For many retirees, Social Security benefits -- or at least some of them -- are subject to federal income tax. Depending on your income after retirement, you may have to pay federal income tax on as much as 85% of your Social Security income.
But what about state taxes? Are you going to pay tax on your Social Security benefits to the IRS and pay even more tax when you file your state tax return?
The short answer is it depends where you live. Some states tax Social Security income, and others don't. Here's a rundown of the states that don't tax Social Security, those that do, and what to keep in mind when looking at your potential tax situation after retirement.
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Which states don't tax Social Security benefits?
There's good news for retirees in most states. 39 states plus the District of Columbia don't tax Social Security benefits at all. Depending on your income and other tax situations, you might still have to pay tax on your Social Security income at the federal level, but in the bulk of U.S. states, you won't pay any tax on Social Security benefits whatsoever.
I won't keep you in suspense. Here are all 39 states (and D.C.) that don't tax Social Security benefits at all, listed in alphabetical order:
- Alabama
- Alaska (no income tax at all)
- Arizona
- Arkansas
- California
- Colorado (as of 2023)
- Delaware
- Florida (no income tax at all)
- Georgia
- Hawaii
- Idaho
- Illinois
- Iowa
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Nevada (no income tax at all)
- New Hampshire (no income tax at all)
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- South Dakota (no income tax at all)
- Tennessee (no income tax at all)
- Texas (no income tax at all)
- Virginia
- West Virginia
- Wisconsin
- Washington (no income tax at all)
- Washington, D.C.
- Wyoming (no income tax at all)
How much will you pay in other states?
This leaves 11 states that do tax Social Security income. However, it's important to mention that while a few states use the same general tax guidelines as the IRS when it comes to taxable Social Security income, most of the states that have a tax on Social Security benefits use different methods -- and usually they are in retirees' favor.
For example, Kansas exempts Social Security income unless your adjusted gross income (AGI) is over $75,000. New Mexico's income thresholds are $100,000 for single filers and $150,000 for married couples filing joint tax returns. And Nebraska is scheduled to phase out taxes on Social Security income by 2025.
Only one part of tax friendliness
As we've seen, most states don't tax Social Security income at all. But as residents in many of these states can tell you, this is only one aspect of how tax-friendly a state is to live in. Some of the states on the list, such as Florida and Texas, are generally lower-tax places for retirees to live. On the other hand, states like New Jersey and New York don't tax Social Security but have high taxes of other kinds that could cost retirees a lot of money.
The bottom line is that if you're trying to assess the tax friendliness of the state you currently live in and/or states you might consider living in after you retire, it's important to look at property taxes, sales taxes, and all of the other types of tax you might have to pay to get the complete picture.
