Unlike the common misunderstanding, Social Security benefits
can
be subject to taxation. Social Security recipients with significant additional income sources may have up to 85% of their benefits incorporated into their taxable earnings. Actually, taxes levied on Social Security benefits constitute a considerable part of the program’s funding.
The positive aspect is that generally, Social Security benefits are exempt from state taxes. Out of 50 states, approximately 41 do not impose any taxation on Social Security income. Moreover, many of the remaining states that apply taxes to Social Security utilize more lenient guidelines compared to those set by the federal government.
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41 states that exempt Social Security income from taxes
I’ll cut right to the chase. Should your state be on this alphabetical 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 will be 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 exemption for Social Security benefits can result in significant savings. Take, for instance, someone who receives $20,000 annually from Social Security and resides in my home state of South Carolina, where the highest marginal tax rate is 7%. In this scenario, they might save up to $1,400.
Additionally, this list is expected to expand over the coming years. As an illustration, West Virginia is gradually eliminating taxes on Social Security benefits with plans for them to cease entirely 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 to varying degrees. These states include Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
In many instances, though, the guidelines governing Social Security taxes are more lenient compared to those enforced by the IRS. For instance, Colorado imposes taxes on Social Security benefits solely for recipients younger than 65 whose income exceeds specific thresholds.
Only a single component of the tax calculation.
If you’re a retiree living in one of the nine states that impose taxes on Social Security benefits, it may seem like an unlucky situation. However, remember that this factor alone doesn’t determine whether a state is more or less tax-friendly overall. Often, those same states with taxation on Social Security 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 is among only five states without a state sales tax. Some other states listed here feature property taxes significantly lower than the nationwide average.
In essence, although being taxed on your Social Security benefits isn’t ideal, it’s crucial to take into account the overall taxation scenario of a state.
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