With retirement getting more expensive all the time, people want to figure out how to stretch their Social Security dollars as far as possible. You probably know about things you can do to increase your benefits, like boosting your income today. But most people don’t give enough thought to avoiding Social Security benefit taxes. 

Not all states have them, but if yours does, you could lose a chunk of your checks to the government every year. Here’s what you need to know.

These 38 states don’t have Social Security benefit taxes

The following 38 states don’t tax the Social Security benefits of any of their residents:

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

If you live in Washington D.C., you also won’t have to worry about any district taxes on your Social Security benefits. But it’s a different story for residents of these 12 states:

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

But don’t panic if you live in one of these places because not all Social Security beneficiaries in these states owe taxes. Each state government sets its own rules that determine who owes, but it’s generally those with high incomes or high annual Social Security benefits. If you’re worried, check with your state’s department of taxation to learn how it determines who pays Social Security benefit taxes.

The federal government taxes benefits, too

Even if your state government doesn’t take any of your benefits, the federal government might. It decides how much you owe by looking at your combined, or provisional, income. This is your adjusted gross income (AGI), plus nontaxable interest, and half your annual Social Security benefit.

Here’s how much you could owe based on your combined income and your marital status:

Marital Status

Up to 50% of Benefits Taxable

Up to 85% of Benefits Taxable

Single

Provisional income between $25,000 and $34,000

Provisional income greater than $34,000

Married, filing jointly

Provisional income between $32,000 and $44,000

Provisional income greater than $44,000

Data source: Social Security Administration.

This doesn’t mean you’ll lose up to 85% of your benefits. It just means you could owe taxes on that much, but the amount you’ll owe depends on your tax bracket for the year. If you fall in the 12% tax bracket, for example, you might only owe 12% in taxes on up to 85% of your benefits.

Sometimes, it’s possible to avoid federal and state benefit taxes by adjusting your spending or relying more upon your Roth savings account for withdrawals as you near the threshold for benefit taxation. But if you don’t have Roth savings or you need to spend more to cover your essential expenses, this may not be an option.

If you know you’ll owe taxes, the best thing to do is accept it and set aside the funds necessary to cover the bill. Or if you get hit with a surprise at tax time, talk to the IRS and see if you can set up a payment plan. 

Being proactive is often the best approach. If you end up with tax debt you’re unable to pay, the federal government could start garnishing your Social Security checks before they even get to you. No one wants that, so do your best to stay on top of all of your taxes.

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