Unlike the common misunderstanding, Social Security benefits
can
be subject to taxation. Social Security recipients with significant additional income sources may find up to 85% of their benefits incorporated into their taxable earnings. Actually, taxes levied on Social Security benefits constitute a key funding mechanism for the program itself.
The positive aspect is that generally, Social Security benefits are exempt from state taxes. Out of 50 states, 41 do not impose any taxation on Social Security income. Furthermore, many of these states that do apply taxes to Social Security utilize more lenient guidelines compared to those set by the federal government.
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41 states that don’t tax Social Security benefits
I’ll cut right to the chase. Should your state be on this alphabetic list, it does not impose any taxes:
Social Security benefits
for the 2025 tax year:
- 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 (state and D.C.)
- Wisconsin
- Wyoming
If your state is listed here, your Social Security income is exempt from state income tax, irrespective of the amount of extra retirement income you may have or whether you do or do not qualify.
still working
.
Certainly, some of these states do not impose any income tax at all. However, in certain situations, the Social Security exemption might provide significant savings. To illustrate, suppose you get $20,000 annually from Social Security and reside in my home state, South Carolina, where the highest marginal tax rate is 7%. In this case, you could potentially save around $1,400.
Additionally, this list may expand over time. As an illustration, West Virginia is gradually eliminating taxes on Social Security benefits with plans for complete removal by 2026.
What would happen if you reside in one of the remaining nine states?
Given the information from the preceding section, it indicates that nine states continue to impose taxes on Social Security benefits at varying levels. These states include Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
In many instances, though, the guidelines surrounding Social Security taxation are much more lenient compared to those enforced by the IRS. For instance, in Colorado, Social Security benefits are taxed only for beneficiaries younger than 65 whose income exceeds specific thresholds.
Simply one aspect of the tax calculation.
If you’re retired and live in one of the nine states that levy taxes on Social Security benefits, it may seem like an inconvenience. However, remember that taxation of Social Security is only part of what determines whether a state’s tax climate is favorable or not. Often, those same states with Social Security taxes tend to have relatively low rates for other forms of taxation.
For instance, Montana imposes a tax on Social Security benefits for certain residents yet stands among only five states that do not levy a state sales tax. Some other states listed feature property taxes significantly lower than the nationwide average.
In essence, although being taxed on your Social Security benefits is definitely not ideal, it’s crucial to take into account the overall taxation scenario of a state.
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