It is smart to investigate which part of your Social Security benefits are possibly taxed by the state in which you live and by the federal government, since that information could help you in your retirement planning, here we will see which states tax (and do not tax) Social Security.
What we mean when we talk about taxing, the action of taxing consists of imposing taxes or tax charges, therefore, we will use it to impose a levy, charge or tax, we will be able to specify the concept “taxing”, how to impose a levy.
These States (And District Columbia) Do Not Tax Social Security Benefits
Here are the many states that don’t put taxes on your Social Security benefits, as of 2024:
- 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
Ten States Tax Social Security
These are the states that do tax Social Security benefits:
- Colorado
- Connecticut
- Kansas
- Minnesota
- Montana
- Nebraska
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
On the other hand, keep in mind that this list is changing from year to year, West Virginia, for example, made an approval of a legislation that will eliminate Social Security taxes in some few years.
While, many states that do tax Social Security do so, they do not do it with a heavy hand, for example, the state of Colorado, does not tax the Social Security benefits of those people who are 65 years or older, and in the state of Minnesota, those people who meet certain income requirements can take up to $5,840 off their tax return.
Don’t forget about Uncle Sam: Pay Your Taxes
Unfortunately, while your condition may not affect your Social Security benefits much or at all, that’s not exactly true for the federal government. In fact, some of them can tax up to 85% of your income.
So be completely sure that you will probably not have to face significant state Social Security taxes throughout your retirement, at least at the state level, and Uncle Sam cannot tax your benefits either, but stop for a moment to analyze the decision of when to apply for your benefits, as there may be tax derivations to consider.
States With the Highest Taxes Over Retirement Benefits
As previously stated, the majority of US states do not tax Social Security benefits, there are a few that do. Here are the five states with some of the highest taxes on Social Security benefits, including the approximate tax rates where applicable:
- Minnesota
- Tax Rate: Up to 9.85%
- Minnesota taxes Social Security benefits in line with the federal tax system. The state’s income tax rates apply to Social Security benefits, but lower-income individuals may be eligible for certain subtractions to reduce the taxable amount.
- Utah
- Tax Rate: Flat rate of 4.85%
- Utah includes Social Security benefits as taxable income but offers a retirement tax credit to offset the tax burden for qualifying seniors. This credit decreases as income increases, reducing its benefit for higher-income retirees.
- Colorado
- Tax Rate: 4.4%
- Colorado taxes Social Security benefits but provides a substantial retirement income exclusion for residents aged 55 and older. This exclusion helps mitigate the impact of the state tax on Social Security benefits for many retirees.
- Nebraska
- Tax Rate: Up to 6.84%
- Nebraska taxes Social Security benefits but offers relief based on income levels. Retirees with adjusted gross incomes below certain thresholds can avoid state taxes on their Social Security benefits, but higher-income retirees may face taxes at rates up to 6.84%.
- New Mexico
- Tax Rate: Up to 5.9%
- New Mexico includes Social Security benefits in taxable income but offers exemptions and exclusions to reduce the tax burden for lower-income retirees. Higher-income retirees may still face significant state taxes on their Social Security benefits, with rates up to 5.9%.
