Will you have to pay state taxes on your Social Security benefits? It depends on where you live and how much you earn.
The good news is, if you live in the majority of U.S. states you will not have to worry about what the local tax rules are or if your income renders your benefits taxable. That's because Social Security is always free of state taxes in these 37 places.
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These are the 37 states that don't tax your Social Security benefits
Residents of these 37 states will enjoy their Social Security checks free of state taxes, regardless of their earnings.
- 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
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- South Dakota
- Tennessee
- Texas
- Virginia
- Washington
- Wisconsin
- Wyoming
And beginning in 2022, West Virginia will also be added to this list, bringing the total number of states that don't tax Social Security up to 38.
If you live in these states, are your Social Security benefits tax-free?
If you're lucky enough to live somewhere that doesn't take a piece of your benefits, you're not necessarily in the clear from tax obligations. There's also federal taxes to consider. And around 50% of retirees owe federal tax on a portion of their Social Security checks.
Whether you're in this group or not depends on your "provisional income," which is half your Social Security income plus all taxable income and some non-taxable income such as municipal bond interest. The table below shows whether Uncle Sam will take a cut of your benefits, depending on your provisional income.
| Tax Filing Status | Income at Which You're Taxed on Up to 50% of Benefits | Income at Which You're Taxed On Up to 85% of Benefits |
|---|---|---|
| Married Filing Jointly | $32,000 | $44,000 |
| Other Filing Statuses | $25,000 | $34,000 |
Source: IRS.
If you'll owe federal taxes, you may want to think about having money withheld from your checks to pay the IRS throughout the year. You can do this by completing a Voluntary Withholding Request and delivering it to Social Security via mail or to your local office.
Otherwise, you'll need to plan for a larger tax bill and you may need to pay quarterly estimated taxes throughout the year to ensure you're paying in enough over time to avoid IRS penalties.
Be prepared for taxes on benefits
If you plan to spend your retirement in one of the states that taxes Social Security, that doesn't necessarily mean you will owe taxes. Income thresholds apply, so check your state's rules to see if your benefits will be taxable or not.
If it turns out you'll owe state or federal tax, plan for this when estimating the amount of income Social Security will provide. Your benefits won't stretch as far if you're giving up a piece of them, so you'll need more supplementary savings to help you make ends meet.
