

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