When it comes to taxes, the U.S. is a bit of a puzzle. For one thing, there is nothing uniform about tax laws from state to state, which may help explain why retirees sometimes decide to relocate to another state: Living in a low-tax state may help make their retirement dollars stretch further.
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States that don't tax Social Security
The good news is that most states (41, plus the District of Columbia) don't tax Social Security benefits, although you may still owe federal taxes on them. Here's where benefits are free of state taxes:
- 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
- Wisconsin
- Washington, D.C.
- Wyoming
States that don't tax pensions
Besides treating Social Security like tax-free income, the following 15 states also don't tax pension income:
- Alabama
- Alaska
- Florida
- Hawaii
- Illinois
- Iowa
- Mississippi
- Nevada
- New Hampshire
- Pennsylvania
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
States that don't tax IRA or 401(k) distributions
If part of your retirement plan involves drawing from an IRA or 401(k), you'll be glad to know that these 13 states don't tax retiree withdrawals from those accounts:
- Alaska
- Florida
- Illinois
- Iowa
- Mississippi
- Nevada
- New Hampshire
- Pennsylvania
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Rules in the states that tax benefits
Colorado taxes Social Security benefits, but...
Although there is a tax on Social Security in Colorado, some people don't have to pay. Taxpayers 65 and older can deduct all their federally taxed Social Security dollars, exempting them from the state levy. And thanks to a law passed in 2024, Social Security recipients between 55 and 64 with an adjusted gross income of $75,000 or lower for a single filer or $95,000 or lower for a couple filing jointly will also be exempt from state taxes on their benefits.
Connecticut: Technically, there's a tax on Social Security benefits
It all depends on gross income. For example:
- Married filing separately or a single filer: The state won't tax benefits if your adjusted gross income (AGI) is under $75,000.
- Married filing jointly or a head of household filer: Benefits won't be taxed if you have an AGI under $100,000.
If your AGI exceeds these income thresholds, Connecticut will tax no more than 25% of your Social Security benefits.
Minnesota: It also follows a formula
While there's officially a tax on benefits in Minnesota, some retirees qualify for a Social Security income subtraction when they file their state returns. Here's how it works out:
- Married filing jointly: Benefits are fully tax-exempt if your AGI is under $105,380.
- Married and filing separately: Benefits are fully tax-exempt with an AGI of $52,690 or less.
- Head of household or a single filer: With an AGI less than $82,190, benefits are exempt from state taxes.
Even with an AGI over the threshold, you may get a break. That's because most taxpayers' state-return subtractions are reduced by 10% for each $4,000 over the threshold.
Montana: Where taxes are a little rougher
According to the American Association of Retired Persons, several income deductions for taxpayers 65 and older were repealed last year. That leaves taxpayers 65 and over with only a $5,500 subtraction from federal taxable income.
New Mexico: Friendly income thresholds
Technically, New Mexicans face taxes on Social Security benefits, but many end up never paying a dime. That's because the state has relatively high income thresholds for exempting benefits from taxes. For example:
- Single: Social Security benefits are exempt from state taxes with an AGI under $100,000.
- Joint filer: Benefits are exempt with an AGI up to $150,000 per year.
Rhode Island: Another state with healthy income thresholds
Like other states, Rhode Island taxes Social Security benefits but gives many recipients a break. Here are the most recent thresholds for those who have reached full retirement age (FRA):
- Joint filer: With an AGI under $130,250, benefits are exempt from state taxes.
- Most other filing statuses: You can have an AGI up to $104,200 without paying state taxes.
Utah: A potential credit
Utah's state website offers a Social Security Credit Worksheet to help determine whether you qualify for a credit and, if so, the amount you're eligible to receive.
Vermont: Full exemptions for some Social Security recipients
For 2025, here are the income thresholds for exemptions:
- Married and filing jointly: Your Social Security benefit is tax-exempt if your AGI is $65,000 or less. If you file jointly, you can qualify for a partial exemption with an AGI of up to $74,999.
- Single or married filing separately: You qualify for a full exemption with an AGI of $50,000 or less. If you're single, you can qualify for a partial exemption with an AGI of up to $59,999.
West Virginia: It won't be on the list for long
It may be unfair that West Virginia remains on the list of states that tax benefits. It has worked to phase out the taxes by discounting a percentage from AGI. Here's what that looks like:
- In 2025: 65% of Social Security benefits can be subtracted from AGI.
- In 2026: 100% of Social Security benefits can be subtracted.
In retirement, every dollar counts, and living in a state that allows you to keep as much as possible is beneficial. Fortunately, the majority of states don't tax Social Security benefits, and others appear to be moving in that direction.
