Contrary to the popular misconception, Social Security income can be taxed. Social Security beneficiaries who have substantial other sources of income can have as much as 85% of their benefits included in their taxable income calculation. In fact, tax on Social Security benefits is a major revenue source for the program.
The good news is that in most cases, Social Security is not taxable at the state level. 41 states do not tax Social Security income whatsoever. Not only that, but most of the states that do tax Social Security use far looser rules than the federal government.
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41 states that don't tax Social Security benefits
I won't keep you in suspense. If your state is on the following alphabetical list, it doesn't have any tax on Social Security benefits as of the 2025 tax year:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- 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 (state and D.C.)
- Wisconsin
- Wyoming
If your state appears on this list, your Social Security income is exempt from state income tax, regardless of how much additional retirement income you have, or whether or not you are still working.
Of course, some of these states have no income tax whatsoever. But in other cases, the Social Security exemption can be worth quite a bit of money. For example, if you receive $20,000 per year from Social Security and live in my home state of South Carolina, which has a top 7% marginal tax rate, you could save as much as $1,400.
It's also worth noting that this list is likely to grow in the years to come. For example, West Virginia is in the process of phasing out tax on Social Security benefits, and it will be gone in 2026.
What if you live in one of the other nine states?
With the list in the previous section in mind, this means that there are nine states that still tax Social Security benefits to one extent or another. These are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
However, in most cases, the Social Security tax rules are far looser than those used by the IRS. As an example, Colorado only taxes Social Security benefits for beneficiaries under 65 with incomes above certain levels.
Just one part of the tax equation
It might sound unfortunate if you're a retiree who lives in one of the nine states that tax Social Security benefits, but keep in mind that this is just one of several components of how tax-friendly, or unfriendly, a state is. In many cases, states that tax Social Security are on the lower end of the spectrum when it comes to other types of taxes.
For example, Montana has a tax on Social Security benefits for some residents but is also one of just five states with no state sales tax. Other states on the list have property taxes that are well below the national average.
The bottom line is that while tax on your Social Security benefits is certainly not ideal, it's important to consider the full picture of a state's tax situation.
