Taxes are inescapable. You'll pay them in some fashion, regardless of where you live. However, if you receive Social Security benefits, where you live could make a big difference in how much taxes you pay on those benefits -- if any.
The federal government can impose taxes on Social Security benefits depending on your combined income, (adjusted gross income plus nontaxable interest plus half of your benefits). However, many Americans don't pay any state income taxes on their Social Security income. Here are 40 states that don't tax Social Security benefits.
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States with no income taxes at all
Let's start with the states that don't have any income taxes. They are:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
These nine states raise money through other taxes, such as sales taxes and property taxes. Because their residents don't pay income taxes at all, though, their Social Security benefits aren't taxed at the state level.
States with income taxes that don't tax any Social Security benefits
Most U.S. states do have income taxes. Thirty-one of them don't tax Social Security benefits, however:
- Alabama
- Arizona
- Arkansas
- California
- Colorado
- Delaware
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Mississippi
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- Virginia
- West Virginia
- Wisconsin
We can add Washington, D.C. to this list as well, although it's not a state.
There's also a twist to know about Colorado: The state allows taxpayers ages 65 and older to deduct all Social Security income. However, if you claim Social Security retirement benefits earlier than age 65, your Social Security income will be subject to state income taxes.
The remaining states where Social Security benefits might be taxed
That leaves 10 remaining states where your Social Security benefits might be taxed:
- Connecticut
- Kansas
- Missouri
- Minnesota
- Montana
- Nebraska
- New Mexico
- Rhode Island
- Utah
- Vermont
In Minnesota, you don't have to file a state income tax return if your only income is Social Security. If you have other sources of income and your adjusted gross income (AGI) is below $100,000 for married filing jointly or below $78,000 for single or head of household, you can subtract all of your Social Security benefits from your AGI.
In Rhode Island, you won't have to pay state income taxes on your Social Security benefits if you've reached your full retirement age and have income below a specified level. For single filers or heads of household, your AGI must be below $95,800. For married couples, the AGI threshold is $119,750.
The other states in this group also limit how much income taxes must be paid on Social Security benefits based on income. It's quite possible that you won't have to pay any income taxes in these states on your Social Security income, even though they technically tax Social Security benefits.
