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37 States That Don't Tax Social Security Benefits

By Maurie Backman - Apr 8, 2021 at 6:04AM

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You may want to put these states on your retirement list.

Your Social Security benefits will probably serve as an important source of income once you retire. And one way to stretch those benefits is to limit the amount of taxes you pay on them.

Depending on your income, you may be subject to federal taxes on your benefits. But the state you retire in will dictate whether you're taxed on your benefits at the state level.

Smiling older woman in chair knitting

Image source: Getty Images.

Who does -- and doesn't -- tax Social Security?

First, the good news. There are 37 states that do not currently impose a tax on Social Security benefits:

  1. Alabama
  2. Alaska
  3. Arizona
  4. Arkansas
  5. California
  6. Delaware
  7. Florida
  8. Georgia
  9. Hawaii
  10. Idaho
  11. Illinois
  12. Indiana
  13. Iowa
  14. Kentucky
  15. Louisiana
  16. Maine
  17. Maryland
  18. Massachusetts
  19. Michigan
  20. Mississippi
  21. Nevada
  22. New Hampshire
  23. New Jersey
  24. New York
  25. North Carolina
  26. Ohio
  27. Oklahoma
  28. Oregon
  29. Pennsylvania
  30. South Carolina
  31. South Dakota
  32. Tennessee
  33. Texas
  34. Virginia
  35. Washington
  36. Wisconsin
  37. Wyoming

If you retire in one of these states, you won't lose a chunk of your benefits to extra taxes, so you may want to consider that when deciding where to settle down for your senior years.

Meanwhile, these are the 13 states that do tax Social Security benefits:

  1. Colorado
  2. Connecticut
  3. Kansas
  4. Minnesota
  5. Missouri
  6. Montana
  7. Nebraska
  8. New Mexico
  9. North Dakota
  10. Rhode Island
  11. Utah
  12. Vermont
  13. West Virginia

Most of these states offer a tax exemption to low- or moderate-income seniors, but four of them -- Minnesota, North Dakota, Vermont, and West Virginia -- do not. That said, come 2022, West Virginia will stop imposing a tax on Social Security income, so if you're not yet retired, don't be too quick to cross it off your list.

What about federal taxes?

Whether you'll be taxed on Social Security at the federal level hinges on your provisional income -- that's your non-Social Security income plus 50% of your annual benefit. If you're single with a provisional income of $25,000 to $34,000, you could be taxed on up to 50% of your benefits, and beyond $34,000, that percentage rises to 85%. If you're married, a provisional income between $32,000 and $44,000 means you'll risk taxes on up to 50% of your benefits, and beyond $44,000, that percentage rises to 85%.

By wisely choosing the state in which you retire, you can stave off taxes on your benefits. But there's another important move you can make, too -- house your retirement savings in a Roth IRA. Roth IRA withdrawals are tax-free and don't count toward provisional income, so that's a good way to secure more retirement cash without impacting your benefits.

Don't pay more taxes than necessary

Taxes can be a huge burden for seniors on a fixed income, so it's best to avoid them to the greatest extent possible. And a good way to do that is to know which states impose a tax on Social Security and which don't.

Of course, there are other factors to consider when deciding where to retire, like the general cost of living, access to senior healthcare, climate, and amenities. But if you're able to avoid state taxes on your benefits, you'll have some extra money to enjoy during your senior years.

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