The holidays are behind us and now we're entering the much less fun tax season. Soon, we'll have to share all the details of our 2023 income and expenses with the IRS. It's pretty straightforward for most workers, but it can be more complicated for retirees. They'll have to pay taxes on all tax-deferred retirement income and any income from a job. And they could owe Social Security benefit taxes as well. Here's a look at which states have these taxes and how the federal government handles benefit taxes as well.
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The 40 states that don't tax Social Security benefits
The following 40 states don't touch a penny of their seniors' Social Security benefits:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- 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
- Wisconsin
- Wyoming
Missouri and Nebraska are new entrants on this list, having just done away with their Social Security benefit taxes on Jan. 1, 2024. Some seniors in these states could still owe taxes on their 2023 benefits. But going forward, this won't be an issue.
The 10 states that tax some of their seniors' Social Security benefits
Seniors in the following 10 states could owe some Social Security benefit taxes:
- Colorado
- Connecticut
- Kansas
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
However, not all seniors in these states give some of their benefit checks back to the government. States have unique rules that often restrict benefit taxes to high-income seniors. For example, Connecticut only taxes the Social Security benefits of seniors with adjusted gross incomes (AGIs) of $100,000 or more if they're married and filing a joint return or $75,000 or more if they have any other filing status.
How the federal government taxes Social Security benefits
The federal government also taxes Social Security benefits and its rules are much stricter. All seniors with provisional incomes -- AGI plus nontaxable interest and half their annual Social Security benefit -- greater than $25,000 for a single adult or $32,000 for a married couple will pay some Social Security benefit taxes.
The following table illustrates how much of your benefit could be taxable based on your provisional income and marital status:
|
Marital Status |
Up to 50% of Benefits Taxable |
Up to 85% of Benefits Taxable |
|---|---|---|
|
Single |
Provisional incomes between $25,000 and $34,000 |
Provisional incomes greater than $34,000 |
|
Married |
Provisional incomes between $32,000 and $44,000 |
Provisional incomes greater than $44,000 |
Data source: Social Security Administration.
This doesn't mean you could lose up to 50% or 85% of your benefits. It just means that you could pay ordinary income tax on that percentage of your benefits. Still, it's not ideal.
It might be possible for some seniors to avoid these taxes by reducing their spending or relying more upon Roth savings. But as average benefits grow larger, these taxes become increasingly common. If you don't want to get a surprise bill when you file your taxes, you may want to speak to the Social Security Administration about having taxes withheld from your monthly checks. You can call the organization by phone or download Form W-4V and mail or fax it.
Even if you manage to avoid benefit taxes this year, it's something you could run into in the future. Keep this information in mind and stay up to date on any changing tax laws in your state that could affect how much of your Social Security benefits you get to keep.
