It's smart to find out how much of your Social Security benefits are likely to be taxed by the state you live in and by the federal government, as that information can help in your retirement planning. Here's a look at which states do -- and don't -- tax Social Security.
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These states (and one district) don't tax Social Security benefits
Here are the many non-taxers:
- 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
- Washington, D.C.
- Wyoming
10 states do tax Social Security
Here are the states that do tax Social Security benefits:
- Colorado
- Connecticut
- Kansas
- Minnesota
- Montana
- Nebraska
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Note, though, that this list changes from year to year. West Virginia, for example, has passed legislation that will eliminate Social Security taxation within a few years.
Meanwhile, many states that do tax Social Security do so with a very light hand. Colorado, for example, does not tax Social Security benefits of those who are 65 or older. And in Minnesota, those meeting certain income requirements can subtract up to $5,840 on their tax return.
Don't forget Uncle Sam
Unfortunately, while your state may not tax your Social Security benefits much or at all, that's not necessarily true for the federal government. It actually may tax up to 85% of your benefits.
So rest assured that you probably won't face significant Social Security state taxes in retirement -- at least at the state level. And Uncle Sam may not tax your benefits, either. But take some time to think through the decision of when to claim your benefits, as there may be tax ramifications to consider.
