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37 States That Don't Tax Social Security Benefits

By Christy Bieber - Feb 11, 2018 at 8:02AM

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Is your state one of them?

Around one third of Americans expect Social Security will be a major source of their retirement income, according to a 2017 Gallup poll. If you're going to be reliant on Social Security to fund your lifestyle as a retiree, it's important you understand exactly how much money you'll have available to you.

This means not only figuring out what your benefit will be worth depending upon your age at retirement, but also determining if you'll lose a portion of your Social Security benefits to income taxes. 

While the federal government does tax some of your benefits once your income reaches a certain level, the good news is that a lot of Americans live in states that won't tax Social Security. In fact, there are a total of 37 states where you can enjoy your Social Security benefits without paying state taxes on this important source of income. 

Social security card with money.

Image source: Getty Images.

Which states don't tax Social Security benefits?

The 37 states that do not tax Social Security benefits include 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, and Wyoming.  Washington D.C. also exempts Social Security income from local income taxes . 

Map showing 37 states that do not tax Social Security benefits.

Image created by author.

While some of these states are generally tax-friendly for retirees, others still require seniors to pay a substantial amount of other taxes, including high property and sales taxes. New York, Massachusetts and California, for example, are some of the nation's highest taxed states.  

It's important to consider all taxes you may have to pay as a retiree -- including taxes for property, 401(k) and pension income, sales tax, gas taxes, and other state and local taxes -- when you make a decision on where to live during your golden years. 

You could still owe federal taxes on Social Security benefits

If you live in a state that doesn't tax your Social Security benefits, this doesn't necessarily mean you'll enjoy totally tax free income from Social Security. There are federal taxes to pay once your total income reaches a certain threshold:

  • If your income exceeds $25,000 for single filers or $32,000 for married filing jointly, you'll be taxed on 50% of your Social Security benefits. 
  • If your income exceeds $34,000 for single filers or $44,000 for married filing jointly, you'll be taxed on 85% of your Social Security benefits. 

Not all income counts when determining if you're taxed. The IRS considers half of your Social Security benefits, along with all taxable Social Security income such as 401(k) distributions. Some non-taxable income, including interest income from muni bonds, also counts -- but tax-free distributions from your Roth IRA aren't factored in. 

Minimize your tax burden by choosing a tax-friendly state to retire

When you're living on a fixed income from Social Security, every dollar counts. You want to make the most of your retirement money and one of the best ways to keep more of your cash in your pocket is to consider living in a tax-friendly state. 

Fortunately, you have lots of great places to live where the cost of living is reasonable and your Social Security benefits won't be taxed. By taking a little time to research the best states for retirees, you can find the perfect place to set up your retirement home where the minimum amount of your money will go to the government.

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